This approach directly incorporates distributional or equity concerns into .the efficiency calculations. However, it is not clear what weights should be applied. Should benefits to low-income groups be weighted twice, five times, or one half as heavily as benefits to high-income groups? This approach also makes the estimation of program costs directly dependent on the method of financing the project. Many have argued that these issues should remain separate. In a review of seventy-one health care studies, Olsen and Smith (2001) found that only sixteen explicitly recognized the equity aspects of the willingness-to-pay criterion and most of these were the earliest studies reviewed. Of the twelve studies published since 1990 that recognized distributional issues, five were by the same author and two were by one other. Olsen and Smith (2001, 46) com mented that "had it not been for them, explicit equity considerations would
seem to have vanished completely in these studies."
As with cost-effectiveness analysis, discussed in the previous chapter, cost benefit analysis involves a "with and without" comparison, as opposed to a "before and after" comparison (Haveman and Weisbrod 1983). Analysts attempt to calculate the benefits and costs of having the program, and then to compare these with what would happen without the program (the counterfac tual). Thus, if a program provides job skills and training to teenagers, the increased wages these individuals will earn over their lifetime in contrast to what they would have earned otherwise may be considered some of the bene fits of the program. Tills calculation is more complex than simply examining wages before and after the program. 1b.is example also illustrates the fact that the benefits and costs of a program may extend many years into the future. A teenager's working life may be forty years or more, while the life of a physical investment project may exceed one hundred years. Thus, cost-benefit analysis and cost-effectiveness analysis involve not only the technical details of benefit and cost estimation, but also the projection and comparison of dollar values over time. In the previous chapter, we discussed the use of a discount rate to calculate the present value of a future stream of benefits or costs.
.An advantage of cost-benefit analysis compared to cost-effectiveness and cost-utility analyses is that cost-benefit analysis allows for comparison among a broader range of alternatives, because both outcomes and costs are measured in dollar terms. Cost-benefit analysis attempts to measure the value of all pro gram outcomes. In cost-effectiveness and cost-utility analyses, costs are com pared with one outcome at a time (i.e., the cost per infection prevented or the cost per quality-adjusted life year gained). This theoretical advantage may not actually be observed inpractice. Olsen and Smith (2001) reviewed seventy-one empirical studies in health care to evaluate the types of benefits being esti
mated. They found that only seventeen studies described health outcomes