ABSTRACT
This chapter begins with an overview of prescription, focusing on policy choice as a fundamental task of policy analysis. Central to policy choice is the consideration of reasons for making rational choices, especially choices based on normative economic reasoning including the analysis of opportunity costs incurred when one policy alternative is chosen rather than another. The chapter describes some approaches to prescription, the most important of which are cost-benefit and cost-effectiveness analysis. Associated with these approaches are a number of techniques that assist in making choices among policy alternatives whose expected outcomes are known. Cost-estimating relationships are central to the process of making prescriptions, because measures of the relations between the quantity of activities, materials, and personnel and their costs are essential for comparisons of alternatives. Cost internalization incorporates outside costs (externalities) into the internal cost element structure.
