Scott Farrow and Adam Rose are the recipients of the Best Article of 2018 Award in the Journal of Benefit-Cost Analysis. Farrow is a professor in the Department of Economics at the University of Maryland-Baltimore County and a CREATE research fellow. Rose is a research professor in the Price School of Public Policy and a research fellow of USC’S Center for Risk and Economic Analysis of Terrorism Events (CREATE). Both have served as the Coordinator for Economics at CREATE.
The selection committee offered the following praise for the article: “Farrow and Rose provide a comprehensive literature-based comparison of the differences among partial equilibrium, linear input-output, and non-linear general equilibrium models that is accessible to readers.”
Their article, “Welfare Analysis: Bridging the Partial and General Equilibrium Divide for Policy Analysis,” evaluates the strengths, limitations, and relationships between benefit-cost analysis (BCA) in individual markets and across multiple, interrelated markets, or the economy as a whole. General equilibrium effects refer to the full complement of quantity-oriented indirect, or multiplier, impacts, as well as impacts stemming from responses to price changes. Currently, the U.S. Office of Management and Budget (OMB) guidelines for BCA, which have been adopted by most federal government agencies, contain strictures against including general equilibrium effects. The authors make the case that such limitations leave out important economic impacts and suggest relaxing the proscription. General equilibrium effects are likely to be especially relevant in evaluating policies that have economy-wide implications, such as terrorism warning systems, flood insurance programs, and stockpiling influenza vaccines.
The paper is a culmination of many years of research on the topic area by both authors. Rose has pioneered the application of applied general equilibrium models (both input-output and computable general equilibrium) to evaluating the consequences of and resilience to natural disasters and terrorism. He has also done extensive work on the aggregate and income distribution general equilibrium impacts of climate mitigation policy.
Rose recently served on an EPA Science Advisory Board Panel on Economy-wide Modeling that made a similar recommendation to include general equilibrium effects in evaluating environmental policy.
Farrow is a leading authority on the conceptual underpinnings and application of BCA and a former editor of the Journal of Benefit-Cost Analysis. He is currently one of the lead researchers on performing BCAs for projects sponsored by the DHS Office of University Programs. He has also served as chief economist for the U.S. Government Accountability Office.
Farrow and Rose shared this year’s award with Kip Viscusi, University Distinguished Professor of Law, Economics, and Management at Vanderbilt, for his article “Best Estimate Selection Bias in the Value of a Statistical Life.” Viscusi is one of the foremost economists in the area of risk and a pioneer in the analysis of the value of statistical life.