Economic analysis is the systematic examination and evaluation of economic data, trends, and indicators to understand and assess the functioning and performance of an economy. This type of analysis uncovers insights that inform decision-making and shape economic policies. It also includes an examination of the costs, benefits, and outcomes associated with particular economic decisions or events. There are several types of economic analysis, including statistical analysis, macroeconomic modeling, cost-benefit analysis, and scenario analysis.
These tools require a basic understanding of the science behind them and moderate mathematical/quantitative skills to use effectively. They also rely on the availability of existing information and can take weeks to months depending on the complexity of the market and the time required to access, review, and line up interviews with key industry experts.
A major component of economic analysis is the use of a discount rate to convert future costs and rewards to their present value. This is to account for inflation and the opportunity costs of one option over another. For example, the full costs of caring for a patient with tularemia can be divided among several components, such as nursing and physician time, hospital room occupancy, diagnostic testing, medications, and so on. These costs can be further broken down into individual patient and healthcare system payments.
Economic analysis is an important tool to help evaluate and compare alternatives in environmental policy-making. However, it is not the only factor that should be considered in setting regulatory standards. Other factors include enforceability, technical feasibility, affordability, political concerns, and ethics. High-quality economic analysis, provided early in the regulatory design process, can help facilitate comprehensive assessment of alternative policies and their impacts.
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