Opportunity Cost Analysis Research Articles

Economics in Two Lessons: Why Markets Work So Well, and Why They Can Fail So Badly, JohnQuiggin. Published by Princeton University Press, Princeton, NJ, 2019, 408 pages, ISBN 9780691154947.

Economics in Two Lessons: Why Markets Work So Well, and Why They Can Fail So Badly, JohnQuiggin. Published by Princeton University Press, Princeton, NJ, 2019, 408 pages, ISBN 9780691154947.

Wind energy planning for a sustainable transition to a decarbonized generation scenario based on the opportunity cost of the wind energy: Spanish Iberian Peninsula as case study

Most countries in Europe are going under a significant transformation process from carbonized power energy sources to renewable and sustainable ones to feed their increasing demands. European Union targets on its energy roadmap states that by 2030, a reduction of 40% of CO2 emissions regarding the 1990 levels must be done and full transition must be completed by 2050. Thus, EU member countries, such Spain, are carrying out lots of investments to transform their power generation structure by promoting the installation of renewable energy power plants, with a significant visual and environmental impact. In the case of Spain, it is planned that, by 2030, 27% of final power consumption must be renewable, with approximately 31 GW of installed wind energy (8 GW must be installed in the next 10 years). Wind energy is supposed to be one of the generation leaders in this transformation context due to its high performance, high availability and fast decreasing costs.Nevertheless, wind farms have been installed on-shore with great success since the decade of the 90s covering the locations with the best wind resource. Thus, many of the installed wind turbines have overcome the half part of their expected lifespan and their payback periods, but the learning curve of the wind energy technology has improved exponentially since then. This paper is focused on the true valorization of an existing wind farm and the efficacy of the exploitation of the site’s wind resource. A novel repowering decision support model based on the opportunity cost analysis between repowering the current wind farm with the latter technologies and full depletion of the wind farm is proposed and applied to the Spanish Iberian Peninsula case study. Results show that the repowering option is significantly attractive in most cases and its proper application could have, not only a positive environmental effect, but also an economic impact on the sustainability of this source of energy.

Paying the Price: Understanding the Opportunity Cost of Dedicated Research Time during Surgical Training

The pursuit of dedicated research time during surgical residency prolongs training and delays entry into practice. Currently, there is a lack of research quantifying the financial implication of this delay and trainees' understanding of its impact on career earnings. An opportunity cost analysis was performed regarding the impact of delay due to training within general surgery and selected subspecialties. An anonymous survey was distributed to general surgery categorical junior trainees in 2017 at a large academic hospital in the Northeast to determine understanding and beliefs regarding dedicated training on career earnings. For all specialties analyzed, dedicated research time was shown to negatively affect career earnings. The net cost was highest among those intending to pursue cardiothoracic surgery and lowest for those intending to pursue surgical oncology. A total of 26 of 35 (74%) present research residents and clinical residents intending to perform dedicated research time responded to an anonymous survey. On average, survey respondents underestimated the impact of dedicated research time on career earnings by $1.4 million. Dedicated research time during general surgery residency carries a substantial opportunity cost to overall career earnings. General surgery residents lack understanding of both the direction and the magnitude of this opportunity cost.

Producing drama: a comparison of film tax incentives to alternative uses

ABSTRACTIncentive packages are popular tools for economic development. However, development projects are often considered in isolation without an analysis of opportunity costs. In this study, we use an intuitive framework for comparing projects and weigh alternate projects against North Carolina’s film incentive programme. The results indicate that there are substantial differences in the economic impact of the projects we consider in this study. Our results suggest that policy decisions by governments and economic development officials should weigh a potential project against alternative uses in order to optimize the use of incentives.

Social Return on Investment (SROI) for Hindustan Unilever’s (HUL) CSR initiative on livelihoods (Prabhat)

Despite knowing and even appreciating the importance of intangible benefits of social interventions, like – increase in confidence and self-esteem, furthering in linkage of social bonds, leap in hopes and aspirations, rise in spending on essential goods and services etc., conventional methods of return on investment (RoI) end up comparing investment made into the intervention with tangible and visible social outcomes like increase in income levels (as a result of programme). Erroneously the social benefits or intangible gains are ignored while calculating the total monetary gains. For instance, Cost Benefit Analysis (CBA) would only compare monetary inputs in the programme with monetary outputs created by the programme (in present case – increase in income levels).These limitations in conventional approach can be addressed by following SROI i.e. adding ‘social’ benefits while arriving at ‘RoI’. Through participatory process of consulting stakeholders, SROI monetises all experienced social, environmental and financial outcomes (both tangible and intangible) for every rupee invested in social welfare initiatives of a programme through a combination of Cost Benefit Analysis (CBA), Opportunity Cost Analysis and Impact Assessment methods. Entire process of SROI analysis provides a ratio and a story. The story of how the programme has created values during the course of its intervention and after and; the ratio being how much social value is created per rupee of investment. Thus, after due process of stakeholder consultation and primary research one could come to the conclusion “that Rs. X of investment in social intervention has been able to create Rs. Y of social value”. Thereby, helping the management and implementers of the programme to self-evaluate efficiency and impact of the social intervention.

Demanda, disponibilidad de pago y costo de oportunidad hídrica en la Cuenca Tapalpa, Jalisco

Para conocer la factibilidad de la creación de un mercado de servicios ambientales hidrológicos, se requiere contar con información sobre la oferta y demanda hídrica del lugar. Este estudio pretende aportar información sobre el último aspecto, al estimar la demanda hídrica en la cuenca de Tapalpa, Jalisco, México, en cuya superficie de 21 000 ha, la mitad es forestal. Adicionalmente, se estimó la disponibilidad a pagar (DAP) por el recurso hídrico (RH), además de un análisis del costo de oportunidad del uso del suelo para “producción” de agua. El análisis indicó que el RH utilizado asciende a23 171 885 m3/año. El 93% de éste se utiliza en el sector agrícola, principalmente en la producción de hortalizas y cultivos básicos. La DAP calculada por el RH es mayor en el sector servicios (76,7% de los casos dijeron estar dispuestos), en comparación con los otros sectores encuestados. Sin embargo, la mayor participación monetaria en la DAP total estuvo dada por el sector doméstico, con 46 ,5% del total, con $3 064 301 pesos al año. Adicionalmente se determinó que la escolaridad tiene una relación directa con la DAP por RH, mientras que la edad presentó una relación inversa. El valor estimado de la DAP total fue menor que el costo de oportunidad para conservar la superficie boscosa de la cuenca, presentando un déficit anual de $27 201 313 pesos, y sólo cubre el 10% de dicho costo de oportunidad. Al agregar el costo asociado a la recuperación de la superficie forestal actualmente en otro uso (áreas en conflicto), el déficit anual se incrementaría a $45 130 988 pesos y la DAP se reduce a sólo 6% del costo de oportunidad total.

Contribution of Nonmarket Works In Bangladesh Considering Educational Qualification and Sex Issues: An Opportunity Cost Analysis

Nonmarket works (NMWs)are always undermined by the usual market evaluation process. Considering the basic idea of value generationthe NMWs produce significant (384.79 billionlabor hours, studied by author)value in Bangladesh. The economically inactive peopleare the main source of labor force of the NMWs. The problem of conventional measure fails to recognize the value of the NMWs. This paperconsidered to the contributions of the females (from sex issue) and the graduates (from qualification issue) to produce NMWs. To determine the monetary appraisal of the NMWs an opportunity cost method was employedaccompanied by a precise methodology. A distinct theoretical framework, primary data and some case studies were the sources of facts. In each separate model this study uncovered thatthe graduates and the femalesproducedNMWs of the value intaka three thousand five hundred and ninety four per person/month and taka two thousand five hundred eighty eight per person/monthrespectively. Considering boththe variables in a collective model,these figures were tk. 3361.08 per person/month and tk. 2466.03 per person/month.

Using REDD + to balance timber production with conservation objectives in a mangrove forest in Malaysia

In this paper we evaluate if REDD+ initiatives might be financially viable to be used to achieve a more sustainable balance between timber production and ecosystem health in a mangrove forest area in Malaysia. The focus of our study is on a 40,466ha mangrove forest in Malaysia known as the Matang Mangrove Forest Reserve. The Matang Mangrove Forest Reserve has been used for charcoal and pole production for over 100years and is often described as a good example of a sustainably managed multi-use mangrove forest. However, recent research shows that the health of various components of the ecosystem is in decline (notably some bird species and the blood cockle fishery). We use opportunity cost analysis to determine that the minimum compensation required to offset the production revenue currently derived from timber production in the forest is less than US$0.83 tCO2e. At these relatively low costs we demonstrate that REDD+ is financially viable to be strategically used to support the conservation of some parts of the Matang Mangrove Forest Reserve which could result in better sustainable outcomes for the forest area and its stakeholders as a whole.

Targeting REDD+: An Empirical Analysis of Carbon Sequestration in Indonesia

Summary The implementation of REDD+ requires knowledge of the willingness to accept land use change contracts and its application over large areas. This paper uses primary data from Indonesia to contrast two approaches to the elicitation of the supply curve for carbon: an auction and an analysis of opportunity costs. The analysis shows that there are important differences between the two approaches for a wide range of prices. An analysis of bidding behavior shows that location and individual preferences (time and risk preferences), but not opportunity costs, play a significant role in this decision. The implications for targeting are discussed.

Land use change monitoring in Maryland using a probabilistic sample and rapid photointerpretation

The U.S. state of Maryland needs to monitor land use change in order to address land management objectives. This paper presents a change detection method that, through automation and standard geographic information system (GIS) techniques, facilitates the estimation of landscape change via photointerpretation. Using the protocols developed, we show a net loss of forest land, with losses due primarily to urban development and most gains in forest land coming from agricultural land conversions. This study indicates that about 75,000 photo plots would be needed to estimate land use change in Maryland at the county-level, assuming a uniform sampling intensity and a maximum desired county-level sampling error of 20 percent, with an estimated time requirement of 125 h. The protocol we present for designing, planning and conducting a photointerpretation-based land use change procedure can be used by other regions and is well suited for land use change monitoring, assuming that analysis of opportunity costs suggests that existing or new remotely sensed imagery classifications do not meet user needs.

Bailouts, Opportunity Cost and Utilitarian Ethics: A Law & Economics Analysis

This article applies the concepts of opportunity cost and utilitarian ethics to corporate bailouts. When one thinks about bailing out a failing or distressed industry it is also necessary to consider alternative uses for the funds. Opportunity cost analysis concludes that the funds used for bailouts could be better utilized elsewhere. Utilitarian analysis, the dominant methodology among economists, also concludes that funding bailouts cannot be justified. This article constructs a simple mathematical model that is based on utilitarian analysis and concludes that bailouts cannot be ethically justified on utilitarian grounds because the result is a negative-sum game. Possible avenues for future research are also identified and discussed briefly.

Economic Assessment of Best Management Practices in the Mara River Basin: Toward Implementing Payment for Watershed Services

The Mara River in East Africa is currently experiencing poor water quality and increased fluctuations in seasonal flow. Improved water quality will require upstream farmers and foresters to adopt Best Management Practices (BMPs), which might cost them considerably. This study proposes a Payment for Watershed Services (PWS) mechanism. This is a market-based approach, whereby downstream water users would pay upstream watershed service providers towards the costs of BMPs implementation. This study analyzes the technical feasibility and economic viability of adapting selected BMPs and provides cost estimates of a PWS program. Using three criteria of water quality improvement, economic feasibility, and technical suitability, a detailed economic opportunity cost analysis revealed that farmers would indeed incur economic losses for all BMPs except no-till farming. We also developed a multi-criteria (demographic and environmental) methodology for identifying land areas to be placed under BMPs. More than 122,000 ha of land would require BMPs, including a moratorium on agriculture inside the Mau Forest Complex. The initial per hectare opportunity costs across the five highest ranked BMPs ranged from US$ 272 to US$ 926. Using these cost estimates, the paper draws some valuable policy and management insights on how to finance BMP implementation.

Promoción de la salud y prevención en tiempos de crisis: el rol del sector sanitario. Informe SESPAS 2014

This article reviews trends in lifestyle factors and identifies priorities in the fields of prevention and health promotion in the current economic recession. Several information sources were used, including a survey of 30 public health and primary care experts. Between 2006 and 2012, no significant changes in lifestyle factors were detected except for a decrease in habitual alcohol drinking. There was a slight decrease in the use of illegal drugs and a significant increase in the use of psychoactive drugs. Most experts believe that decision-making about new mass screening programs and changes in vaccination schedules needs to be improved by including opportunity cost analysis and increasing the transparency and independence of the professionals involved. Preventive health services are contributing to medicalization, but experts’ opinions are divided on the need for some preventive activities.Priorities in preventive services are mental health and HIV infection in vulnerable populations. Most experts trust in the potential of health promotion to mitigate the health effects of the economic crisis. Priority groups are children, unemployed people and other vulnerable groups. Priority interventions are community health activities (working in partnership with local governments and other sectors), advocacy, and mental health promotion. Effective tools for health promotion that are currently underused are legislation and mass media. There is a need to clarify the role of the healthcare sector in intersectorial activities, as well as to acknowledge that social determinants of health depend on other sectors. Experts also warn of the consequences of austerity and of policies that negatively impact on living conditions.

Opportunity Costs of Emissions Caused by Land-Use Changes

Amid the euphoria of Reducing Emissions from Deforestation and Forest Degradation (REDD) and REDD+ discussions, the expectations of large financial gains raise the interest of all. A country, however, will only enjoy REDD benefits if the cost of REDD is lower than the benefit. The opportunity cost analysis is an effective tool for assessing the feasibility of REDD+ since the largest portion of costs associated with REDD+ and can help to identify fair compensation for those who change their land use. The opportunity cost analysis has been exercised in Tanjung Jabung Barat (Tanjabar) district-Indonesia to examine the economic-feasibility of carbon emission reduction under different type carbon price scenarios. This study reveals a sharp decline of land-use systems with high carbon-stock and low profitability is obvious. On mineral soil, low carbon-stock and high profitability (mostly oil palm) has increased rapidly, especially in the period 2000-2009. It has become the dominant land-use system. The low-to-medium carbon stock and medium profitability land-use category increased from 1990 to 2005 but declined from 2005 to 2009. The low carbon-stock and low profitability category was constant and the proportion of the area was below 15%. The ex-ante analysis in predicting the potential for future emissions reduction in Tanjabar through REDD+ approaches shows that the cumulative emission of Tanjabar in 2020 is estimated at 61.91 Mg CO2-eq/Ha.Year, while the reduced emission by excluding all land use conversion below $5 threshold is estimated at 51.71 Mg CO2-eq/Ha.Year. This means that there is a potential for 16% emission reduction using $5/ton CO2-eq incentive. Another important finding in this study is that if the price of carbon increases by double to $10, the amount of reduced emission does not change much. This can use as a basis for determining the right amount of incentive for trade-off between economic profitability and climate change mitigation effort in Tanjabar using REDD+ scheme both at seller and buyer perspectives.

The Existence of Transaction Costs as the Rationale for Maximum Harmonization of the European Common Sales Law

In recent years, an extensive debate on the need for harmonization of a European sales law has evolved. The existing diversity of contract laws in the Member States has been perceived as a barrier to trade and hence as burdensome for the European internal market. Moreover, recent impact assessment studies suggest that this diversity is a source of substantial transaction costs. The observed existence of such substantial transaction costs represents a per se overwhelming argument for the adoption of an optional instrument on the European Common Sales Law. The analysis and calculations of opportunity and transaction costs that have been made provide seemingly unbiased, unprecedented, empirical and affirmative answers. However, this paper challenges and critically analyses the results and shows that it might simply be impossible to calculate either the full transaction costs of legal diversity or costs of uniformity. This analysis also shows that: (1) calculations made by the EU Commission rely heavily on subjective observation and selectively biased data; (2) that the obtained results might be severely impaired and over conclusive; and finally (3) that those results merely generate an anecdotal evidence of the possible volume of transaction costs originating from that contract law's differences. In order to obtain a more affirmative answer on the actual amount of transaction costs, this paper provides a list of possible refinements and suggests a set of new quantitative measures that would permit more accurate cross-firm, cross-country and cross-industry comparisons.

The value of effective public tuberculosis treatment: an analysis of opportunity costs associated with multidrug resistant tuberculosis in Latvia.

BackgroundA challenge to effective protection against tuberculosis is to sustain expensive and complex treatment public programs. Potential consequences of program failure include acquired drug resistance, poor patient outcomes, and potentially much higher system costs, however. In contrast, effective efforts have value illustrated by impacts they prevent. We compared the healthcare costs and treatment outcomes among multidrug-resistant tuberculosis (MDR-TB) and non MDR-TB patients in Latvia to identify benefits or costs associated with both.MethodsWe measured and compared costs, healthcare utilization, and outcomes for patients who began treatment through Latvia’s TB control program in 2002 using multivariate regression analysis and negative binomial regression.ResultsWe analyzed data for 92 MDR-TB and 54 non MDR-TB patients. Most (67%) MDR-TB patients had history of prior tuberculosis treatment. MDR-TB was associated with lower cure rates (71% vs. 91%) and greater resource utilization. MDR-TB treatment cost almost $20,000 more than non MDR-TB.ConclusionUp to 2/3 of MDR-TB treated in our sample was preventable at a potential savings of over $1.3 million in healthcare resources as well as substantial individual health.

Challenges of Opportunity Cost Analysis in Planning REDD+: A Honduran Case Study of Social and Cultural Values Associated with Indigenous Forest Uses

The REDD Programme is predicated on the assumption that developed countries will provide sufficient funds to offset opportunity costs associated with avoiding deforestation. The role of non-market values in indigenous land management may challenge the efficacy of compensation schemes targeted at meeting opportunity costs as calculated in traditional opportunity cost analysis (OCA). Furthermore it is unclear how these economic incentives might affect social and cultural values linked to land-use norms, livelihoods, and local governance. This study explores the economic, social and cultural values of forest uses for a Miskito community in the Rio Plátano Biosphere Reserve in Honduras. Data were collected using household surveys, farm visits, and community workshops. OCA indicates potential for successful REDD+ payment schemes; however it is an inadequate method to account for subsistence and cultural opportunity costs associated with avoided deforestation. Compensation to change land-use practices may undermine governance institutions necessary to address deforestation in the region. Our results indicate that small-scale agriculture and other forest-based subsistence activities are important cultural practices for maintaining Miskito identity and forest management institutions. Recommendations are offered for using OCA to develop REDD+ projects that recognize the linkages between social and cultural values and forest management by focusing on approaches that consider a full range of economic, social and cultural opportunity costs.

Evaluating the length of stay and value of time in a pediatric emergency department with two models by comparing two different albuterol delivery systems

Objective:Asthma is one of the most common childhood illnesses and accounts for a substantial amount of pediatric emergency department visits. Historically, acute exacerbations are treated with a beta agonist via nebulizer therapy (NEB). However, with the advent of the spacer, the medication can be delivered via a metered dose inhaler (MDI + S) with the same efficacy for mild-to-moderate asthma exacerbations. To date, no study has been done to evaluate emergency department (ED) length of stay (LOS) and opportunity cost between nebulized vs MDI + S. The objective of this study was to compare ED LOS and associated opportunity cost among children who present with a mild asthma exacerbation according to the delivery mode of albuterol: MDI + S vs NEB.Methods:A structured, retrospective cross-sectional study was conducted. Medical records were reviewed from children aged 1–18 years treated at an urban pediatric ED from July 2007 to June 2008 with a discharge diagnosis International Classification of Disease-9 of asthma. Length of stay was defined: time from initial triage until the time of the guardian signature on the discharge instructions. An operational definition was used to define a mild asthma exacerbation; those patients requiring only one standard weight based albuterol treatment. Emergency department throughput time points, demographic data, treatment course, and delivery method of albuterol were recorded.Results:Three hundred and four patients were analyzed: 94 in the MDI + S group and 209 in the NEB group. Mean age in years for the MDI + S group was 9.57 vs 5.07 for the NEB group (p < 0.001). The percentage of patients that received oral corticosteroids was 39.4% in the MDI + S group vs 61.7% in the NEB group (p < 0.001). There was no difference between groups in: race, insurance status, gender, or chest radiographs. The mean ED LOS for patients in the MDI + S group was 170 minutes compared to 205 minutes in the NEB group. On average, there was a 25.1 minute time savings per patient in ED treatment time (p < 0.001; 95% CI = 3.8–31.7). Significant predictors of outcome for treatment time were chest radiograph, steroids, and treatment mode. Opportunity cost analysis estimated a potential cost savings of $213,532 annually using MDI + S vs NEB.Conclusion:In mild asthma exacerbations, administering albuterol via MDI + S decreases ED treatment time when compared to administering nebulized albuterol. A metered dose inhaler with spacer utilization may enhance opportunity cost savings and decrease the left without being seen population with improved throughput.Limitations:The key limitations of this study include its retrospective design, the proxy non-standard definition of mild asthma exacerbation, and the opportunity cost calculation, which may over-estimate the value of ED time saved based on ED volume.

Opportunity Cost Analysis for Dynamic Wavelength Routed Mesh Networks

Optical backbone networks are becoming increasingly intelligent and flexible. These networks are able to establish high-bandwidth wavelength connections on-demand to support future network-centric applications. Choosing an efficient path in a timely manner, while considering important criteria such as operation costs and network performance, is a key problem confronting the network operators. Subtle path preferences of different dynamic routing algorithms (which are usually ignored by traditional analysis techniques) can make a significant difference in performance on mesh networks. It opens new research to advance routing algorithms in both analysis and implementation paradigms. In this paper, we propose an opportunity cost model that provides fast and accurate analysis for threshold-based online congestion-aware routing algorithms. The model is simple to compute, robust to different network topologies, and scalable. We show that our model further aids in the design of a number of new routing algorithms that can be easily applied to practical networks. In contrast to previous work, the optimal threshold values for our algorithms can be identified analytically, and the values sustain good performance on different network topologies and sizes.

Forest loss and management in land reform settlements: Implications for REDD governance in the Brazilian Amazon

Land reform settlements (LRS) in the Brazilian Amazon have been suggested to hold promise for the successful implementation of incipient efforts to reducing emissions from deforestation and degradation (REDD). However, differences in forest cover, deforestation behaviour and settler welfare plus the inevitable overlap of upcoming REDD efforts with existing conservation policies, mean that scope and impact of REDD in LRS will not be uniform across settlements. Based on evidence from a case study of four LRS and a Brazilian Amazon regional analysis of opportunity costs, this paper explores the actual scope for targeting initial Brazilian REDD efforts to LRS and discusses potential welfare and equity implications based on scenario analysis. While our findings confirm considerable economic scope for compensation-based schemes for avoided degradation and deforestation, the pre-existence of legal use right limitations in combination with the distribution of forest cover among LRS means that less than half of settlements - poorer - will be able to derive economic gains. Exploring a mix between incentives and disincentives seems to offer the most promising future regarding efficiency and equity successful results. The paper concludes with the implications of the results in the international debate on the constraints ahead to implement the REDD principles.