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Levin on Cost-Effective Analysis in Education

The educational sector of the U.S. is second in size only to the health care sector in terms of its use of national resources, said Henry M. Levin, William Heard Kilpatrick Professor of Economics and Education and Director of the National Center for the Study of Privatization in Education (NCSPE). It is considerably larger than the military sector. Since so much money is dedicated to education, cost-effectiveness evaluation is a big concern.

The Second Edition of Cost-Effective Analysis: Methods and Applications (Sage Publications, Inc.), a book by Levin and Patrick J. McEwan of University of Illinois at Urbana-Champaign, helps researchers and evaluators to discover if a particular program or policy has attained maximum effectiveness for a given budget.

"Cost-effective analysis is a method of comparing alternatives for their relative costs and results. Also it's a way of establishing guidelines on how alternative ideas can affect costs," said Levin. "It differs from cost-benefit analysis, which measures the dollar amounts of how different ways of using resources impacts cost."

Some of the areas covered by the book are the nature of costs, including how to identify, measure and distribute costs; measuring effectiveness, utility, and benefits; and lastly the challenges to incorporating evaluations in the decision-making process.

In many areas of education, it is difficult to measure the values of improvements in market terms or benefits, explained Levin in his lecture titled, "Waiting for Godot: Cost-Effectiveness Analysis in Education." However, he said, "it is possible to measure academic achievements and other measures of school quality. Cost-effective analysis enables measures of learning as well as other appropriate indicators to be used to assess educational outcomes relative to costs."

Levin stresses that cost-effective analysis "should be viewed as helpful in guiding decisions, but not in determining the decisions." There are many other factors that need to be considered in making these decisions.

There are three basic steps to designing and implementing a cost analysis. First, the resources or ingredients must be identified for each alternative. Once the ingredients are defined, monetary value can be determined for each. Finally, those figures can be calculated to estimate the total cost of each alternative.

This type of analysis emerged in the 1960s as an important method for choosing among costly weapons, said Levin. Eventually, it made its way from the Pentagon to other government agencies when Lyndon Johnson required that budgetary requests had to tie mission and goals to costs. Later, these techniques were refined and they became more user-friendly.

Levin said that education has not benefited from this method as has the area of healthcare. There seems to be little research or literature on studies of cost-effective analysis in education.

In order to open up the world of cost-effective analysis to a wider audience, Levin and McEwan illustrate its use with examples. At the end of each chapter they recommend readings and provide a comprehensive bibliography of sources at the end of the book.

The authors wanted the book to give "a technically correct presentation and accessibility to someone without rigorous training."

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