Allocations among programs having counteractive outcomes

Abstract

Difficulties have been encountered in attempting to apply benefit-cost analysis to the problem of determining resource allocations among social programs, especially when there are multiple outcomes associated with each of the programs. Further complications result when program outcomes are characterized as counteractive: a specific allocation of resources to a program is likely to achieve a favorable impact regarding certain objectives while that allocation is also likely to have an unfavorable impact regarding other objectives. A model which promises to be useful in determining optimal resource allocations among programs having counteractive outcomes is presented. Two steps are required for the use of the model: (1) values, reflecting priorities, need to be assigned to the various objectives that programs are intended to accomplish and (2) an ensemble of probabilistic functions relating resources to program outcomes needs to be specified and combined to reflect the value of an ensemble of programs. In addition to determining optimal resource allocations, the model provides insights into the consequences of resource decisions based on noneconomic considerations. An example illustrates the major features of the model.