<p>If for project $P_i$ the cost calculated was based on prices that held during the year that the project was executed, then certainly you should bring all costs on the same temporal base, in order to compare them.</p>

<p>This can be done in different ways, namely, the common base may be the year of the oldest project, or the year of the most current project, or something in between. Choose the one that will make more sense to the recipients of your study: this usually means bringing "past costs to the present", because this facilitates comprehension (people can better understand current costs and to what they amount in term of resources), and also, makes the adjusted figures more relevant for <em>future</em> projects.</p>

<p>In order to bring past costs to the present, you can use a price index like the Consumer Price Index, and the implied inflation. In general, costs in current dollars is just</p>

<p>$$\tilde C_{i,t|t+k} = C_{i,t}\cdot \prod_{j=1}^k(1+\pi_{t+j})$$</p>

<p>where $t$ is the actual year the project was undertaken, and $t+k$ is Now. $\pi_{t+j}$ is the price inflation between year $t+j$ and year $t+j-1$. Data on yearly inflation are usually available and easily accessible.</p>

<p>Another possible issue to consider is whether all these projects were undertaken in the same economy/country. If they are not, then you also face the task of incorporating in your calculations "purchasing-power-parity" considerations.</p>

CC BY-SA 3.0
2015-10-21T12:32:26.747Z
2015-10-21T12:32:26.747Z
Alecos Papadopoulos
<p>I'm looking at differences in the cost-effectiveness of two alternative conservation strategies (treatments). The analysis will compare benefit-cost ratios between the two treatments. Projects vary in age (number of years since undertaken eg. trees planted) within and between treatments, from 20 to 7 years. I have several projects as replicates for each of the two treatments. I have field data (birds) for my measure of effectiveness, measured in one year. I have calculated a total cost using input costs from an established pricing structure, giving a total cost for each project in dollars equivalent to the same year as the bird data. I do not have access to the original (actual) cost for the year undertaken. Note the costs were one-off in the year of implementation, not ongoing.<br>
My question relates to the estimation of costs and the different ages of the projects. My concern is that similar projects will have the same cost, despite one being twice the age. Should the costs account for different ages of the projects, and if so how to approach it? The literature commonly focusses on calculating present value using discounting for projects to occur in the future; I can find less regarding past costs.</p>

CC BY-SA 3.0
2015-10-21T11:27:42.487Z
It is not exactly clear what you are asking. If you know that a project cost \$500 in the year 1980 then you can use future value calculus to convert that \$500 to present day dollars.
Giskard
CC BY-SA 3.0
2015-10-21T21:14:06.753Z
Thanks, as I mention above I don't know what the projects cost in the year they were undertaken. Therefore I have estimated costs based on 2015 prices.
DHunter
CC BY-SA 3.0
2015-10-21T22:47:05.877Z
I understand that you have the resources used in _quantities_, and then you used current prices. No need to adjust anything then - the costs are immediately comparable (in general, the hardest data to find is what you appear to have available - resources absorption in quantities).
Alecos Papadopoulos
CC BY-SA 3.0
2015-10-22T04:21:14.313Z
Thank you @Alecos Papadopoulos, yes that is correct, I have quantities of materials used (e.g. number of plants, hours of labour, fuel etc) and have applied current prices to derive a total. I think I was getting confused with the pervasive messaging in economics to account for differences in time, but I inadvertently already have! Much appreciated.
DHunter
<econometrics>
Ex post evaluation of conservation projects - accounting for time in cost calculations
DHunter
# Ex post evaluation of conservation projects - accounting for time in cost calculations

(Asked by: username_0 on 2015-10-21)

I'm looking at differences in the cost-effectiveness of two alternative conservation strategies (treatments). The analysis will compare benefit-cost ratios between the two treatments. Projects vary in age (number of years since undertaken eg. trees planted) within and between treatments, from 20 to 7 years. I have several projects as replicates for each of the two treatments. I have field data (birds) for my measure of effectiveness, measured in one year. I have calculated a total cost using input costs from an established pricing structure, giving a total cost for each project in dollars equivalent to the same year as the bird data. I do not have access to the original (actual) cost for the year undertaken. Note the costs were one-off in the year of implementation, not ongoing.  
My question relates to the estimation of costs and the different ages of the projects. My concern is that similar projects will have the same cost, despite one being twice the age. Should the costs account for different ages of the projects, and if so how to approach it? The literature commonly focusses on calculating present value using discounting for projects to occur in the future; I can find less regarding past costs.

**Tags:** econometrics
> **Comments:**
> **username_1**: It is not exactly clear what you are asking. If you know that a project cost \$500 in the year 1980 then you can use future value calculus to convert that \$500 to present day dollars.  
> **username_0**: Thanks, as I mention above I don't know what the projects cost in the year they were undertaken. Therefore I have estimated costs based on 2015 prices.  
> **username_2**: I understand that you have the resources used in _quantities_, and then you used current prices. No need to adjust anything then - the costs are immediately comparable (in general, the hardest data to find is what you appear to have available - resources absorption in quantities).  
> **username_0**: Thank you @Alecos Papadopoulos, yes that is correct, I have quantities of materials used (e.g. number of plants, hours of labour, fuel etc) and have applied current prices to derive a total. I think I was getting confused with the pervasive messaging in economics to account for differences in time, but I inadvertently already have! Much appreciated.  

---

## 1 answers

### Answer by username_2 on 2015-10-21. Score: 0 | Accepted answer

If for project $P\_i$ the cost calculated was based on prices that held during the year that the project was executed, then certainly you should bring all costs on the same temporal base, in order to compare them.

This can be done in different ways, namely, the common base may be the year of the oldest project, or the year of the most current project, or something in between. Choose the one that will make more sense to the recipients of your study: this usually means bringing "past costs to the present", because this facilitates comprehension (people can better understand current costs and to what they amount in term of resources), and also, makes the adjusted figures more relevant for *future* projects.

In order to bring past costs to the present, you can use a price index like the Consumer Price Index, and the implied inflation. In general, costs in current dollars is just

$$\tilde C\_{i,t|t+k} = C\_{i,t}\cdot \prod\_{j=1}^k(1+\pi\_{t+j})$$

where $t$ is the actual year the project was undertaken, and $t+k$ is Now. $\pi\_{t+j}$ is the price inflation between year $t+j$ and year $t+j-1$. Data on yearly inflation are usually available and easily accessible.

Another possible issue to consider is whether all these projects were undertaken in the same economy/country. If they are not, then you also face the task of incorporating in your calculations "purchasing-power-parity" considerations.


---

