CEA Policy Evaluation and Analysis 3 — Questions and Answers
Question 1: In policy analysis, 'satisficing' (as described by Herbert Simon) suggests that decision-makers:
- Optimize across all possible policy alternatives simultaneously
- Choose the first option that meets a minimum acceptability threshold (Correct answer)
- Defer decisions until complete information is available
- Maximize expected utility subject to political constraints
Correct answer: Choose the first option that meets a minimum acceptability threshold
Simon's bounded rationality concept holds that decision-makers settle for a satisfactory solution rather than exhaustively searching for the optimal one.
Question 2: Which evaluation criterion asks whether a policy produces its intended outputs efficiently using minimum resources?
- Effectiveness
- Equity
- Efficiency (Correct answer)
- Sustainability
Correct answer: Efficiency
Efficiency evaluates whether the policy achieved outputs at the lowest feasible input cost, distinguishing it from effectiveness (did it work) and equity (who benefited).
Question 3: A 'theory of change' in program evaluation serves primarily to:
- Provide the statistical model linking inputs to outcomes
- Articulate the causal logic connecting program activities to intended impacts (Correct answer)
- Set the counterfactual baseline against which outcomes are compared
- Document the legal authority under which the program operates
Correct answer: Articulate the causal logic connecting program activities to intended impacts
A theory of change maps how program inputs and activities are expected to produce outputs, outcomes, and ultimate impacts through specified causal mechanisms.
Question 4: Sensitivity analysis in cost-benefit analysis is used primarily to:
- Adjust discount rates for inflation over the policy horizon
- Test how conclusions change when key assumptions are varied (Correct answer)
- Compare the CBA results across different policy alternatives
- Identify which stakeholder groups bear the largest net costs
Correct answer: Test how conclusions change when key assumptions are varied
Sensitivity analysis varies uncertain parameters (discount rates, elasticities, benefit values) to determine whether the sign or magnitude of net benefits is robust.
Question 5: The 'multiplier effect' argument for public spending suggests that a $1 increase in government expenditure leads to:
- Exactly $1 increase in GDP in the long run
- A GDP increase greater than $1 due to induced private spending rounds (Correct answer)
- A GDP increase less than $1 due to crowding out of private investment
- No change in GDP because Ricardian equivalence holds perfectly
Correct answer: A GDP increase greater than $1 due to induced private spending rounds
The Keynesian multiplier arises because initial government spending becomes income for others who re-spend a portion, amplifying the total demand effect.
Question 6: Which type of policy evaluation occurs during program implementation to allow mid-course corrections?
- Ex ante evaluation
- Summative evaluation
- Formative evaluation (Correct answer)
- Meta-evaluation
Correct answer: Formative evaluation
Formative evaluation provides ongoing feedback during implementation to improve program design and delivery before final outcomes are assessed.
Question 7: The 'broken windows' theory as applied to policy analysis illustrates which evaluation concept?
- Threshold effects where small environmental cues trigger larger behavioral changes (Correct answer)
- The diminishing returns to additional law enforcement spending
- Positive feedback loops between economic growth and crime reduction
- Displacement of crime from treated to adjacent untreated areas
Correct answer: Threshold effects where small environmental cues trigger larger behavioral changes
The broken windows theory posits that visible signs of disorder signal permissiveness, triggering cascading behavioral responses and illustrating non-linear threshold dynamics.
CEA Policy Evaluation and Analysis 3
In policy analysis, 'satisficing' (as described by Herbert Simon) suggests that decision-makers: