1

 The final version of the paper can be found in the British Journal of Education
Studies, 62/4 373-91 at http://dx.doi.org/10.1080/00071005.2014.969190

Education and the Rationale of Cost-Benefit Analysis

By: Tal Gilead

Introduction:
Questions related to technical efficiency, namely, maximizing output with given resources, are
high on the agenda of educational policymakers (Meyer, 1998). This is especially true today in
light of growing financial constraints and public demand for increased accountability.
Economists have developed a number of procedures aimed at measuring and enhancing technical
efficiency, the most influential of which is, undoubtedly, cost-benefit analysis (CBA). Designed
to facilitate rational decision-making by systematically weighing the advantages and
disadvantages of possible courses of action, CBA currently plays a key role in public policy-
making and is widely applied in a variety of domains such as law, health and safety,
environmental protection and agriculture (M. D. Adler & Posner, 2006; Kornhauser, 2000).
Although so far the use of CBA in education has remained limited, a change is being felt (Levin,
2001). In the last two decades, the World Bank, UNESCO and the OECD have increasingly
integrated CBA into educational policymaking (Vawda, Moock, Price Gittinger, & Patrinos,
2003). Moreover, many economists, academics and policymakers now call to further expand the
use of CBA in this area. For example, a recent report by the European Expert Network on
Economics of Education, which is a think tank that is sponsored by and advises to the European
Commission, Directorate General Education and Culture, states that 'Wider use of good quality
CBAs/CEAs would surely be a step in the right direction to improve policy-making in the area of
education within EU-Member States' (Müinch & Psacharopoulos, 2014, p.57).

While there is at present a significant body of literature dealing with the technical issues
surrounding the use of CBA in educational settings (e.g. Blaug, 1968; Hough, 1994; Hummel-
Rossi & Ashdown, 2002; Woodhall, 2004), little attention has been paid to examining the more
 2

fundamental question of how and when CBA should be used in educational policymaking. This
stands in sharp contrast to the extensive discussion on these questions in other areas, such as law,
health, and environmental protection (e.g. Ackerman & Heinzerling, 2001; M. D. Adler &
Posner, 2006; Self, 1975). Given this gap, my aim in this article is to critically examine CBA’s
appropriateness as a guide to educational policymaking. To this end, I draw on relevant literature
in other fields to identify a number of important theoretical issues stemming from the
embracement of CBA and examine them in light of education’s unique features. My main
argument is that the rationale guiding CBA has some fundamental limitations when applied in
educational settings and that these render the use of CBA in educational policymaking beneficial
only under certain restrictive circumstances. These circumstances are presented and discussed. I
conclude by suggesting that when these specific circumstances are not present, CBA should not
be accepted as a guide for improving educational efficiency because it is bound to misrepresent
the real value of different policy options and thereby lead policymakers astray.

The remainder of the article is divided into five sections. In the first section, I clarify what I
mean by CBA in the context of the article and introduce the rationale and principles guiding it. In
the second section, I provide a very brief account of how CBA is currently used in the
educational sphere. In the third section, I discuss some of CBA’s limitations as a decision-
making procedure. I explain why CBA should not be seen as a definitive guide to educational
policymaking but only as a tool providing additional information supporting it. In the fourth and
main section of the article, I ask under what conditions the results of CBA should inform
educational policymaking. It is suggested that due to inherent problems in the valuation of
educational benefits, and CBA's reliance on an aggregation of outcomes and inability to properly
account for positive aspects of unpredictability, there are many cases in which it is less than
advisable to take the results of CBA into consideration, as they can be systematically biased. In
the final section, I present some conclusions regarding the appropriate use of CBA in educational
settings.

Before I proceed, however, two important clarifications are in order. Firstly, this article does not
aim to provide a comprehensive critique of the general philosophical framework underlying
 3

CBA, or of the policy orientation CBA leads to. CBA is grounded in a positivistic and
technocratic view of educational policy, which places an important emphasis on efficiency.
Since, however, there is a vast literature examining these general issues (e.g. Cope & I’Anson,
2003), they will not be addressed here. The aim of the present article is more limited: it focuses
specifically on CBA, and discusses some philosophical issues and practical challenges directly
emerging from employing this particular procedure in educational settings. Secondly, since the
aim here is to examine how and when CBA should be used rather than the way it is used, the
focus is on the rationale underlying CBA rather than on the way CBA is currently implemented
in educational settings. For this reason, the article mainly draws on literature discussing the
principles underlying CBA, both in educational and non-educational settings, rather than on
existing CBA research.

The Logic of Cost-Benefit Analysis

There are a number of economic procedures employed in educational policymaking involving a
systematic comparison of costs and results (Levin, 1983). Among these an important distinction
can be drawn between procedures designed to inform decision-making regarding how to achieve
predefined outcomes in the most efficient way, and those designed to guide decision-making
across different possible outcomes.1 The focus of the current article is on the second category in
which all methods entail three necessary steps: 1) the quantification of the various costs and
benefits stemming from possible courses of action, 2) the conversion of all these quantities into a
scale on which different types of costs and benefits can be compared, and 3) the calculation of
the relative value of every possible option in terms of the chosen scale (Wolff, 2006). The most
prevalent economic procedure for choosing between different possible outcomes is standard
CBA, in which both cost and benefits are converted to and presented in monetary terms. Other
procedures, however, are also in use. The most common among them is cost-utility analysis
(CUA) where costs are set in monetary terms and benefits are measured in terms of utility
(Levin, 1983). Since the philosophical rationale underlying the procedures in the second category
is fairly similar, for the sake of convenience I refer to them here as CBA, and will differentiate
between them only when necessary.
 4

At the base of every CBA lies the identification and evaluation of all relevant costs and benefits
(Hough, 1994). To do so effectively, however, requires first that the perspective from which the
analysis takes place be defined. It must be made clear whether CBA is conducted from the
standpoint of certain individuals, specific groups, or society as a whole (S. W. Barnett, 1993).
After this has been established, costs must be calculated. Since in order to provide an accurate
picture of existing possibilities, cost estimation in CBA must be as comprehensive as possible,
calculation of not only money expenditure, but also what economists term ‘opportunity costs’ is
required. When resources are invested in a certain way, they are not invested in other ways, yet
having invested them differently might also have yielded benefits. For example, by deciding to
build a school instead of a park we forfeit the benefits the park would have provided. Economists
argue that forgone benefits of the best available alternative must also be taken into account when
calculating costs (Rice, 1997). Moreover, many of the resources consumed do not normally
appear as educational expenditures. A well-known example of this is the time spent by students
in class or by parents and volunteers in schools. When CBA is conducted, the unaccounted-for
resources and costs must be identified and monetized. Since, as we have just seen, estimation of
educational costs is often complicated there is substantial literature dealing with the complexities
and possible pitfalls involved (Levin, 1983; Monk & King, 1993; Rice, 1997; Tsang, 1997;
Woodhall, 2004).

On the other side of the equation are the benefits. Here it is required that all relevant benefits be
identified, valuated, quantified, converted into a single scale, and then aggregated and compared.
Ideally, calculation of benefits should take into account all private and social outcomes both
economic and non-economic. Valuation of benefits (especially non-economic ones),
quantification of benefits, placement of benefits on a single scale and aggregation of benefits are,
however, all highly complicated matters, which give rise to serious difficulties. Since these
difficulties will be examined at length later in the article, I will not elaborate on them here. For
the time being, I would like to discuss two central issues that pervade estimation of both costs
and benefits and examine how economists deal with them. This is important, since the way in
which economists deal with these issues forms an integral and important part of the rationale
guiding CBA.
 5

The first issue has to do with the fact that CBA often involves the estimation of future outcomes,
and these cannot be fully predicted. Here economists normally draw an important distinction
between two categories referring to unknown results: risk and uncertainty. Risk is a condition in
which the exact future results are unknown but probabilities can be assigned to each possible
result. Uncertainty, on the other hand, arises when the probabilities of future results are
undetermined. In CBA, different ways have been developed of dealing with risk. It is commonly
assumed that risk has to be compensated for through greater benefits or lower costs, that is, the
higher the risk, the better the potential outcomes have to be in order to make a course of action
worthwhile. Uncertainty, by contrast, cannot be incorporated into CBA because it undermines its
logic by rendering the computation of costs and benefits impossible. Accordingly, different
methods have been devised to assign probabilities to cases of uncertainty, thereby transforming
them into risk (see: Mishan & Quah, 2007). For obvious reasons, these tend to rely on
conservative estimates that convert uncertainty into a relatively high degree of risk.

The second issue is that CBA has to account for the effects of time (S. W. Barnett, 1993). Since
costs and especially benefits often spread over long periods of time, and since the value of
things, and especially money, fluctuates over time, the value of costs and benefits must be
adjusted to reflect their timing. Normally, economists tend to regard the passing of time as
reducing the value of benefits, and the more immediate the benefits, the greater the value usually
assigned to them. The process of adjusting the value of cost and benefits to their timing is
referred to in the economic literature as ‘discounting’.

Once costs and benefits have been identified, quantified, converted into a single scale on which
they can be compared, and adjusted to account for the effects of time and risk, they can be
aggregated and the cost/benefit ratio can be calculated. In theory, the calculation of the
cost/benefit ratio should enable a ranking of possible options according to their level of
efficiency by indicating the surplus of benefits over costs for every option.

On the Current Use of CBA in Education

 6

Application of economic methods of analysis in the educational sphere has been relatively
limited compared to other fields, such as health, transport and environmental protection.
According to Levin (2001), this is mainly due to various technical difficulties (especially with
measuring benefits), insufficient training of researchers, and a low demand for it amongst
policymakers. Yet, it seems the wind is gradually shifting. The establishment in 2007 of the
Center for Benefit-Cost Studies of Education at Teachers College, Columbia University, as well
as the World Bank and the OECD's growing use of economic methods in setting educational
policy, are just two indications, among many, of the transformation taking place. CBA is, of
course, only one of the methods of economic analysis used in education, and not necessarily the
most common. The employment of other methods of cost analysis, such as CEA, which are
designed to adjust means to pre-prescribed outcomes rather than choose between different
possible outcomes, is also becoming more widespread. A good example of the use of this type of
method is a recent study by a group of researchers, which analyzes the efficiency of seven
different programs that aim to improve the literacy of very young children (kindergarten to third
grade) (Hollands et al., 2013). Employing economic methods, the study calculates the cost-
effectiveness of the programs, namely, the ratio between gains in literacy and monetary costs,
and points to the best available options (Hollands et al., 2013).

The use of CBA in education, however, is also gradually expanding, and CBA has been
conducted and employed in a variety of ways. Most commonly, CBA has been used in its most
basic form, which seeks to establish the monetary cost-benefit ratio of an existing policy or
project. For example, in his renowned study on the Perry pre-school program, Barrnett estimated
the financial costs and returns of investing in this program offered to Afro-American families of
an impoverished socioeconomic background (W. S. Barnett, 1985). Relying on a longitudinal
study of the participants and a control group, he calculated the profitability of the Perry pre-
school program by using multiple sources of data, including data on potential future earnings,
levels of delinquency and welfare payments (W. S. Barnett, 1985). Concluding that the Perry
pre-school program has been a profitable investment from both a public and private perspective,
Barnett recommended that similar pre-school programs should be more widely implemented (W.
S. Barnett, 1985). In addition, CBA has also taken more complex forms that incorporate non-
 7

monetary costs and benefits or compare existing educational policies or programs. For example,
in an important study that does both, Lewis et al. (1994), conduct a CUA that analyzes the cost
utility-ratio of three educational programs offered in Minnesota for students with substantial
disabilities. In this study, the costs are measured in a standard way and the utility of the benefits
is arrived at by identifying the relevant stakeholders, ascertaining from them the most significant
aspects of the programs (students participation in school life, satisfaction with the program,
accomplishments of the program, the program process) and assigning these aspects appropriate
weight. By collecting data on the most significant aspects of the program, the study then goes on
to establish the utility derived from each program and calculates its cost-utility ratio in order to
compare them (Lewis et al., 1994). In this study, as in most of the cases in which CBA is
conducted on existing educational interventions or policies, the aim is not just to assess how well
existing programs or policies function, but to provide future recommendations regarding what
ought to be done.

In recent decades and especially since the mid-1990s, CBA has also been used to estimate the
merits of future educational projects and policies. Although there are many similarities between
CBA studies that examine existing educational interventions and those that examine future ones,
there is a fundamental difference between them. While the former’s primary aim is to assess
policy, the latter are primarily designed as an aid to determining future policy. Here too, CBA is
most commonly employed to estimate the cost-benefit ratio of a single project or policy. A good
example of such a study can be found in the project appraisal submitted to the World Bank in
2004 as a part of a request to authorize a substantial loan for reforming the education system of
the state of Pernambuco in Brazil.2 This CBA estimated that due to the predicted reduction of
class repetitions to be achieved by the reform, the reform would yield a high return for the
investment. Even though at present CBAs of future educational interventions only rarely contain
an appraisal of alternative options, it can still play an important role in determining policy. When
compared to each other, CBAs of single interventions become an important source of
information for policymaking bodies, such as the World Bank, which have to choose between
different educational options.
 8

As can be seen from the brief account presented above, CBA, assuming various forms, already
plays a role in educational policy formation. For example, CBA has been conducted for about
40% of the World Bank's educational projects (Jimenez & Patrinos, 2008). More significantly for
us, however, while the role of CBA has so far been relatively limited, there is a growing call by
academics and policymakers to further expand its use in determining educational policy. While it
is commonly acknowledged that in its current form CBA has some serious limitations, it is
argued that if a better understanding of the social and private outcomes of education is to be
achieved, then CBA could, as stated in a World Bank research paper, "greatly improve
educational policy-making" (Jimenez & Patrinos, 2008). Conveying a similar view, the OECD
has clearly stated that one of its key objectives in the educational domain is to explore the
‘systematic application of different cost-benefit approaches, using common parameters and
assumptions . . . [in order] to make them more reliable as policy tools’(Schuller & Desjardins,
2007, p. 129). The OECD has also already made a vast investment in measuring both the
monetary and non-monetary costs and benefits of education. The questions then arise of how far
the use of CBA in educational policymaking should be expanded and what role CBA should play
in it. It is to these questions that we turn now. We will begin by examining the extreme view
according to which CBA can serve as a definitive guide to policy making (Hubin, 1994).

The Limitations of CBA as a Decision-Making Procedure

The idea that CBA could be used as a definitive guide to educational policymaking is vulnerable
to a number of severe criticisms. To begin with, CBA, in its standard incarnations, is designed to
maximize efficiency and overlooks questions of distributive justice (Ackerman & Heinzerling,
2001). Similarly, CBA's emphasis on producing desired outcomes in the most efficient way
renders it blind to violations of rights (Kelman, 1992). These criticisms, however, may be
countered by rendering CBA sensitive to both distribution and rights. CBA can incorporate
equity values of some sort by attributing, for example, a greater significance to every pound (or
its equivalent) gained by the poor (Cowen, 1998). It can also be made to reflect a concern for
rights by, for example, placing an exceptionally high price-tag on their violation (Nussbaum,
2000). This, nevertheless, comes at a cost. It makes CBA more controversial by infusing it with
conceptions of justice or rights, which by their very nature tend to be contentious (Copp, 1987).
 9

Moreover, once consideration of distribution, justice and rights are introduced, CBA moves
‘away from its role as an ‘efficiency watchdog’’ (Cowen, 1998, p. 16). For these reasons, it is
usually held that CBA should not transcend questions of pure efficiency and that instead its
results should be weighed against and balanced by other decision rules specifically suited to deal
with questions of distributions, justice and rights (M. D. Adler & Posner, 2006; Copp, 1987;
Frank, 2000).

Another fundamental criticism is that CBA, being essentially a method of consequential

evolution, which assesses options on the basis of their expected outcomes, collapses processes
into results (Tribe, 1992). Although there are ways in which different aspects of processes can
come to be reflected in CBA, this has to be done in end-result terms. Yet, there are cases in
which the value of the process is independent of its results. Education is arguably one of them. In
education there is a long standing-tradition that views the process as the heart of education and
maintains that education has to be justified on the basis of process rather than outcomes (Carr,
1992). According to this tradition, education has an intrinsic value and must not be regarded as
instrumental in achieving external aims (Reid, 1998). It is, of course, hard to see how CBA can
contribute to education when such a view is adopted, but even if education is to be judged mainly
on the basis of its products, as it often is, educational decisions must remain sensitive to the
question of process. As Biesta (2007) argues, in education there is often a gap between the most
efficient procedure and the procedure most desirable from an educational standpoint, because
education is also a moral practice. The question of what makes something educationally
appropriate has been answered in countless ways throughout the years and cannot be resolved
here, but two examples can help illustrate the point made above. Firstly, brainwashing might
often be the most effective way to achieve an educational objective, but few liberal
educationalists would consider it appropriate since they normally conceive of education as
aiming to develop the child's understanding (Peters, 1973). Secondly, educational productivity
can in many cases be increased by reducing or eliminating unproductive educational activities,
such as play. Since, however, doing so can turn education into a strenuous activity, thereby
reducing the likelihood that pupils will enjoy it, educators tend to deem it educationally
inappropriate (Halpin, 2008). Educational policymaking, it follows, must not be reduced to
 10

considerations of instrumental effectiveness, but rather should also tackle questions related to
ethical consistency and educational appropriateness that cannot be adequately dealt with within
the framework of CBA (Elliott, 2001). This does not necessarily mean that questions of
educational appropriateness should always trump questions of efficiency, but the former must at
least be taken into consideration when policy is set, and CBA is not designed to do so.

In conclusion, since CBA cannot deal easily with questions of rights, distribution, ethical
consistency and educational appropriateness, it must be recognized that it is a limited tool for
educational policymaking. Unless one assumes that only efficiency matters, an assumption that
can hardly be embraced by educational policymakers, CBA does not necessarily point to the
most desirable educational option. Accordingly, it can be argued that CBA should be seen as a
vital policy tool, which provides crucial information on the efficiency of given courses of action,
but that this information should be balanced against other significant considerations as part of a
broader decision-making procedure. In practice, it is this position that is commonly embraced by
those who advocate increased use of CBA in educational policymaking. Adopting this position
makes the use of CBA seem hardly controversial. After all, what could be wrong with providing
the educational policymaker with the extra information ascertained through CBA? It is to this
question that we turn now.

Some Fundamental Problems with Using CBA to Inform Educational Decisions

Even when CBA is viewed as only one element in a wider decision-making procedure, rather
than a definitive guide to educational policymaking, its value depends on its ability to provide
advantageous insights. If, however, there are circumstances in which CBA tends to yield
recommendations that misrepresent the real value of educational options, then it should not be
used in such circumstances at all. In this section, I deal with three issues that significantly limit
the circumstances under which the use of CBA, or the results it produces, are advisable in
educational settings.

Valuating Outcomes
 11

Difficulties related to the estimation and measurement of educational outcomes pose what is
perhaps the most salient obstacle to applying CBA in education (Jimenez & Patrinos, 2008). One
possible course of action is to confine CBA to what can be directly and objectively evaluated in
monetary terms. Since, however, as acknowledged by Levin and McEwan (2002, p. 3), two
ardent proponents of the economic analysis of education, only a small fraction of education’s
potential outcomes can be directly and objectively monetized, this option necessarily yields
partial and distorted results. Take, for example, the question of the contribution of education to
the improvement of health that has been high on the OECD’s policymaking agenda (Schuller &
Desjardins, 2007). While it is possible to objectively monetize education’s contribution to health
by calculating such results as saving in health expenditure, enhanced worker productivity, etc., it
still provides an incomplete understanding of education’s potential contribution. The
improvement of health achieved by education can also greatly improve quality of life, self-
esteem, social connections and many other factors that cannot be objectively monetized (Schuller
& Desjardins, 2007). By restricting CBA, then, to outcomes that are objectively monetizable,
such outcomes are assigned inordinate significance while many other important educational
benefits are excluded. As a result, even in cases such as health, in which many benefits are
monetizable, CBA is liable to produce a biased assessment of the value of projects or policies.
Although CBA that relies exclusively on objectively monetizable outcomes may potentially
include some important information about the effects of education, many have argued that given
the biases it produces it is bound to lead policymakers astray rather than assist them (Woodhall,
2004).

Another possible course of action is to attempt to make CBA as comprehensive as possible, since
ideally it should include all identifiable outcomes (Hansson, 2007). Economists, especially in the
last three decades, have devoted increasing attention to estimating and measuring all forms of
educational outcomes. Following developments in welfare economics, considerable
advancements have been made in measuring both the economic and non-economic private
benefits of education. Important work has been done, for example, on education’s effects on
market productivity, health, fertility, leisure, crime, consumption and various other factors (e.g.,
Haveman & Wolfe, 1984; McMahon, 2000). Measuring the public benefits of education,
 12

especially non-economic ones, has proven to be more elusive. Nevertheless, there is presently a
concentrated effort being made by the OECD and other bodies to develop new tools for
measuring education’s impact on political stability, democratic participation, public health,
social cohesion and other public benefits (Schuller & Desjardins, 2007).

Complications, however, emerge once CBA is extended to include educational effects that
cannot be objectively monetized. To begin with, in other fields various objections have been
raised to monetizing non-monetary outcomes. It has been argued, inter alia, that putting a price
tag on certain things, such as human life, environmental protection and artistic sensibility, is
inappropriate and automatically devalues them (see: Anderson, 1993; Kelman, 1992; Schmidtz,
2001). In addition, and more significantly, when CBA is extended to outcomes that are not
objectively monetizable, values must be assigned since they cannot be directly inferred. This, in
turn, is done by determining the values of benefits on the basis of their relative importance. For
example, in their aforementioned CUA of programs for students with disabilities, Lewis et al.
(1994) have asked parents and other stakeholders to determine what are the most significant
elements of the programs and to rank them according to their utility. In another CBA study,
Escobar et al. (1988) have calculated the monetary value of pre-school programs for handicapped
children by investigating how much parents say they would be willing to pay for them. When
these methods are used, and values are assigned rather than objectively calculated, CBA can
provide a much broader and more accurate picture of the benefits, but it comes at the cost of
infusing CBA with a strong element of subjective judgment. This, of course, renders CBA less
rigorous because it is no longer based on explicit replicable procedures (Levin, 1983). While the
first difficulty presented above can be avoided relatively easily by expressing benefits in terms of
utility instead of money, namely, by a shift from CBA to CUA, the second cannot. When values
must be assigned rather than inferred, either in monetary or utility terms, CBA and CUA are
necessarily reliant upon a strong subjective element.

A second set of complications emerges from the fact that notwithstanding all the advances made
in measuring the outcomes of education, many important ones still elude measurement. While it
can be expected that in time methods of measuring some of these benefits can be developed, it is
 13

widely recognized that there are important educational benefits, such as moral development, that
simply cannot be measured accurately (White, 1999). Furthermore, it has been claimed that in
some cases, such as in art education, the mere attempt to measure outcomes could undermine the
educational process and therefore should be avoided (Boughton, 2004). The existence of
significant benefits that cannot or should not be measured, however, presents a dilemma
regarding how to account for them. If they are ignored, as is often the case in practice, CBA will
still provide systematically biased results. If, on the other hand, they are incorporated into CBA,
they introduce a strong element of arbitrariness.

It follows that in applying CBA or CUA in education, the problems stemming from measurement
and valuation of benefits cannot be completely overcome, and each course we take has marked
shortcomings. The aim in recent years has been to find ways of incorporating into CBA or CUA
educational costs and benefits that cannot be directly and objectively monetized, even at the
price of subjectivizing these types of analysis (OECD, 2001). This takes educational CBA a long
way from standard economic CBA, but considering the limitations and biases the latter produces,
such a move can be defended. Extending the measurement of all forms of costs and benefits,
then, is an important step towards rendering CBA educational. Yet, it must not be forgotten that
education has important benefits that cannot or should not be measured. These are often
disregarded in CBA, but mistakenly so from an education perspective. When the relative number
of these costs and benefits is low, and when we possess a solid basis for assessing them without
measuring, there is no reason they should not be incorporated into CBA in the same way that
unmonetizable benefits are, namely, on grounds informed by judgments. On the other hand,
when these benefits and costs are unclear and their relative number is high, they should not be
disregarded and cannot be productively incorporated because the results CBA will produce are of
low validity. In these cases, CBA should not be used, because whether we incorporate these
outcomes into CBA or not, it will provide a poor guide for policy. In these cases educational
investments should be based not on the basis of efficiency but rather on other considerations,
such as what we think we ought to invest in.

Reliance on a Single Scale to Produce a Single Value

 14

In order to facilitate rational decision-making across different possible outcomes, CBA demands
more than just valuating benefits. It requires that benefits be placed on a single scale, aggregated
and then compared. In the case of standard CBA, a monetary scale is used. This makes benefits
not only comparable among themselves but also comparable with costs. In the case of CUA, all
benefits are measured in terms of utility and are comparable with each other but not with costs.
Yet any reliance on a single scale to compare educational benefits, be it in monetary or utility
terms, opens the door to additional problems that go beyond questions of measurement and
valuation.

One important set of objections to the use of a single scale for measuring educational benefits is
grounded in the notion of incommensurability. Employed in various different ways in the
literature, this concept highlights at least three possible difficulties with rendering benefits
comparable by placing them on a single scale (M. Adler, 1998). Firstly, incommensurability
suggests that in some cases educational benefits simply cannot be compared, either because a
common scale for judging them is not available or because comparison is so complex that it
cannot yield significant results (Ben-Amitai, 2006). It may be claimed, for example, that it is
impossible to compare the benefits of educating a good citizen to those of educating an artist
because they are just too different. Secondly, incommensurability implies that although some
benefits can be placed on a single scale and compared, doing so necessarily distorts or alters the
value assigned to them (Richardson, 1997; Sunstein, 1994). For example, our judgment of moral
education might be affected by what we compare it to. Since comparing it to science or
citizenship education changes the perspective from which we examine the value of moral
education, it can lead us to different conclusions regarding not only the relative value of moral
education but also its absolute value. This is especially true since in CBA the value of many
educational benefits is subjectively determined. Finally, there may be cases in which the very act
of comparison itself is perceived as wrongheaded because it leads us to think of things in an
inadequate way (M. Adler, 1998). In a famous example, Raz (1986, p. 352) argues that although
it might be possible to evaluate friendship in monetary terms, people tend to refuse to do so
because they feel that the very act undermines the notion of friendship. Similarly, in education,
the value of the humanities could be compared to that of professional training, but the refusal of
 15

many to do so is significant, because it is an indication of the special position they accord the
humanities.

By highlighting the problems involved in using a single scale to measure benefits (or costs),
incommensurability poses a serious challenge to the use of CBA in educational settings. It leads
to the conclusion that since CBA relies on a single scale, there are many cases in which it should
not be performed, cannot be performed, or will produce distorted or biased results. Those
defending CBA, however, maintain that in the real world we cannot accept the idea of
incommensurability. For example, Robert Frank (2000, p. 914) writes that ‘Scarcity is a simple
fact of the human condition. To have more of one good thing, we must settle for less of another.
Claiming that different values are incommensurable simply hinders clear thinking about difficult
trade-offs.’ According to defenders of CBA, the need to draw comparisons between seemingly
incommensurable goods is a necessary feature of decision-making, and a scale can always be
found on which to so (Ben-Amitai, 2006). They conclude that the need to deal with
incommensurability is a feature of policymaking in general and not only CBA, and must,
therefore, not be accepted in itself as an argument against the use of the latter (M. Adler, 1998;
Hansson, 2007). While there is a grain of truth to this claim, it disregards the fact that CBA,
given its mathematical nature, is especially sensitive to difficulties and biases arising from the
attempt to place disparate goods on a single scale. CBA does more than just compare different
options; it calculates their exact relative value. In light of the aforementioned problems involved
in using a single scale, it is hard to see how CBA can reliably do so. The results of CBA, it
follows, might often misrepresent the relative value of different options and thereby misinform
policymakers.

Moreover, there are different sorts of difficulties that arise from the reliance of CBA on an
additive framework. In order to transform multidimensional decisions into unidimensional ones,
after placing benefits on a single scale, CBA adds together, often using appropriate weights,
various forms of benefits (and costs) to produce a single value (Sen, 2000). What is significant
for CBA, then, is the total value of a course of action rather than the internal division of the
different values of which it is composed. This means that higher-level benefits in some domains
 16

can compensate for a lower-level ones, or even a complete lack of benefits, in others (Hansson,
2007). From an educational perspective, however, the additive framework is problematic. Low
achievements in history cannot always be compensated for by higher achievements in
mathematics, and a failure in moral education surely cannot be compensated for by greater
development of cognitive skills. Education's success depends not so much on the maximization
of the cost-benefit ratio as on achieving the right balance between different sorts of benefits.
Consequently, when education cannot be reduced to the achievement of a single and clearly
defined objective, the attempt to maximize the cost-benefit ratio might lead educational policy
astray and produce sub-optimal results from an educational perspective. In such a case, CBA
might not provide valuable information to policy makers but rather systematically mislead them.

Predicting Future Results

Prediction is an inseparable part of CBA. As Hansson (2007, p. 171) writes, ‘in order to assess
alternatives we need to determine, for each of these alternatives, the future developments that
will follow, if it is chosen.’ The reliance of CBA on prediction raises a number of significant
issues, the primary one being whether accurate predictions can be made. In the literature,
questions have been put forward regarding the ability to produce reliable predictions in the
educational domain. Cziko (1989), for example, argues that such factors as the indeterminacy of
human behavior and existence of individual differences necessarily render educational
predictions inaccurate. Moreover, in recent years, it has been increasingly maintained that
education is a complex system characterized by unpredictability, given its unclear boundaries,
non-linear dynamics, constant restructuring and the vast number of variables simultaneously
influencing it (Radford, 2008). Nevertheless, although such claims have led to a growing
recognition that educational predictions might have their limits, their use is still widespread and
forcefully defended. Experience, it is claimed, shows us that when dealing with large numbers,
educational predictions can prove to be very useful (Lehrer, Serlin, & Amundson, 1990;
Morrison, 2008). Moreover, current policy discourse is dominated by the idea that the key to
educational improvement lies in rendering education more controllable and predictable by
making it evidence-based, namely, grounded in empirical data obtained through quantitative and
preferably experimental research (Phillips, 2006). This general debate surrounding educational
 17

prediction, which goes well beyond the use of CBA, cannot, however, be resolved here. My
focus, therefore, is on issues related to prediction that emanate directly from the use of CBA.

CBA is not designed to deal with unpredictability. Since CBA cannot incorporate uncertainty, it
has to either exclude unpredictable outcomes or find ways of dealing with them as if they were
predictable. In order to treat uncertainty as predictable, it is modeled in CBA as risk, and the
higher the degree of uncertainty, the greater the negative effect it has on the value of outcomes
(Mishan & Quah, 2007). Although in dealing with possible negative outcomes of education
compensating for any increase in uncertainty by assigning it a high price tag might be suitable,
doing the same for the potentially positive outcomes of education is more problematic. This is
due to the fact that unpredictability can in fact have a positive value in education. Let me
explain.

Following MacIntyre (1992), a distinction can be drawn between unpredictability resulting from
chance or complexity and that resulting from an inability to predict radical conceptual
innovations. According to MacIntyre (2007), it is impossible to predict with any degree of
precision great advances in knowledge, conceptual breakthroughs or revolutionary inventions
because predicting them in an accurate way in effect entails making them. In order to predict the
invention of the wheel, he writes, we need to say what the wheel is and to do so is to invent it
(MacIntyre, 2007, p. 93). Products of this type of unpredictability, however, are often a highly
desired outcome of education. One key aim of education, especially at its higher levels, is to lay
the foundations leading to these kinds of unpredictable results. Moreover, one must not go as far
as radical inventions and conceptual breakthroughs. As Eisner (1983) argues, in many domains,
education should yield behavior and products that are original, novel, creative and therefore
unpredictable. There are many cases, he writes, in which the specification, determination and
prediction of the end results of education are not only impossible but also undesirable (Eisner,
1983). In education, then, unpredictability may have a negative value but it may sometimes also
have a positive one. The main problem in this regard is that CBA fails to accommodate the
possibility that unpredictability might be desirable.
 18

The result of dealing with uncertainty by assigning it a negative value is that many unpredictable
but positive outcomes of education are systematically underrated and thus a bias against them is
created. When we add to this the fact that the unpredictable negative outcomes of education are
dealt with by placing a high price tag on them, CBA can discourage investments in which there
are many unpredictable results and lead to conservative patterns of education. This will
especially affect investment in areas in which the average return is low but where unpredictable
positive outcomes can have far-reaching positive consequences for individuals or societies. The
inability, then, of CBA to properly deal with uncertainty should limit the domains in which it is
used to those in which unpredictability is not likely to have a significant and positive educational
value.

Conclusions
CBA is a powerful tool. As noted by Ackerman and Heinzerling (2001, p. 1583) ‘Once a cost-
benefit analysis is performed, its bottom line number offers an irresistible sound bite that
inevitably drowns out more reasoned deliberation.’ It is, therefore, extremely important that
CBA be used only under appropriate circumstances. In this article, I have argued that CBA
should not be seen as a determining guide to educational policy making and that its results must
be balanced against other significant considerations related to distribution, rights, and
educational appropriateness. Moreover, I have asserted that the results of CBA should be
incorporated into educational policymaking only under specific conditions. When the number of
benefits (or costs) that cannot or should not be measured or predicted is relatively high, when the
unpredictability of outcomes is likely to have a considerable positive aspect, or when the internal
balance between outcomes is significant, CBA should not be employed because it is bound to
have distorted and misleading results. Since in education one of these conditions is almost
always present, CBA should be used to inform policy decisions only in a limited number of
instances in which the desired outcomes are largely measurable, can be predetermined and are of
a fairly similar nature. Proceeding as if all educational programs meet these conditions by only
bringing into CBA that which is measurable and predictable and by disregarding how different
types of outcomes are interconnected, can prove, for reasons discussed in this article, to have a
detrimental impact on educational policy. Unfortunately, as CBA is increasingly used in the
 19

educational domain, this seems to be the direction in which we are heading. Before policymakers
expand the use of CBA in educational settings any further it is important that they fully
understand the limits of this method and take them into consideration.

Finally, while this article has focused specifically on CBA, many of the questions discussed here
could have broader implications. Today, education is increasingly viewed as an economic
investment, and from an economic perspective, all investment decisions should be at least
informed, if not guided, by the rationale underlying CBA. The points made here regarding
measurement of educational outcomes, unpredictability, aggregation of outcomes and the
limitations of CBA as a decision-making procedure, therefore, constitute a serious challenge to
the idea that education should be approached as an investment (regardless of whether or not a
formal CBA has not been conducted). Moreover, the challenges presented in this article to the
use of CBA in educational settings raise serious question regarding the adequacy of the common
view among policymakers that educational decision should ideally be taken on the basis of
rational calculations. As suggest here, the policymakers desire to make educational policy
rational can easily lead to biases which are detrimental from an educational perspective. It is
crucial, I think, that those concerned with educational policy be aware of the limits of applying
the rationale guiding CBA to education. I hope that this article has taken one step towards
deepening this understanding.

Acknowledgements
I would like to thank the anonymous referees of this article for their very helpful comments and
suggestions. I would also like to thank the Spencer Foundation for its support of the research that
led to this article [Grant 20150042].

Endnotes
1
Cost-efficiency analysis provides a good example of a procedure belonging to the first category. The aim of cost-
efficiency analysis, which is the most commonly used procedure in this category, is to examine how one specific
outcome, such as improving grades, can be achieved most efficiently. Cost-efficiency analysis, however, cannot
serve as a guide for decision-making when different possible outcomes are involved because it does not provide a
way to compare them.
2
For the full project proposals, which include detailed CBA studies, and for more on the World Bank’s use of CBA
in these and other projects, see:
 20

http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTEDUCATION/0,,contentMDK:20754638~menuPK:
2448286~pagePK:210058~piPK:210062~theSitePK:282386~isCURL:Y~isCURL:Y,00.html

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