What is a cost-effectiveness analysis?

is an economic evaluation tool that can be used to compare two or more programs or interventions. " It seems like a good program, but is it cost-effective? " is a question that is often asked about education programs. This article is designed to provide you with background information on cost-effectiveness analysis that may be helpful when responding to this question in relation to Reading Recovery or other program choices. Policy makers and administrators are concerned about being fiscally responsible for how dollars are spent on education programs and so they question costs; teachers are concerned about teaching programs that really have an impact on children's academic performance , and so they question effectiveness. Bringing these two viewpoints together in resource allocation decision making can be difficult. Some programs are highly effective, but their costs appear to make them too expensive. At the same time, evaluations of a program's effectiveness often focus on a narrow range of outcomes. Access to a full picture of a program's costs relative to the total scope of its outcomes would provide a stronger basis for decision making. In this environment an evaluation tool like cost-effectiveness analysis would appear to have much to recommend it as an aid to decision making. Surprisingly however, the story of cost-effectiveness analysis of education programs in the United States is less than gripping. The following discussion clarifies what cost-effectiveness analysis involves, describes how cost-effectiveness analysis has been applied in other public service sectors, examines some of the constraints to using this evaluation tool in education, and considers how we can move forward in the application of cost-effectiveness analysis in resource allocation decision making. What is cost-effectiveness analysis? Cost-effectiveness analysis is an economic evaluation tool that can be used to compare two or more programs or interventions. The product of this kind of analysis is cost-effectiveness ratios that represent the trade-off between each program's costs (measured in dollars) and each pro-gram's outcomes (measured in appropriate units). The ratio will show for every dollar spent how much student achievement will be gained or retentions prevented, depending on the goals of the program. Levin (1983) and Levin and McEwan (2001) provide excellent examples of cost-effectiveness ratios and how to interpret them. It should be noted that programs can only be compared if they have similar goals and use outcome measures that can be compared. How widespread is the use of cost-effectiveness analysis …