Efficiency implies cost-effectiveness, but cost-effectiveness does not imply efficiency. Explain this statement.
Alex and Zoe,
I start by highlighting the diction Alex used at the beginning of his answer: “to have an efficient policy in place, the resources (cost) that go in to developing, enforcing, and regulating the policy have to be worth the anticipated outcome (benefits). On the other hand, a cost-effective policy may not be directed at the appropriate result (Field and Field 2017, 189)”. The answer accurately explains why efficiency implies cost-effectiveness but cost-effectiveness does not imply efficiency. Further, efficiency implies effectiveness as a precursor to implying cost-effectiveness.
I am also particularly fond of his comprehensive description of costs which include developing, enforcing and regulating policy. In the case monitoring is not built into the policy’s business model, is an unforeseen cost and cannot be implemented, it is unclear whether the policy achieved anticipated benefits. For example, inadequate ecological monitoring results in it being “almost impossible” to determine the effectiveness of the $US15 billon river restoration programs in the USA (Lidenmayer et al. 2012). Without accurately understanding effectiveness, it is impossible to measure efficiency.
Zoe phenomenally outlined various ways of measuring efficiency such as Gross Domestic Product (GDP), Green GDP and Gross National Happiness (GNH). The various indicators emphasize effectiveness measurements are based upon the values of the study’s purpose. The definition of efficiency can only be written for a given scenario after determining the group intended to experience the anticipated benefits. For example, do the researchers value preservation and promotion of culture? If so, then they must measure efficiency in terms of GNH as opposed to GDP. Further, the degree to which a program is cost-effective varies between populations. For example, energy efficiency programs impact a wide array of groups. In Geneva, Switzerland, researchers evaluated whether energy efficiency programs are cost-effective from various perspectives including the program administrators, program participants, the utility companies and society as a whole. Despite energy efficiency programs being cost-effective in terms of employment and increased GDP, they are not efficient for the utility companies (Yushchenko and Patel 2017). There are definitely instances requiring a certain environmental policy is designed to support efficiency from the perspective of specific stakeholders. On the other hand, the study informs the need to strengthen a program so it achieves greater social efficiency instead of only greater equity for a select group.
The Australian Environmental Stewardship Program defines efficiency as incorporating biodiversity conservation into sustainable agriculture production systems with a cost-effective method (Lidenmayer et al. 2012). The program uses auctions for contracting individual land managers to conserve threatened ecological communities. Then, researchers measured the degree to which the program is cost-effective by studying the program’s initial project which targeted the critically endangered White Box-Yellow Box-Blakely’s Red Gum Grassy Woodland and Derived Native Grassland community in south eastern Australia. The authors collected data regarding the costs of experimental design, site establishment, field survey and data analysis. Further, they measured the costs of monitoring are roughly 8.5% of the program’s investment in the first four years and “hence are in broad accord with the general rule of thumb that 5–10% of a program’s funding should be invested in monitoring” (Lidenmayer et al. 2012). Incentivizing the land managers and implementing the cost of monitoring into the equation enabled the researches to increase effectiveness and aim for a total, annual cost-efficiency of 23% (Lidenmayer et al. 2012). The authors advise other researchers to provide evidence of program effectiveness early on and then examine opportunity to lower cost.
Lindenmayer, David, Charles Zammit, Simon Attwood, Emma Burns, Claire Shepherd, Geoff Kay, and Jeff Wood. 2012. “A Novel and Cost-Effective Monitoring Approach for Outcomes in an Australian Biodiversity Conservation Incentive Program”. Journal of PLOS One.
Yushchenko, Alisa, Martin Patel. 2017. “Cost-effectiveness of energy efficiency programs: How to better understand and improve from multiple stakeholder perspectives”. Journal on Energy Policy. Vol. 108 pp. 538-550.
Comment by Professor Scott Thomas:
Glad that you discussed the importance of budgeting for adequate monitoring. This is sometimes under-funded. It is not uncommon for a capital investment under a grant program to cover implementation of a program for a short period, and then continuance of the program is a local responsibility. If the original program included funding for monitoring, that is often the first thing to be cut once the subsidy is gone. The same thing happens for federal agencies when a park or forest or military installation receives initial funding for a project or program, then must continue funding operations and maintenance locally.