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National and local pressures to improve student achievement, to implement educational reforms, to increase services to "at risk" students, and to monitor the size of education budgets all function as motivators for educators to consider the use of cost analysis in decisions about resource allocation. Yet the application of cost-benefit and cost-effectiveness analyses in education is limited. The authors explore the advances in cost-benefit and costeffectiveness analyses that have been made in the human services, health, and medical fields, and they identify the difficulties and analyze the issues involved in applying these analyses in education. They make recommendations for assessing costs and measuring effectiveness in educational evaluations, discuss the strengths and weaknesses of several exemplar cost-benefit and cost-effectiveness educational studies, and provide a protocol to guide future analyses.
KEYWORDS: accountability, cost-benefit, cost-effectiveness, economic evaluation.
Why invest in education? It is widely believed that using public money to provide education will benefit society at large by generating increased wealth, improved employment opportunities, and reductions in social problems (Carnoy, 1994; Hy, 2000). However, competing policy alternatives and the necessity of raising funds for education through taxes test this belief. Recently, researchers have demonstrated that increased money can make a positive difference in student achievement (Greenwald, Hedges, & Laine, 1996; Verstegen & King, 1998). Establishing a clear link between funds spent on education and specific student achievement outcomes has proved difficult and controversial (Hanushek, 1989, 1994; Hedges, Laine, & Greenwald, 1994). Researchers have cautioned policymakers that unless the issue of how money is spent is addressed, simply allocating more money to education will not necessarily result in increased student achievement or the reduction in pressing inequities and inefficiencies in the delivery of educational services. Furthermore, to make informed decisions about how best to allocate funds, educational decision makers need more complete information on the relation between expenditures and student achievement outcomes that includes details of how services are delivered (Chambers, 1999).1
Educators can look to the field of economics for methods for organizing data and for procedures that provide linkage between resource inputs and outcomes. Economic evaluation that broadly considers how to optimize the production of particular outcomes within budgetary constraints, given certain inputs, can guide such choices (Barnett, 1993; Chambers, 1999). More specifically, economic evaluation...