Government Programs: Measuring the Total Costs and Benefits Created For Society

As government spending becomes a greater focus for societies throughout the world, the ability to accurately measure the impact of government spending has become more important. While the cash revenues and costs of programs are generally obvious, other factors are not as apparent. Assuming that the role of government spending is to increase the welfare of society at large, rather than to generate a profit, the ability to measure the amount of welfare created is vital. This measurement is enhanced by borrowing concepts from the field of economics, such as deadweight loss and externalities because those costs and benefits need to be included in the analysis in determining the correct and the total value of government programs. Two examples of government programs are the construction of the Hoover Dam and the operation of the Amtrak system. Applying basic analysis to these programs helps frame the discussion of measuring total economic costs and benefits. This analysis is not intended to be exhaustive but rather suggestive in the approach skillful analysts should frame their work. In theory, switching to a more mathematical model for evaluation of government spending can have the effect of more rational political discourse. Limitations to this model exist, as do suggestions for ways to work around these measurement limitations.