Skills

Policy Cost-Benefit Analysis

8 weeks · 0 milestones

Conduct a cost-benefit analysis for a real government, NGO, or institutional decision — named and documentable, not a hypothetical scenario. Document your assumptions, discount rate choice, sensitivity analysis, and conclusions. Proof is the CBA document plus a written review by an economist or policy practitioner who challenges at least one benefit categorisation, cost estimate, or key assumption — your written response to their critique, engaging with each specific point raised, is a required part of the proof artifact.

Part of: Social Sciences, Law & Humanities · Proves for: UG

Milestone map

3 milestones

Identify policy options and define the CBA framework

4 weeks

Select a real documented policy question where multiple options are under genuine consideration — an infrastructure investment, a public health intervention, an environmental regulation, or a social programme — from a government consultation document, a published policy review, or a think-tank policy paper. Define the cost-benefit analysis framework: the scope of the analysis (whose costs and benefits are included), the time horizon, the discount rate and its justification, and at least three policy options to compare including a 'do nothing' baseline.

Proof required

CBA framework document (500+ words) identifying the real policy question with its source, defining the scope (whose costs/benefits included), time horizon, discount rate with justification, and at least three policy options including a do-nothing baseline.

What gets checked

Policy question is from a real documented source — not invented
Discount rate is stated with a specific justification — not just 'I used 3.5%'
At least three options including a do-nothing baseline are defined with enough specificity to be costed

Common mistakes

Omitting a do-nothing baseline — CBA only makes sense relative to what would happen without the policy intervention
Not justifying the discount rate — the discount rate has a large effect on the NPV of long-term policies and must be justified, not assumed
Setting scope too narrowly — a CBA that excludes externalities (environmental, health, distributional) often misses the most important costs

Powstik Guide

A 500-word CBA framework for a real policy question.

Steps

State the policy question and source.
Define scope and time horizon.
List options, including doing nothing.
Choose and justify a discount rate.

Template

Question (source):
Scope:        Horizon:
Options:
Discount rate and why:

What gets sent back

No do-nothing option.
Discount rate unjustified.
Under 500 words.

Resources

Foundationstart here

Depthgo deeper

What a verifier looks for

Confirm the policy question is from a real documented source — request the citation
Review the discount rate — confirm it is stated with a specific justification
Check the options list — confirm a do-nothing baseline is included

You'll sign in first, then come straight back here.

Quantify costs and benefits and calculate net present values

5 weeks

Populate the CBA framework with real quantified estimates: direct costs (capital, operating, administrative), direct benefits (time savings, health outcomes, productivity), and where possible, monetised externalities (environmental, social). Calculate the Net Present Value (NPV) and Benefit-Cost Ratio (BCR) for each option using the defined discount rate. Document all assumptions explicitly and perform a sensitivity analysis on the two or three most influential assumptions.

Proof required

CBA spreadsheet (or equivalent table) with NPVs and BCRs for all options, plus a written analysis (400+ words) documenting key assumptions, data sources for monetised values, and sensitivity analysis showing how conclusions change under alternative assumptions.

What gets checked

NPV and BCR are calculated for all options using the defined discount rate — not just for the preferred option
All monetised values have stated data sources — not assumed without citation
Sensitivity analysis tests at least two assumptions and documents whether the ranking of options changes

Common mistakes

Monetising costs but not benefits (or vice versa) — a CBA with asymmetric monetisation systematically biases the result
Not citing sources for monetised externality values — shadow prices and value of statistical life estimates vary substantially by source
Sensitivity analysis that only changes values by ±1% — realistic sensitivity analysis should test assumptions at their plausible extremes, not small perturbations

Powstik Guide

A costed CBA with NPVs and a real sensitivity test.

Steps

List every cost and benefit per option and year.
Monetise benefits as carefully as costs.
Cite a source for every shadow price used.
Discount to NPV and compute benefit-cost ratios.
Vary the two assumptions that matter most.

Template

| Item | Option | Year | Value | Source |
|------|--------|------|-------|--------|

Discount rate and why:
| Option | NPV | BCR |
|--------|-----|-----|
Sensitivity: assumption / low / high / does ranking change?

What gets sent back

Costs monetised but benefits not.
Shadow prices with no source.
Sensitivity tests on minor inputs only.

Resources

Foundationstart here

Depthgo deeper

What a verifier looks for

Review the spreadsheet — confirm NPV and BCR are calculated for all options, not just the preferred one
Check monetised values — confirm each has a stated data source
Review sensitivity analysis — confirm it tests at least two assumptions at plausible extremes

You'll sign in first, then come straight back here.

Defend CBA methodology and conclusions under economist or policy practitioner challenge

1 week

Present the CBA to an economist or senior policy analyst for a Q&A challenge. The reviewer must probe specific methodology decisions — 'your discount rate — why not use the social discount rate?', 'you've treated this cost as certain but it has significant variance — why?', 'your sensitivity analysis shows the ranking flips under alternative assumptions — why do you still recommend option B?'. Document the challenges and your responses. This Q&A satisfies the ADVERSARIAL VERIFICATION RULE for social-* outcomes.

Proof required

Q&A notes (250+ words) documenting the reviewer's credentials (economist or senior policy analyst), at least three specific methodology challenges, your responses, and any assumption changes or analysis updates committed to based on the session.

What gets checked

Reviewer is an economist or senior policy analyst with CBA or policy evaluation experience
At least three specific methodology challenges are documented — not general approval
At least one assumption or analysis update is committed to based on the session

Common mistakes

Choosing a reviewer who approves the structure without engaging with the specific assumptions
Not being able to explain a monetised value under challenge — 'I found it online' is not a sufficient answer for a CBA assumption
Not revising anything after the Q&A — in a well-conducted adversarial session, at least one assumption will need updating

Powstik Guide

Your CBA, challenged by an economist or policy analyst.

Steps

Prepare the source for every monetised value.
Justify your discount rate choice.
Book an economist or senior policy analyst.
Ask for three challenges to specific assumptions.

Template

Challenge session log
Date:            Duration:
Reviewer name:
Reviewer role and credentials:

Challenge 1 (a discount rate or monetised value):
  What they asked:
  My answer:
  Did it hold?
Challenge 2:
  What they asked:
  My answer:
  Did it hold?
Challenge 3:
  What they asked:
  My answer:
  Did it hold?

Update I am committing to:

What gets sent back

'I found it online' as a source defence.
A reviewer who approves the structure only.
No assumption changed after the session.

Resources

Foundationstart here

Depthgo deeper

What a verifier looks for

Confirm reviewer credentials — economist or senior policy analyst with CBA or evaluation experience
Review Q&A notes — confirm at least three specific methodology challenges are documented
Check that at least one assumption or analysis update is documented based on the session

You'll sign in first, then come straight back here.

Part of

Prove Your Economics Chops →

Related outcomes

Milestone map

3 milestones

Identify policy options and define the CBA framework

4 weeks

Proof required

What gets checked

Policy question is from a real documented source — not invented
Discount rate is stated with a specific justification — not just 'I used 3.5%'
At least three options including a do-nothing baseline are defined with enough specificity to be costed

Common mistakes

Omitting a do-nothing baseline — CBA only makes sense relative to what would happen without the policy intervention
Not justifying the discount rate — the discount rate has a large effect on the NPV of long-term policies and must be justified, not assumed
Setting scope too narrowly — a CBA that excludes externalities (environmental, health, distributional) often misses the most important costs

Powstik Guide

A 500-word CBA framework for a real policy question.

Steps

State the policy question and source.
Define scope and time horizon.
List options, including doing nothing.
Choose and justify a discount rate.

Template

Question (source):
Scope:        Horizon:
Options:
Discount rate and why:

What gets sent back

No do-nothing option.
Discount rate unjustified.
Under 500 words.

Resources

Foundationstart here

Depthgo deeper

What a verifier looks for

Confirm the policy question is from a real documented source — request the citation
Review the discount rate — confirm it is stated with a specific justification
Check the options list — confirm a do-nothing baseline is included

You'll sign in first, then come straight back here.

Quantify costs and benefits and calculate net present values

5 weeks

Proof required

What gets checked

NPV and BCR are calculated for all options using the defined discount rate — not just for the preferred option
All monetised values have stated data sources — not assumed without citation
Sensitivity analysis tests at least two assumptions and documents whether the ranking of options changes

Common mistakes

Monetising costs but not benefits (or vice versa) — a CBA with asymmetric monetisation systematically biases the result
Not citing sources for monetised externality values — shadow prices and value of statistical life estimates vary substantially by source
Sensitivity analysis that only changes values by ±1% — realistic sensitivity analysis should test assumptions at their plausible extremes, not small perturbations

Powstik Guide

A costed CBA with NPVs and a real sensitivity test.

Steps

List every cost and benefit per option and year.
Monetise benefits as carefully as costs.
Cite a source for every shadow price used.
Discount to NPV and compute benefit-cost ratios.
Vary the two assumptions that matter most.

Template

| Item | Option | Year | Value | Source |
|------|--------|------|-------|--------|

Discount rate and why:
| Option | NPV | BCR |
|--------|-----|-----|
Sensitivity: assumption / low / high / does ranking change?

What gets sent back

Costs monetised but benefits not.
Shadow prices with no source.
Sensitivity tests on minor inputs only.

Resources

Foundationstart here

Depthgo deeper

What a verifier looks for

Review the spreadsheet — confirm NPV and BCR are calculated for all options, not just the preferred one
Check monetised values — confirm each has a stated data source
Review sensitivity analysis — confirm it tests at least two assumptions at plausible extremes

You'll sign in first, then come straight back here.

Defend CBA methodology and conclusions under economist or policy practitioner challenge

1 week

Proof required

What gets checked

Reviewer is an economist or senior policy analyst with CBA or policy evaluation experience
At least three specific methodology challenges are documented — not general approval
At least one assumption or analysis update is committed to based on the session

Common mistakes

Choosing a reviewer who approves the structure without engaging with the specific assumptions
Not being able to explain a monetised value under challenge — 'I found it online' is not a sufficient answer for a CBA assumption
Not revising anything after the Q&A — in a well-conducted adversarial session, at least one assumption will need updating

Powstik Guide

Your CBA, challenged by an economist or policy analyst.

Steps

Prepare the source for every monetised value.
Justify your discount rate choice.
Book an economist or senior policy analyst.
Ask for three challenges to specific assumptions.

Template

Challenge session log
Date:            Duration:
Reviewer name:
Reviewer role and credentials:

Challenge 1 (a discount rate or monetised value):
  What they asked:
  My answer:
  Did it hold?
Challenge 2:
  What they asked:
  My answer:
  Did it hold?
Challenge 3:
  What they asked:
  My answer:
  Did it hold?

Update I am committing to:

What gets sent back

'I found it online' as a source defence.
A reviewer who approves the structure only.
No assumption changed after the session.

Resources

Foundationstart here

Depthgo deeper

What a verifier looks for

Confirm reviewer credentials — economist or senior policy analyst with CBA or evaluation experience
Review Q&A notes — confirm at least three specific methodology challenges are documented
Check that at least one assumption or analysis update is documented based on the session

You'll sign in first, then come straight back here.