Cost Benefit Analysis with Applications to Animal Health Programmes: Basics of CBA

This discussion paper is one of a series of six papers which brings together both cost-benefit analysis methodology and the problems and issues in evaluation of regional and national animal health programs. Cost-benefit analysis (CBA) is a powerful economic technique for evaluating public sector investments, evaluating proposed research projects and programs, estimating the economic impact of new regulations, predicting the economic impacts of resource exploitation and conservation programs, and a variety of other applications. Applying CBA to animal health issues is a challenging task which, with a few notable exceptions, economists have avoided. Economic approaches to the study of animal health have many similarities with economics of public health. Livestock industries are vital in many developing countries for their food, fibre and other products, export revenue earnings and provision of draft and transport. In addition to their private costs, livestock diseases and pests have important externality costs to communities and nations. Eradication of particular diseases can allow access to high-priced foreign markets. Effects of improved animal health can be subtle and may take a number of years to be fully realised. They present particular measurement difficulties. Studies of the economic desirability of animal health programs have frequently overlooked important cost and benefits items, for example, the benefits which accrue to consumers from lower prices and better quality meat products. Like it or not, cost considerations will continue to play a part in determining what animal health initiatives can be funded. Also, it is usually necessary to present a thorough economic evaluation to decision-makers when seeking funding. This paper examines the economic logic underlying such an analysis, and makes suggestions on how it can be carried out.