ECONOMICS OF EDUCATION: What is the cost-effectiveness? How does it impact the teaching-learning process?



8b iii). Outline the cost-effectiveness approach


Cost-effectiveness analysis was developed in the 1950s by the United States Department of Defense

Used as a device for judge among the demands of the various branches of the armed services for increasingly costly weapons systems with different levels of performance and overlapping missions

Cost-effectiveness analysis refers to the consideration of decision alternatives in which both their cost and consequences are taken into account in a systematic way.

It is a decision-oriented tool, in that it is designed to ascertain which means of attaining particular educational goals are most efficient.

For example, there are many alternative approaches for pursuing such goals as raising reading or mathematics achievement.

These include the adoption of

  • New materials or curriculum,
  • Teacher training,
  • Educational television,
  • Computer-assisted instruction,
  • Smaller class sizes, and so on.

The cost-effective solution to this challenge is to ascertain the costs and effects on reading or mathematics achievement of each alternative and to choose that alternative which has the greatest impact on raising achievement scores for any given resource outlay.

Cost-effectiveness analysis is closely related to cost-benefit analysis in that both represent economic evaluation of alternative resource use and measure costs in the same way.

However, cost-benefit analysis is used to address only those types of alternatives where the outcomes can be measured in terms of their monetary values.

The purpose of cost-effectiveness analysis in education is to ascertain which program or combination of programs can achieve particular objectives at the lowest cost.

The underlying assumption is that different alternatives are associated with different costs and different educational results.

By choosing those with the least cost for a given outcomes, society can use its resources more effectively.

Those resources that are saved through using more cost-effective approaches can be devoted to expanding programs or to other important educational and social endeavors.

To assess effectiveness one must answer the following questions:

  1. What is the decision problem?
  2. How do we measure effectiveness,
  3. Which alternatives are being considered and
  4. What their effects

Both CBA and CEA involve a systematic comparison between cost and outcomes; however, there is an important difference between the two techniques.

  1. CBA relies on monetary measures of both cost and benefits.
  2. The most  common way of measuring direct benefits of education is to compare the earnings of the people with different levels or types of education
  3. Where benefits or outcomes cannot be measured or even approximated in monetary terms.

CEA compares alternatives such as different types of schools e.g. public versus primary vocational, different combinations of inputs(teachers, books, and other learning materials) or different educational programmes in term of their effectiveness, measured by variables such as examination results, test scores, retention or completion rates.


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