Sometimes, the term cost is used to describe economic losses or burdens. For example, a policy discussion might draw attention to the “cost of school failure” or the “cost of juvenile delinquency.” This usage may be confusing. These are not costs in the sense of resources expended to provide an educational intervention. Instead, they are burdens or losses caused by not implementing effective educational interventions. The so-called cost of juvenile delinquency is what is spent on the juvenile justice system, not what is spent on educational programs to reduce delinquency. As such, this “cost” is better understood as the economic benefits from overcoming school failure or reducing juvenile delinquency. (Even then, it is sometimes an inaccurate measure of benefits because it includes both preventive and remedial expenditures; see the discussion of defensive expenditures in Chapter 9.)
3.3. Costs and the Theory of Change
The analyst must identify, and then calculate, all resources involved in “making the intervention work.” In practice, identifying all resources requires detective work and a thorough understanding of the intervention. To help acquire this understanding, it is helpful to think about the costs of an intervention in relation to its theory of change (for an example with a resilience program for youth, see Crowley, Jones, Greenberg, Feinberg, & Spoth, 2012).
The primary cost will be the actual delivery or implementation of the program within its educational setting. For example, a school might purchase a new math curriculum, so the costs will be all the resources required to teach children using this new curriculum. It should include all the preparatory resources needed to ensure that the program can be implemented, such as training of teachers in the new curriculum and changes to the school schedule.
This implementation cost must be related to the resources required for the alternative or counterfactual program. The alternative might entail no resources, but this must be established by the researcher. For example, a pull-out reading program for struggling third-grade students will require resources, but the students remaining in class are now in a smaller group and may receive more personalized instruction. Also, many struggling readers do already receive additional learning supports, and these may not be available if the student is pulled out of the classroom. The researcher must measure the resource use that is additive, beyond what would have otherwise been received.
Strictly, we think of costs as the costs to provide the program or implement the policy and to make sure it works. We do this so that a policymaker can understand what resources are actually needed for implementation. However, there are often other costs associated with educational interventions.
Induced costs are those arising from behavioral change after an intervention has been implemented. These induced costs should be examined in relation to the theory of change: They are the changes in resource use associated with the mediators of an intervention (Bowden, Shand, Belfield, Wang, & Levin, 2016; Chandra, Jena, & Skinner, 2011; Weiss, Bloom, & Brock, 2014). For instance, career academies are intended to help students get better jobs (Maxwell & Rubin, 2000). We can estimate the incremental cost of a career academy over an alternative youth training program; this would be the direct implementation cost. However, career academies often encourage students to stay in school longer, after which they get even better jobs. Whereas the delivery cost is the amount of resources needed to implement a career academy education, the induced cost is the cost of staying in school longer. If we are interested in the full cost of career academies, we should account for these induced costs. (These induced costs are sometimes referred to as indirect or mediated costs; for BC analysis, they are better thought of as negative benefits; see Chapter 9.)
In fact, when viewed in the context of their theory of change, many interventions explicitly anticipate these induced costs. Often, interventions begin with a diagnosis of educational need or a foundational treatment, which then leads to further services. These additional services are the mediator through which the program is effective.
For example, interventions to change remedial education lead to new college pathways; a new placement test might reassign students to fewer remedial classes, saving on resources as well as boosting college completion rates (see Scott-Clayton, Crosta, & Belfield, 2014). One prominent example is simplification of the FAFSA college aid application process (Bettinger, Long, Oreopoulos, & Sanbonmatsu, 2012); this simplification helped students apply for college and so induced them to attend and make progress in college. Student counseling and informational interventions work in the same way (Castleman, Page, & Schooley, 2014), and financial incentives in the first semester boost credit-taking in later semesters (Barrow, Richburg-Hayes, Rouse, & Brock, 2014).
Also, much of the research literature on school choice should be appraised in light of its induced costs: giving families a choice of school is likely to mean they will choose a school with a different—increased—level of school resources (Hsieh & Urquiola, 2006). These interventions affect students directly, but they also place students on a different educational or developmental pathway—and this new pathway has resource consequences. Finally, we can think of interventions that induce new resources outside the school. For example, the federal early childhood program Head Start has been found to influence parental time: Head Start children receive more help from their parents at home (Gelber & Isen, 2013; for a similar family-mediated effect with the Chicago Child-Parent Center program, see Reynolds, Ou, & Topitzes, 2004). These family resources mediate the effect of Head Start on longer-term outcomes. From a social perspective, these family resources are a cost.
For many interventions, therefore, it is important to estimate these induced costs and distinguish them from the costs of the intervention. In fact, these costs might be larger than the cost of delivering the intervention. Nevertheless, if the theory of change is clearly specified, these induced resources will be an explicit part of how the intervention is expected to work.
Another cost that is often neglected is raising funds to pay for a program. The ingredients might include the “deadweight loss” associated with raising funds to support the program (Haveman & Weimer, 2015). The deadweight loss is the distortion in other markets. For example, a city may wish to implement a new public school program in a city funded through a local sales tax. This tax will distort consumption decisions away from the taxed goods, leading to a deadweight loss or marginal excess tax burden (METB). Estimates of the METB for the United States are approximately 13% (Allgood & Snow, 1998)—that is, to generate $100 in funds for a program imposes a distortion of $13. Other countries may have larger METBs. If every public program imposes a deadweight loss, then the incremental effect may be very small. However, the size of the loss depends on how the tax is levied and at what level of government. It is important to check that the necessary funding for a given education program does not impose large distortions.
One other cost that is often ignored is that of reallocation of resources from one program to another. Often, school personnel assume that there is no cost because the shifts came from inside the school. But there is an opportunity cost if the shifted resources were producing valued outcomes in the previous program—that is, the cost is the value of the resources in their previous use, which is likely to be nonzero.
3.4. Costs Data and Budgetary Information
A very common question often arises: Why should we go to all this trouble to estimate costs? Almost all social programs have budgets and expenditure statements, which presumably contain expenditure data that can be used to address the cost issues. However, there are many reasons why budgetary information is inadequate for cost analysis.
First, although the existence of budgets is universal, the assumption that they will contain all the cost information that is needed is usually erroneous. First, budgets often
