Policy analysis - Assignment Example

Policy Analysis The rationale for discounting in calculating the cost and benefits of government programs Government programs are critical projects that must be undertaken based on explicit cost and benefits analysis (Birnie & Bonneux, 2014). Effective evaluation of the current and future costs involved in executing the programs and benefits is inevitable in ensuring that objectives set are met. Therefore, the use of discounting technique that facilitates effective evaluation of costs and benefits that occurs at different times is essential for the government.

Discounting method is rationally viable for the government since it provides clear benchmarks and guidelines on which costs and benefits, associated with the program is pegged (Birnie & Bonneux, 2014). For instance, calculation of the costs and benefits that are valued in executing a water project today is bound to change in the coming years.Why the consumer price index overstates the inflation rateConsumer price index is the absolute measure of price levels of consumer products whose calculation is based on the product type, region, and buying power of consumers.

The price index is usually a fixed value that is set by a regulatory body, for instance, the department of labor in US. The value is based on a fixed weight price of goods that consumers purchase in every month (Adler & Posner, 2006). However, inflation is the measure of the increase in price levels in the economy in average terms. Its value is dependent on market forces since most economies operate under a free market system where forces of demand and supply play a crucial role. Therefore, the main reason why CPI overstates the value of inflation is because CPIs determination is done by an authorized body while inflation rate is determined by the market forces.

The CPI figure is based on predictable parameters, and it is fixed for a period while inflationary changes are unpredictable. Three years amortization of $50,000 Amortization is a systematic repayment of loan or distribution of the cost associated with an asset over the period. The amortized schedule of $50000 is given belowA= I * P * (1+I)n/(1 + i)n – 1Where A is the monthly payment, P is the Loans initial capital,I is the monthly interestN is the total number of paymentsMonthly interest = 0.7%/12 = 0.583%A = 0.

00583 * 50000 * (1 + 0.00583)24/ 1 + 0.00583)36 – 1= 291.5 * 35.99417/34.99410492.28$299.83 Per monthTotal amount = 299.83 * 36 = 10793.88Reading by Viscusi:Indeed, economic value of life is dependent greatly on how one maximizes on the potential loss within the earning system. The value of lost earnings affects individual’s capacity for meeting certain life objectives due to eminent constraints. As noted by various economists, lost time, leads to lost earnings that in turn expose one to diminishing life value.

Therefore, the assertion that economic value of life should be based on the present value of lost earnings instead of current earnings is real. Statistical reports from various empirical studies also affirm the fact that lost earnings exposes individuals to serious risks. Lost time has immense negative economic connotations that can be mitigated through effective measures.Why survey based on willingness-to-pay measures overstate respondents true willingness-to-pay Willingness-to-pay measures that are based on conducted surveys give an average base of which a pricing decision is pegged.

It helps institutions in ascertaining the average potential demand for products and services that fosters the accuracy in decision-making especially on the production and supply quantities of a product (Julnes, 2012). However, willingness to pay is a measure based on the individual’s maximum amount he is willing to spend on a product. This explains the difference that is based on the practicality of facilitating the formulation of accurate pricing decisions. Willingness-to-pay surveys give institutions the opportunity to make viable decisions in consideration of a wide range of feedback as compared to willingness to pay (Julnes, 2012).

Consideration of smoking benefits in cost-benefit analysis of policies to reduce the smoking rateYes, it is prudent for the benefits of smoking to be considered when developing cost-benefit analysis policies in various settings. This is to foster effective estimation of money value based on the benefits and related costs attached to cigarette smoking (Adler & Posner, 2006). A question assessing the validity of willingness-to-pay estimatesThe possible questions to ask respondents when conducting a survey on the use of contraceptives would includeAre you a consumer of contraceptives?

What is your opinion on contraceptives?How much are willing to spend in buying contraceptives?These questions would help in ascertain the level of contraceptive usage, individuals opinion on their safety, acceptance or rejection and the amount they deem fit for the items.ReferencesAdler, M. D., & Posner, E. A. (2006). New foundations of cost-benefit analysis. Cambridge, Mass: Harvard University Press.Birnie, E & Bonneux, L. (2014). The discount rate in the economic evaluation of prevention: a thought experiment.

Retrieved from, http://jech.bmj.com/content/55/2/123.fullJulnes, G. (2012). Promoting valuation in the public interest: Informing policies for judging value in evaluation. San Francisco: Wiley.