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Structural brain correlates of childhood trauma with replication across two large, independent community-based samples
- Rebecca A. Madden, Kimberley Atkinson, Xueyi Shen, Claire Green, Robert F. Hillary, Emma Hawkins, Emma Såge, Anca-Larisa Sandu, Gordon Waiter, Christopher McNeil, Mathew Harris, Archie Campbell, David Porteous, Jennifer A. Macfarlane, Alison Murray, Douglas Steele, Liana Romaniuk, Stephen M. Lawrie, Andrew M. McIntosh, Heather C. Whalley
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- Journal:
- European Psychiatry / Volume 66 / Issue 1 / 2023
- Published online by Cambridge University Press:
- 26 January 2023, e19
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Introduction
Childhood trauma and adversity are common across societies and have strong associations with physical and psychiatric morbidity throughout the life-course. One possible mechanism through which childhood trauma may predispose individuals to poor psychiatric outcomes is via associations with brain structure. This study aimed to elucidate the associations between childhood trauma and brain structure across two large, independent community cohorts.
MethodsThe two samples comprised (i) a subsample of Generation Scotland (n=1,024); and (ii) individuals from UK Biobank (n=27,202). This comprised n=28,226 for mega-analysis. MRI scans were processed using Free Surfer, providing cortical, subcortical, and global brain metrics. Regression models were used to determine associations between childhood trauma measures and brain metrics and psychiatric phenotypes.
ResultsChildhood trauma associated with lifetime depression across cohorts (OR 1.06 GS, 1.23 UKB), and related to early onset and recurrent course within both samples. There was evidence for associations between childhood trauma and structural brain metrics. This included reduced global brain volume, and reduced cortical surface area with highest effects in the frontal (β=−0.0385, SE=0.0048, p(FDR)=5.43x10−15) and parietal lobes (β=−0.0387, SE=0.005, p(FDR)=1.56x10−14). At a regional level the ventral diencephalon (VDc) displayed significant associations with childhood trauma measures across both cohorts and at mega-analysis (β=−0.0232, SE=0.0039, p(FDR)=2.91x10−8). There were also associations with reduced hippocampus, thalamus, and nucleus accumbens volumes.
DiscussionAssociations between childhood trauma and reduced global and regional brain volumes were found, across two independent UK cohorts, and at mega-analysis. This provides robust evidence for a lasting effect of childhood adversity on brain structure.
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- By Brian Abaluck, Imran M. Ahmed, Torbjörn Åkerstedt, Sonia Ancoli-Israel, Anna Anund, Donna L. Arand, Isabelle Arnulf, Fiona C. Baker, Thomas J. Balkin, Christian R. Baumann, Michel Billiard, Michael H. Bonnet, Meredith Broderick, Christian Cajochen, Scott S. Campbell, Sarah Laxhmi Chellappa, Fabio Cirignotta, Yves Dauvilliers, David F. Dinges, Christopher L. Drake, Neil T. Feldman, Catherine S. Fichten, Charles F. P. George, Namni Goel, Christian Guilleminault, Shelby F. Harris, Melinda L. Jackson, Joseph Kaleyias, Göran Kecklund, William D. S. Killgore, Sanjeev V. Kothare, Andrew D. Krystal, Clete A. Kushida, Luc Laberge, Gert Jan Lammers, Christopher P. Landrigan, Sandrine H. Launois, Patrick Levy, Eva Libman, Yinghui Low, Jennifer L. Martin, Una D. McCann, Renee Monderer, Patricia J. Murphy, Sona Nevsimalova, Seiji Nishino, Eric A. Nofzinger, Maurice M. Ohayon, Masashi Okuro, Jean-Louis Pepin, Fabio Pizza, Anil N. Rama, David B. Rye, Paula K. Schweitzer, Hideto Shinno, Renaud Tamsier, Michael J. Thorpy, Astrid van der Heide, Hans P. A. Van Dongen, Mari Viola-Saltzman, Jim Waterhouse, Nathaniel F. Watson, Rajive Zachariah
- Edited by Michael J. Thorpy, Michel Billiard
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- Book:
- Sleepiness
- Published online:
- 04 February 2011
- Print publication:
- 27 January 2011, pp vii-x
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- By Rose Teteki Abbey, K. C. Abraham, David Tuesday Adamo, LeRoy H. Aden, Efrain Agosto, Victor Aguilan, Gillian T. W. Ahlgren, Charanjit Kaur AjitSingh, Dorothy B E A Akoto, Giuseppe Alberigo, Daniel E. Albrecht, Ruth Albrecht, Daniel O. Aleshire, Urs Altermatt, Anand Amaladass, Michael Amaladoss, James N. Amanze, Lesley G. Anderson, Thomas C. Anderson, Victor Anderson, Hope S. Antone, María Pilar Aquino, Paula Arai, Victorio Araya Guillén, S. Wesley Ariarajah, Ellen T. Armour, Brett Gregory Armstrong, Atsuhiro Asano, Naim Stifan Ateek, Mahmoud Ayoub, John Alembillah Azumah, Mercedes L. García Bachmann, Irena Backus, J. Wayne Baker, Mieke Bal, Lewis V. Baldwin, William Barbieri, António Barbosa da Silva, David Basinger, Bolaji Olukemi Bateye, Oswald Bayer, Daniel H. Bays, Rosalie Beck, Nancy Elizabeth Bedford, Guy-Thomas Bedouelle, Chorbishop Seely Beggiani, Wolfgang Behringer, Christopher M. Bellitto, Byard Bennett, Harold V. Bennett, Teresa Berger, Miguel A. Bernad, Henley Bernard, Alan E. Bernstein, Jon L. Berquist, Johannes Beutler, Ana María Bidegain, Matthew P. Binkewicz, Jennifer Bird, Joseph Blenkinsopp, Dmytro Bondarenko, Paulo Bonfatti, Riet en Pim Bons-Storm, Jessica A. Boon, Marcus J. Borg, Mark Bosco, Peter C. Bouteneff, François Bovon, William D. Bowman, Paul S. Boyer, David Brakke, Richard E. Brantley, Marcus Braybrooke, Ian Breward, Ênio José da Costa Brito, Jewel Spears Brooker, Johannes Brosseder, Nicholas Canfield Read Brown, Robert F. Brown, Pamela K. Brubaker, Walter Brueggemann, Bishop Colin O. Buchanan, Stanley M. Burgess, Amy Nelson Burnett, J. Patout Burns, David B. Burrell, David Buttrick, James P. Byrd, Lavinia Byrne, Gerado Caetano, Marcos Caldas, Alkiviadis Calivas, William J. Callahan, Salvatore Calomino, Euan K. Cameron, William S. Campbell, Marcelo Ayres Camurça, Daniel F. Caner, Paul E. Capetz, Carlos F. Cardoza-Orlandi, Patrick W. Carey, Barbara Carvill, Hal Cauthron, Subhadra Mitra Channa, Mark D. Chapman, James H. Charlesworth, Kenneth R. Chase, Chen Zemin, Luciano Chianeque, Philip Chia Phin Yin, Francisca H. Chimhanda, Daniel Chiquete, John T. Chirban, Soobin Choi, Robert Choquette, Mita Choudhury, Gerald Christianson, John Chryssavgis, Sejong Chun, Esther Chung-Kim, Charles M. A. Clark, Elizabeth A. Clark, Sathianathan Clarke, Fred Cloud, John B. Cobb, W. Owen Cole, John A Coleman, John J. Collins, Sylvia Collins-Mayo, Paul K. Conkin, Beth A. Conklin, Sean Connolly, Demetrios J. Constantelos, Michael A. Conway, Paula M. Cooey, Austin Cooper, Michael L. Cooper-White, Pamela Cooper-White, L. William Countryman, Sérgio Coutinho, Pamela Couture, Shannon Craigo-Snell, James L. Crenshaw, David Crowner, Humberto Horacio Cucchetti, Lawrence S. Cunningham, Elizabeth Mason Currier, Emmanuel Cutrone, Mary L. Daniel, David D. Daniels, Robert Darden, Rolf Darge, Isaiah Dau, Jeffry C. Davis, Jane Dawson, Valentin Dedji, John W. de Gruchy, Paul DeHart, Wendy J. 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Flowers, Carole Fontaine, David Ford, Mary Ford, Stephanie A. Ford, Jim Forest, William Franke, Robert M. Franklin, Ruth Franzén, Edward H. Friedman, Samuel Frouisou, Lorelei F. Fuchs, Jojo M. Fung, Inger Furseth, Richard R. Gaillardetz, Brandon Gallaher, China Galland, Mark Galli, Ismael García, Tharscisse Gatwa, Jean-Marie Gaudeul, Luis María Gavilanes del Castillo, Pavel L. Gavrilyuk, Volney P. Gay, Metropolitan Athanasios Geevargis, Kondothra M. George, Mary Gerhart, Simon Gikandi, Maurice Gilbert, Michael J. Gillgannon, Verónica Giménez Beliveau, Terryl Givens, Beth Glazier-McDonald, Philip Gleason, Menghun Goh, Brian Golding, Bishop Hilario M. Gomez, Michelle A. Gonzalez, Donald K. Gorrell, Roy Gottfried, Tamara Grdzelidze, Joel B. Green, Niels Henrik Gregersen, Cristina Grenholm, Herbert Griffiths, Eric W. Gritsch, Erich S. Gruen, Christoffer H. Grundmann, Paul H. Gundani, Jon P. Gunnemann, Petre Guran, Vidar L. Haanes, Jeremiah M. 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Yee, Viktor Yelensky, Yeo Khiok-Khng, Gustav K. K. Yeung, Angela Yiu, Amos Yong, Yong Ting Jin, You Bin, Youhanna Nessim Youssef, Eliana Yunes, Robert Michael Zaller, Valarie H. Ziegler, Barbara Brown Zikmund, Joyce Ann Zimmerman, Aurora Zlotnik, Zhuo Xinping
- Edited by Daniel Patte, Vanderbilt University, Tennessee
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- The Cambridge Dictionary of Christianity
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- 05 August 2012
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- By Joanne R. Adler, David A. Alexander, Laurence Alison, Catherine C. Ayoub, Peter Banister, Anthony R. Beech, Amanda Biggs, Julian Boon, Adrian Bowers, Neil Brewer, Eric Broekaert, Paula Brough, Jennifer M. Brown, Kevin Browne, Elizabeth A. Campbell, David Canter, Michael Carlin, Shihning Chou, Martin A. Conway, Claire Cooke, David Cooke, Ilse Derluyn, Robert J. Edelmann, Vincent Egan, Tom Ellis, Marie Eyre, David P. Farrington, Seena Fazel, Daniel B. Fishman, Victoria Follette, Katarina Fritzon, Elizabeth Gilchrist, Nathan D. Gillard, Renée Gobeil, Agnieszka Golec de Zavala, Jane Goodman-Delahunty, Lynsey Gozna, Don Grubin, Gisli H. Gudjonsson, Helinä Häkkänen-Nyholm, Guy Hall, Nathan Hall, Roisin Hall, Sean Hammond, Leigh Harkins, Grant T. Harris, Camilla Herbert, Robert D. Hoge, Todd E. Hogue, Clive R. Hollin, Lorraine Hope, Miranda A. H. Horvath, Kevin Howells, Carol A. Ireland, Jane L. Ireland, Mark Kebbell, Michael King, Bruce D. Kirkcaldy, Heidi La Bash, Cara Laney, William R. Lindsay, Elizabeth F. Loftus, L. E. Marshall, W. L. Marshall, James McGuire, Neil McKeganey, T. M. McMillan, Mary McMurran, Joav Merrick, Becky Milne, Joanne M. Nadkarni, Claire Nee, M. D. O’Brien, William O’Donohue, Darragh O’Neill, Jane Palmer, Adria Pearson, Derek Perkins, Devon L. L. Polaschek, Louise E. Porter, Charlotte C. Powell, Graham E. Powell, Martine Powell, Christine Puckering, Ethel Quayle, Vernon L. Quinsey, Marnie E. Rice, Randall Richardson-Vejlgaard, Richard Rogers, Louis B Schlesinger, Carolyn Semmler, G. A. Serran, Ralph C. Serin, John L. Taylor, Max Taylor, Brian Thomas-Peter, Paul A. Tiffin, Graham Towl, Rosie Travers, Arlene Vetere, Graham Wagstaff, Helen Wakeling, Fiona Warren, Brandon C. Welsh, David Wexler, Margaret Wilson, Dan Yarmey, Susan Young
- Edited by Jennifer M. Brown, London School of Economics and Political Science, Elizabeth A. Campbell, University of Glasgow
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- By Phillip L. Ackerman, Neil Anderson, Jens B. Asendorpf, R. Michael Bagby, Michael Harris Bond, Gregory J. Boyle, Andrea L. Briggs, Giles St J. Burch, Turhan Canli, David Canter, Gianvittorio Caprara, Charles S. Carver, Douglas F. Cellar, Gordon Claridge, Susan Cloninger, Elisabeth D. Conradt, Philip J. Corr, Sharon Dawe, Ian J. Deary, Boele De Raad, Edward L. Deci, Colin G. DeYoung, M. Brent Donnellan, Juris G. Draguns, Marko Elovainio, Aurelio José Figueredo, David C. Funder, Paul Gladden, Rapson Gomez, Samuel D. Gosling, Jeremy R. Gray, Robert D. Hare, B. Austin Harley, Edward Helmes, Robert Hogan, Lauri A. Jensen-Campbell, Daniel Nelson Jones, Mika Kivimäki, Jennifer M. Knack, James T. Lamiell, Natalie J. Loxton, Geoff MacDonald, Gerald Matthews, Robert R. McCrae, Mario Mikulincer, Stephanie N. Mullins-Sweatt, Marcus R. Munafò, Vickie Nam, Craig S. Newmann, Rainer Reisenzein, Madeline Rex-Lear, Richard W. Robins, Michael D. Robinson, Mary K. Rothbart, Richard M. Ryan, Gerard Saucier, Michael F. Scheier, Constantine Sedikides, Phillip R. Shaver, Brad E. Sheese, Yuichi Shoda, Ronald E. Smith, Alice F. Stuhlmacher, Rhonda Swickert, Avril Thorne, David D. Vachon, Geneva Vásquez, Michele Vecchione, Seth A. Wagerman, Fiona Warren, Hannelore Weber, Thomas A. Widiger, Pedro Sofio Abril Wolf, Donna Youngs, Moshe Zeidner
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- By Graham Allan, Donna M. Allen, Irwin Altman, Arthur Aron, Donald H. Baucom, Steven R. H. Beach, Ellen Berscheid, Rosemary Blieszner, Jeffrey Boase, Tyfany M. J. Boettcher, Barbara B. Brown, Abraham P. Buunk, Lorne Campbell, Daniel J. Canary, Rodney Cate, John P. Caughlin, Mahnaz Charania, Jennie Y. Chen, F. Scott Christopher, Jennifer A. Clarke, Marilyn Coleman, W. Andrew Collins, Michael K. Coolsen, Nathan R. Cottle, Carolyn E. Cutrona, Marianne Dainton, Valerian J. Derlega, Lisa M. Diamond, Pieternel Dijkstra, Steve Duck, Pearl A. Dykstra, Norman B. Epstein, Beverley Fehr, Frank D. Fincham, Helen E. Fisher, Julie Fitness, Garth J. O. Fletcher, Myron D. Friesen, Lawrence Ganong, Kelli A. Gardner, Jenny de Jong Gierveld, Robin Goodwin, Christine R. Gray, Kathryn Greene, David W. Harris, Willard W. Hartup, John H. Harvey, Kathi L. Heffner, Ted L. Huston, William J. Ickes, Emily A. Impett, Michael P. Johnson, Deborah J. Jones, Deborah A. Kashy, Janice K. Kiecolt‐Glaser, Jeffrey L. Kirchner, Brighid M. Kleinman, Galena H. Kline, Mark L. Knapp, Ascan Koerner, Jean‐Philippe Laurenceau, Kim Leon, Timothy J. Loving, Stephanie D. Madsen, Howard J. Markman, Alicia Mathews, Mario Mikulincer, Patricia Noller, Nickola C. Overall, Letitia Anne Peplau, Daniel Perlman, Sally Planalp, Urmila Pillay, Nicole D. Pleasant, Caryl E. Rusbult, Barbara R. Sarason, Irwin G. Sarason, Phillip R. Shaver, Alan L. Sillars, Jeffry A. Simpson, Susan Sprecher, Susan Stanton, Greg Strong, Catherine A. Surra, Anita L. Vangelisti, C. Arthur VanLear, Theo van Tilburg, Barry Wellman, Amy Wenzel, Carol M. Werner, Adam R. West, Sarah W. Whitton, Heike A. Winterheld
- Edited by Anita L. Vangelisti, University of Texas, Austin, Daniel Perlman, University of British Columbia, Vancouver
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13 - Economic Impact Analysis
- Harry F. Campbell, University of Queensland, Richard P. C. Brown, University of Queensland
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- Benefit-Cost Analysis
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Summary
Introduction
A large project, such as construction of a major highway or development of a large mine, will have a significant impact on the economy. The spending in the construction and operating phases will generate income and employment, and public sector decision-makers often take these effects into account in deciding whether or not to undertake the project. An economic impact analysis is a different procedure from a cost-benefit analysis in that it attempts to predict, but not evaluate, the effects of a project. Since the data assembled in the course of a cost-benefit analysis are often used as inputs to an economic impact analysis the two types of analyses tend to become related in the minds of decision-makers and may be undertaken by the same group of analysts.
In this Chapter we survey briefly three approaches to economic impact analysis: the income multiplier approach; the inter-industry model; and the computable general equilibrium model. Use of the latter two approaches involves a degree of technical expertise and would generally not be undertaken by the non-specialist. In discussing economic impacts we emphasize that these are not the same as the costs or benefits measured by a cost-benefit analysis. However there may be costs and benefits associated with the project's economic impact and the decision-maker may wish to take these into account.
The decision whether or not to take the multiplier or flow-on effects into account in the evaluation should be based on an assessment of the extent to which similar such effects would or would not occur in the absence of the project in question.
Acknowledgements
- Harry F. Campbell, University of Queensland, Richard P. C. Brown, University of Queensland
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12 - Valuation of Non-marketed Goods
- Harry F. Campbell, University of Queensland, Richard P. C. Brown, University of Queensland
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Summary
Introduction
This Chapter deals with the methods and techniques used by economists to place monetary values on non-marketed goods and services, or, more specifically, those project inputs or outputs which affect the level of economic (material) welfare but which do not have market prices. While the discussion will focus mainly on environmental goods in order to illustrate the issues involved, the Chapter concludes with a brief discussion of various methods of valuing human life.
In previous Chapters we discussed how benefit-cost analysis involves the identification and valuation of a project's costs and benefits. Our analysis has so far been confined to those inputs and outputs that are exchanged through markets and where, in consequence, market prices exist. We recognized in Chapter 5 that the market does not always provide the appropriate measure of value and that shadow-prices sometimes have to be generated in order to better reflect project benefits or opportunity costs. This discussion was essentially about adjusting existing market prices where these were believed to be distorted, due perhaps to government intervention or to imperfections in the structure and functioning of markets. The present Chapter deals with another type of market failure – where there is no market for the input or output in question, and, therefore, no market price at which to value the cost or benefit.
As a starting point it is reasonable to ask why there is no private market for the commodity in question. Markets exist in order to trade ownership of goods and services – hamburgers and machine tools, haircuts and labour services. For economic agents to exchange ownership of a good or service there must exist a reasonably well-defined set of property rights that specify what is being traded.
4 - Private Benefit-Cost Analysis: Financial Analysis
- Harry F. Campbell, University of Queensland, Richard P. C. Brown, University of Queensland
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Summary
Introduction
As noted in Chapter 1, social benefit-cost analysis takes a wide, “social” perspective in the context of investment appraisal – it measures and compares the costs and benefits experienced by all members of “society”. In contrast, when a project is being evaluated by a private or public enterprise from a purely commercial or “private” perspective, account is taken only of the benefits and costs of the project that accrue to the enterprise itself and that affect its profitability. The project may have wider implications – environmental and employment effects, for example – but if these do not affect the enterprise's commercial profitability, they are omitted from the private analysis.
It is to be expected that the private enterprise would already have undertaken a private investment analysis of the project and will be basing its investment decision on the results of that analysis. However these results may not be available to the public sector decision-maker, and the social benefit-cost analysis, using discounted cash flow techniques very similar to those used in private benefit-cost analysis, and incorporating a private analysis, may be important in helping the public decision-maker decide what incentives are required in the form of tax concessions, for example, to induce the firm to undertake the project. For this reason the appraisal of a proposed project from a purely private viewpoint is often an integral part of a social benefit-cost analysis undertaken by the project analyst. This Chapter focuses on the methodology of private benefit-cost analysis, using discounted cash flow (DCF) analysis.
Appendix 1 - Case Study Assignment
- Harry F. Campbell, University of Queensland, Richard P. C. Brown, University of Queensland
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Summary
International Mining Corporation (IMC) Copper Mining Project
Project Description
The Government of Indonesia is considering a proposed joint venture with a foreign investor, International Mining Corporation (IMC), to develop a new copper mine in the mountainous and remote Eastern Province (EP) where recent geological surveys have revealed significant copper deposits. Under the proposal, Eastern Province Mining Limited (EPML), in which the Government of Indonesia (GOI) will hold 30% of the shares, will mine and mill the copper ore on site. The concentrate will then be transported (in slurry form) by pipeline to a dedicated port facility at the mouth of the Eastern Province River, from where it will be shipped to Japan for refining and sale on the world market. Although the main product is copper, the concentrate will also contain some quantities of gold and silver that will also be extracted from the concentrate at the refining stage and sold on the world market.
Eastern Province is a low-income region with a population of 5 million and a per capita income of around US$300 per annum, considered the least developed part of the country. The local population living in the area rely mainly on subsistence agriculture and fishing for their livelihoods. At present there is very little economic or social infrastructure in the area, which means that apart from on-site investment in the mine, mill and tailings dam, EPML will need to make substantial off-site investments in infrastructure and logistics, such as transport equipment, the construction of roads, bridges, wharfs, an airstrip, storage facilities, housing, power generation and supply, as well as the establishment of a school, hospital, shops, recreational facilities and other amenities for the locally engaged and expatriate employees and families.
9 - Incorporating Risk in Benefit-Cost Analysis
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Summary
Introduction
If benefit-cost analysis is to assist in the decision-making process the analysis must be conducted in advance of the project being undertaken. This means that the value of none of the variables involved in the analysis can be observed, but rather has to be predicted. Risk and uncertainty are always associated with predictions about the future and should be taken into account in the benefit-cost analysis. Since risk and uncertainty impose costs on decisionmakers, these costs need to be assessed and measures taken to reduce them if possible. One way of reducing risk and uncertainty is to acquire additional information mdash; what a benefit-cost analysis does mdash; and the value of information is briefly discussed in Chapter 10. The present Chapter discusses the related concepts of risk and uncertainty.
Risk and Uncertainty
In the preceding Chapters, exercises and case studies we have assumed that all costs and benefits to be included in a cash flow are known with certainty. While this assumption might be acceptable in the context of project evaluation where the analyst is undertaking an ex post assessment of what has already occurred, it is clearly an unrealistic assumption to make where the purpose of the analysis is to undertake an appraisal of proposed projects where one has to forecast future cost and benefit flows. The future is uncertain: we do not know with certainty what the future values of a project's costs and benefits will be.
14 - Writing the Benefit-Cost Analysis Report
- Harry F. Campbell, University of Queensland, Richard P. C. Brown, University of Queensland
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Summary
Introduction
If benefit-cost analysis is to assist in the decision-making process the analyst must be able to convey and interpret the main findings of the benefit-cost analysis in a style that is user-friendly and meaningful to the decision-makers. The analyst should never lose sight of the fact that the findings of a BCA are intended to inform the decision-making process. BCA is a decision-support tool; not a decision-making tool. To this end it is imperative that the report provides the decision-maker with information about the project and the analysis which is directly relevant to the decision that has to be made, and to the context in which it is to be used.
There is no blue-print for report writing, as every project or policy decision will be different in various respects, as will the decision-making context and framework within which the analyst will be operating. Good report writing is essentially an art that can be developed and refined through practical experience. The purpose of this final Chapter is to identify what we consider to be some of the key principles the analyst should follow when preparing a report and to illustrate how these might be applied in the drafting of a report on the ICP Project we have used in previous chapters as a case study. As an illustration, we have selected the report prepared by one of our postgraduate students at the University of Queensland, Australia, who has kindly given us permission to use it in this way. In the sections below we explain why we consider this study an example of good BCA reporting.
7 - Consumer and Producer Surplus in Benefit-Cost Analysis
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Summary
Introduction
So far in this book it has been assumed that undertaking a proposed project would have no effect on the market prices of goods and services. However, since the market economy consists of a complex network of inter-related output and input markets, it is possible, in principle, that undertaking the project will have wide-ranging effects on market prices. If the project's output or input quantities are small relative to the amounts traded in the markets for these goods and services, the effects on market prices will be small enough to be ignored, on the grounds that including them would have no bearing on the outcome of the analysis. While this “small project assumption” is a reasonable one for many of the projects which the analyst will encounter, it is necessary to be able to identify circumstances in which price changes are relevant, and to know how to deal with them in the benefit-cost analysis.
A project increases the aggregate supply of the output produced by the project, and increases the aggregate demand for the inputs used in the project. Significant changes in market supply or demand can result in changes in market prices. A significant change in supply or demand is one that is large relative to the quantity that would be bought and sold in the market in the absence of the project being undertaken. It is evident that there is little chance of such a change occurring where the output or input in question is traded on international markets, as will be discussed in Chapter 8.
Appendix 2 - Discount and Annuity Tables
- Harry F. Campbell, University of Queensland, Richard P. C. Brown, University of Queensland
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2 - Investment Appraisal: Principles
- Harry F. Campbell, University of Queensland, Richard P. C. Brown, University of Queensland
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Summary
Introduction
This Chapter provides a simple introduction to the principles of investment appraisal. It starts with an outline of the logic of the investment appraisal process from the viewpoint of an individual considering a very simple type of project. During the course of the discussion of this process such concepts as the discount rate, discount factor, present value, benefit/cost ratio, marginal productivity of capital and internal rate of return are developed. The discussion then shifts to the economy as a whole and the role of investment appraisal in allocating resources between investment and the production of goods for consumption. The simple algebra of various investment decision-rules applied in the latter part of the Chapter is then presented, followed by a numerical example. Following this, some special concepts, such as annuities, economic depreciation, inflation and risk, are discussed in the context of investment appraisal.
In the following chapter (Chapter 3), the discussion shifts to applications of the various investment decision-rules. Some of the applications rely on the simple algebraic concepts already discussed in Chapter 2, while some are developed using the basic tool of the benefitcost analyst – the spreadsheet. Some issues already raised in this Chapter, such as the time value of money and the calculation of present value and internal rate of return, are explored further, while new concepts, such as comparison of projects and capital rationing are introduced and discussed.
Investment Appraisal from a Personal Viewpoint
Economists start from the proposition that an individual's economic welfare in a given time period is determined by the quantity of goods and services she consumes in that time period; consumption of goods and services is taken to be the ultimate goal of economic activity.
10 - The Social Discount Rate, Cost of Public Funds, and the Value of Information
- Harry F. Campbell, University of Queensland, Richard P. C. Brown, University of Queensland
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Summary
Introduction
In this Chapter we consider three issues each of which may call for a modification of the following simple net present value rule: in the absence of risk, undertaking any project with a positive net present value (NPV), calculated using the appropriate shadow-prices and discounting at the market rate of interest, will contribute to economic efficiency.
Firstly, the concept of social time preference reflects the view that the market rate of interest does not accurately reflect society's preference for present as opposed to future consumption, and that a discount rate based on a social time preference rate should be used to calculate NPVs from a public interest viewpoint. For reasons which will be discussed below, the social time preference rate is usually judged to be lower than the market rate of interest.
Secondly, the concept of social opportunity cost is based on the notion that, because of tax-induced distortions to the pattern of resource allocation, the opportunity cost to the economy of raising public funds for government expenditures is higher than the nominal amount raised. This suggests that a public project should have a present value of benefits sufficiently large not only to offset project costs (the NPV>0 rule), but also to offset the premium on the cost of public funds if the project is to make a net contribution to efficiency.
Thirdly, the fact that a project has a NPV>0 does not necessarily imply that now is the most efficient time to implement it. Because additional information about the project variables - prices, costs etc. - may accrue in the future there could be an advantage to keeping open the option of undertaking the project.
3 - Investment Appraisal: Decision-Rules
- Harry F. Campbell, University of Queensland, Richard P. C. Brown, University of Queensland
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Summary
Introduction
In this Chapter the discussion shifts to applications of the various investment decision-rules discussed in the previous Chapter. Some of the applications rely on the simple algebraic concepts already discussed in Chapter 2, while some are developed using the basic tool of the benefit-cost analyst – the spreadsheet. Some issues already raised in Chapter 2, such as the time value of money and the calculation of present value and internal rate of return, are explored further, while new concepts, such as comparison of projects under capital rationing, are introduced and discussed. Finally, the use of spreadsheets in project appraisal is discussed in detail.
Discounted Cash Flow Analysis in Practice
We now turn to evaluating multi-period investment projects – projects that have a net benefit stream occurring over many years. The remainder of this Chapter aims at familiarizing the reader with the practical application of discounted cash flow (DCF) decision-making techniques. At the end of the section the reader should know how decisions are made: to accept or reject a particular project; to select a project from a number of alternatives; and, to rank a number of projects in order of priority. Slightly different DCF decision-rules apply in each case. Although some examples are given to illustrate the use of these techniques, the exercises at the end of this section are also useful.
The widespread availability and relatively low cost of personal computers have transformed the task of the project analyst. Electronic spreadsheets such as Excel, Lotus 1–2–3, and Quattro have greatly facilitated the previously laborious, computational side to benefit-cost analysis. Repetitive, mechanical calculations can now be performed at will, which has the enormous advantage of allowing more project options and alternative scenarios to be considered than ever before.
Benefit-Cost Analysis
- Financial and Economic Appraisal using Spreadsheets
- Harry F. Campbell, Richard P. C. Brown
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Benefit-Cost Analysis offers the perfect introduction to benefit–cost analysis. The book closely integrates the theory and practice of benefit–cost analysis using a spreadsheet framework. The spreadsheet model is constructed in a truly original way which contributes to transparency, provides a check on the accuracy of the analysis, and facilitates sensitivity, risk and alternative scenario assessment. A case study incorporating the various issues is progressively developed on a spreadsheet with the links between each stage thoroughly explained. The complete case study spreadsheet can serve as a template for the reader's own appraisal of projects in the field. In addition to the worked examples in the text some exercises are appended at the end of each chapter.For further information please visit http://www.uq.edu.au/economics/bca
8 - Valuing Traded and Non-traded Commodities in Benefit-Cost Analysis
- Harry F. Campbell, University of Queensland, Richard P. C. Brown, University of Queensland
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Summary
Introduction
A project undertaken in an open economy may result in changes in the flows of goods and services which are exported or imported. It is not important whether the actual output of the project is exported, or the actual inputs imported. If the output is a traded commodity (a commodity which the country exchanges in international trade) it may be exported or it may replace imports; similarly, if the inputs are traded commodities they may be imported or they may come from domestic sources which are replaced by increased imports or reduced exports. The changes in international trade flows resulting from the project need to be valued, and the prices which measure the benefit or cost to the economy of changes in exports or imports are international prices.
Projects which involve outputs or inputs of traded commodities are likely also to involve outputs and inputs of non-traded commodities (goods and services which are not involved in the country's international trade), and these non-traded commodities are valued at domestic prices. The benefit-cost analysis of such projects requires comparisons of values of traded and non-traded goods. This poses two problems: first, since traded good prices are denominated in foreign currency (often US$) and non-traded good prices are denominated in domestic currency, an exchange rate is required to convert from one to the other; and, second, the domestic price structure differs from the international price structure, and benefits and costs must be valued under the same price structure if they are to be compared.
Traded and Non-traded Goods
We start this discussion of the distinction between traded and non-traded goods by considering a broader distinction mdash; that between tradeable and non-tradeable goods.