Earlier this month, Scioto Analysis released our most recent example cost-benefit analysis looking at what a child tax credit might look like in Ohio. Our goal with releasing these analyses is to demonstrate what detailed policy analysis looks like in Ohio and to encourage more policymakers to make evidence-based decisions.
In the spirit of helping demonstrate what the process of performing a well defined cost-benefit analysis looks like, I wanted to explain some of the key considerations when choosing policy alternatives and show how we apply them in our research.
Choose the right number of policies
One thing to realize right away is that just like in policymaking, there are significant tradeoffs we should be aware of in the policy analysis process. The more policy alternatives we choose to measure, the more accurate our understanding of a particular policy will be. However, this comes at the cost of time and resources that could otherwise be spent on other more useful endeavors.
Only choose alternatives that add sufficient information about the policy in question. In our case, we could have specified countless child tax credits, incrementing the values by pennies at a time. Of course, this doesn’t add enough additional information compared to picking three amounts for the credit. If you have the capacity and are interested in how pennies change policies, then an interactive tool that allows for very small marginal adjustments could be one way to see that without a ton of additional work.
Compare to relevant policies
Unless you are dealing with a truly novel policy proposal, it is often good practice to start with similar policies as the basis for your alternatives. Not only does this give you a clear place to look for data, but also it ensures that the alternatives you propose are politically feasible in at least some contexts.
In our analysis, we based the amounts of the tax credits on what other states already have in place. This ensures that the amount of the tax credit would be reasonable for Ohio to implement and helps the policy makers focus on the most realistic options.
Make adjustments that are relevant
The goal of measuring multiple policy proposals is to better understand the full scope of what a policy looks like in practice. We are interested in what some child tax credit might look like rather than what a specific child tax credit might look like.
Keeping the main structure of a policy intact and adjusting around the margins can identify what the range of outcomes is for policymakers and give them a sense of what levers there are to pull.
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The goal of defining good policy alternatives is to show policymakers what a range of reasonable specifications might look like for a given proposal. As policy analysts, it is our job to make sure that we choose our alternatives carefully and make sure we are getting as much information for the work we put in as possible.
Hopefully the demand for quality policy analysis increases in Ohio in the future. Although policy analysis will always carry some amount of uncertainty, through careful research we have the ability to increase the quality of our decisions as a society should we choose.