U.S. Department of Justice

Office of Justice Programs

National Institute of Justice JUNE 2014

NATIONAL INSTITUTE OF JUSTICE

RESEARCH

IN BRIEF

Cost-Benefit 

Analysis 

A GUIDE FOR

DRUG COURTS AND

OTHER CRIMINAL

JUSTICE PROGRAMS

BY P. MITCHELL DOWNEY

AND JOHN K. ROMAN
U.S. Department of Justice 

Office of Justice Programs

810 Seventh St. N.W. 

Washington, DC 20531

Eric H. Holder, Jr.

Attorney General

Karol V. Mason

Assistant Attorney General

Greg Ridgeway

Acting Director, National Institute of Justice

This and other publications and products 

of the National Institute of Justice can be 

found at:

National Institute of Justice

http://www.nij.gov

Office of Justice Programs

Innovation • Partnerships • Safer Neighborhoods 

http://www.ojp.usdoj.gov
RESEARCH

NATIONAL INSTITUTE OF JUSTICE

JUNE 2014

IN BRIEF

Cost-Benefit 

Analysis

A GUIDE FOR DRUG COURTS AND

OTHER CRIMINAL JUSTICE PROGRAMS

BY P. MITCHELL DOWNEY AND JOHN K. ROMAN

Findings and conclusions of the research reported here are those of the 

authors and do not necessarily reflect the official position or policies of the 

U.S. Department of Justice. 

NCJ 246769

RESEARCH IN BRIEF 3

National Institute of Justice | NIJ.gov

Cost-Benefit 

Analysis 

A GUIDE FOR DRUG COURTS AND 

OTHER CRIMINAL JUSTICE PROGRAMS

BY P. MITCHELL DOWNEY AND JOHN K. ROMAN

P

olicymakers and practitioners face difficult decisions when they 

allocate resources. As resource constraints have tightened, 

the role of researchers in informing evidence-based and costeffective decisions about the use of funds, labor, materials and 

equipment — and even the skills of workers — has increased. We believe 

research that can inform decisions about resource allocation will be a central 

focus of criminal justice research in the years to come, with cost-benefit 

analysis (CBA) among the key tools. This report about the use of CBA is 

aimed at not only researchers but also practitioners and policymakers who 

use research to make choices about how to use limited resources. Although 

we include NIJ’s Multi-site Adult Drug Court Evaluation (MADCE) as an 

example of CBA in practice, this report is not just about using CBA in 

drug courts.

Our intent is to help researchers, state agencies, policymakers, program 

managers and other criminal justice stakeholders understand:

• What CBA is and in which contexts it is appropriate.
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4 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

• Which kinds of information can — and should — be collected to facilitate 

a CBA.

• What the results of a CBA mean.

This report is divided into three sections. In the first section, “The Basics of 

Cost-Benefit Analysis,” we describe the foundations of CBA: the motivation 

for performing a CBA, what CBA can (and cannot) tell us, and the general 

principles used in conducting CBA in terms of the conceptual basis and an 

applied framework. In the second section, “Cost-Benefit Analysis in Action: 

NIJ’s MADCE,” we apply the framework and illustrate the necessary steps 

using NIJ’s MADCE as a case study. In the third section, “NIJ’s MADCE 

Results,” we present the findings from NIJ’s MADCE and demonstrate how 

the results provide new and useful information that would not have been 

available without conducting such an analysis. 

Report Highlights 

In this report, we address several key cost-benefit analysis (CBA) 

concepts, including:

• The difference between what cost-benefit researchers believe they 

are producing and what policymakers often believe they are receiving. 

Researchers believe they are estimating societal benefits, whereas 

policymakers believe they are receiving estimated fiscal benefits; this 

confusion has important policy implications (see “Cost-benefit analysis: 

What and why” on page 5).

• A variety of data sources and analytical approaches that have wide 

applicability throughout criminal justice CBA (see “Site-specific prices” 

on page 16 and “National prices” on page 17).

• Practical considerations for conducting a CBA and a look at information 

often missing from technical reports, which tend to focus more on 

principles and theoretical foundations (see sidebar, “Practical 

Considerations of Conducting a Cost-Benefit Analysis,” on page 20).
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RESEARCH IN BRIEF 5

The Basics of Cost-Benefit Analysis 

Cost-benefit analysis: What and why. Why conduct a CBA? Unlike 

other types of analysis, CBA offers a comprehensive framework for 

combining a range of impacts. Consider a law that bans smoking in 

restaurants. Such a law has several positive effects (called benefits), 

including improved health of restaurant staff and diners as well as a more 

pleasant atmosphere for nonsmokers. The same law, however, also has 

some negative impacts (called costs), such as inconveniencing smokers 

and the added expense to restaurant owners to enforce and publicize the 

new law. Note that these impacts are not all financial. Although money is 

a useful metric for combining diverse outcomes, the key contribution of 

CBA is providing a framework on which to combine diverse impacts. 

CBA is usually subject to two key criticisms. First, some people argue that 

CBA values things that cannot be valued, such as pain and suffering from 

violent victimization or loss of life. A common response to this criticism 

is to ask, “Would you support a program that spent $1 trillion to prevent 

a single homicide?” If you would not support such a program, then you 

are implicitly conducting a CBA and designating the value of a human life. 

In the same way, CBA seeks to balance the use of resources to solve a 

variety of problems, but to do so using evidence carefully, consistently and 

transparently. 

The second criticism involves the way in which things are valued. For 

instance, CBA theory uses wages and earnings to approximate the value 

of someone’s time and his or her productivity (see sidebar, “Considerations 

in Valuing Time”). Suppose a probation officer makes $25 per hour and a 

program saves him or her one hour. Standard CBA counts that one hour 

saved as a $25 benefit of the program. Many people find this approach 

inappropriate. The program may save one hour of “probation officer time,” 

but this savings doesn’t reduce agency costs. This issue highlights the 

importance of understanding CBA’s goals: CBA does not seek to estimate 

fiscal savings but, rather, seeks to estimate social value. If that same 

probation officer spends his or her time doing another productive activity, 

as is assumed in CBA and economic theory, then this is a productivity 

gain and a benefit of the program. Still, it is reasonable (in our view) to 
6 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

criticize this assumption. This criticism, however, doesn’t reject CBA in 

its entirety — rather, it is an argument about how CBA is conducted. A 

good CBA makes its assumptions transparent and identifies how these 

assumptions affect the results. 

These arguments are not the only criticisms of CBA. Analysts often 

debate what discount rate to use, the validity of willingness-to-pay in the 

presence of inequality, and the difficulty in valuing equity and justice. In this 

report, we focus on the two criticisms initially described, because they are 

commonly heard and can be addressed through the practice of CBA.

CBA is inherently comparative; it is particularly useful for comparing two 

programs or alternatives that may have different types of impacts. When 

a program’s net benefits are compared with zero (i.e., deemed “cost 

beneficial” or “not cost beneficial”), the net benefits are implicitly being 

compared with business as usual (i.e., what is usually done without the 

policy change).

CONSIDERATIONS IN VALUING TIME

A critical element of cost-benefit analysis (CBA) is valuing the time spent by workers. A 

program might increase a probationer’s time spent with a probation officer, reducing the 

amount of time that the officer has to fulfill other responsibilities. It is possible that neither 

of these outcomes will have an impact on an agency’s spending, but if the time could have 

been spent productively on other activities, then both outcomes have implications for available 

resources. In other words, without the program, the officer may have conducted additional 

patrols, thereby contributing to society. Spending time on additional patrols and communitybased approaches to crime prevention contributes to the larger community. Without 

the program in place, the probation officer may instead spend time on enhanced client 

interactions that are designed to reduce violence and revocations. CBA draws upon a long 

tradition in economic theory and assumes that an individual’s wage is equal to the marginal 

value contributed to society by his or her time. This assumption is an uncomfortable one for 

many people, including the authors of this report. However, this approach remains standard 

practice in the literature, and this report repeatedly uses wages to measure productivity and 

the social value of time.
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RESEARCH IN BRIEF 7

What Cost-Benefit Analysis Can and Cannot Do

Cost-benefit analysis (CBA) can:

• Tell us the impact of a program on a wide range of outcomes.

• Offer guidance on how to balance these diverse impacts. 

• Tell us how the program draws from (or contributes to) the pool of 

available resources.

CBA cannot:

• Provide the end-all, be-all, irrefutable, definitive answer to all policy 

questions.

• Do anything without a strong impact analysis.

• Tell us how much money an agency or jurisdiction will save by 

implementing a particular program.

CBA is useful because it combines different types of information into a 

single metric, allowing for comparisons that could not otherwise be made. 

CBA provides guidance on how to balance these different types of impacts. 

CBA also tells decision-makers how the program draws from or adds to 

resources (not just funding) that are available for other programs and offers 

guidance on what it would take to replenish those resources. 

CBA, however, is not a magic bullet that can answer all policy questions. 

For one thing, without a strong impact evaluation, a CBA is meaningless; 

that is, to estimate (and value) the impact of a program on resources, 

we need to be able to convincingly estimate what effect the program 

had (i.e., compare outcomes when the program is present with outcomes 

when the program is absent). To do so requires implementing a strong 

research design (including, but not limited to, random assignment) and 

collecting enough data for both the treatment and comparison groups to 

determine what would have happened in the absence of the program. 

Because CBA is inherently comparative, data about program participants 

alone is not enough. Second, although CBA theory provides a framework 

for valuing any impact, as a matter of practice, impacts often simply can’t 

be valued (see “Cost-Benefit Analysis in Action: NIJ’s MADCE” on page 11).
National Institute of Justice | NIJ.gov

8 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

Finally, CBA does not tell us how much money an agency or jurisdiction 

can expect to save from a particular program. This is not the purpose of 

a CBA, and the methods are not designed to answer this question. CBA, 

as described below, is about social well-being and resources, not about 

fiscal impacts. This is an important point that is often overlooked and must 

be considered. Within this report, we emphasize the discrepancy between 

what cost-benefit researchers think they are producing (i.e., estimates of 

societal well-being) and what policy stakeholders think they are receiving 

(i.e., advice about fiscal savings).

The steps of a cost-benefit analysis. CBA can be thought of as 

progressing through four steps: 

1. Choose the population.

2. Select potential impacts.

3. Consider how the program might change well-being.

4. Determine how society values these changes.

It is important to keep in mind that the final goal of a CBA is to estimate 

the social benefit (or cost) of a program. In the following paragraphs, we 

describe the conceptual steps and then offer an applied framework. Finally, 

we show how these steps work in practice through NIJ’s MADCE.

1. Choose the population. The first step of a CBA is to determine the 

population you are interested in (called the “standing” of the study). In 

brief, the study’s standing is the group whose well-being is changed by a 

new policy or practice. Stated another way, the standing is the population 

whose costs and benefits are counted. A study’s standing might be all 

of society, all of society excluding the program participants, or all taxpaying citizens. Choosing which group has standing is a value-based 

decision that depends on the nature of the program, the analysis, and the 

decision-makers or stakeholders. For example, a CBA of a mandatory job 

training program for recipients of government assistance generally includes 

program participants in its standing, whereas a CBA of sentencing policy 

generally does not include prisoners in its standing (although it could). In 

practice, the selection of the standing in the aforementioned examples 
National Institute of Justice | NIJ.gov

RESEARCH IN BRIEF 9

means that one cost of the job training program would be the value of the 

time that clients give up to participate in training (economists call this the 

“opportunity cost” of participants’ time), whereas a sentencing CBA would 

not include the opportunity cost of the prisoners’ time. 

2. Select potential impacts. Select the potential impacts to include in 

the analysis. First, consider what might have changed as a result of the 

program. In a criminal justice context, potential impacts often mean 

changes in behavior (e.g., employment, criminal offenses) or resources 

used (e.g., police time, jail beds, court hearings). Think about what effects 

the program may have had, identify the impacts you can plausibly measure, 

and estimate the size of the changes that the program caused (if any). This 

step is the reason that a CBA relies on a strong impact evaluation. Without 

an impact evaluation, estimating the program’s effects is impossible, and, 

thus, there are no effects to value. Economists sometimes say that an 

evaluation is “well identified” if it convincingly isolates the causal impacts 

of the program.

3. Consider how the program might change well-being. Consider how 

the program’s effects might have changed the well-being (either positively 

or negatively) of someone in the standing. For instance, a program that 

increases meetings with a probation officer might decrease the time 

that the officer has to work with other clients. A program that improves 

participants’ educational outcomes might lead participants to make 

greater contributions to society through employment. Regardless, 

this step translates the program’s impacts into social well-being.i

i

Economists usually call this “social welfare” or just “welfare.” To avoid confusion with the 

unrelated government assistance programs, we often say “well-being” instead, even though 

researchers more commonly use the term “welfare.”

4. Determine how society values these changes. Find information 

either from within or outside of the evaluation to determine how society 

values these changes. For instance, ask, “How much does society value 

a probation officer’s time?” Or, “How much does society value more and 

better education?” Keep in mind that the answers to these questions have 

nothing to do with the analysts’ beliefs about how much these issues 
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10 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

should be valued; rather, the analyst must use existing data to estimate, 

based on observed behavior, how society does in fact value these changes. 

Steps 3 and 4 could be considered the key contributions to — and the key 

challenges of — conducting a CBA. 

Implementing the conceptual framework. To implement the 

conceptual framework, we must “ground” our thinking: First, we think of 

each cost (or benefit) as a price multiplied by a quantity. Because a cost is 

simply a negative benefit, we tend to use the terms “costs” and “benefits” 

interchangeably. Using the terms interchangeably allows us to illustrate 

that both costs and benefits measure how the program affected social 

well-being (either positively or negatively) and that costs and benefits 

are not fundamentally different concepts. 

The quantities used in CBA are the main project inputs (e.g., hours of 

training) and the outcomes of interest (e.g., number of arrests, number of 

treatment episodes, hours of employment). These quantities are drawn 

from the impact analysis, which must include comparable information for 

the comparison group. The prices are the way that well-being is affected 

(e.g., resources used per arrest/treatment episode, social value contributed 

by employment). This information is drawn from surveys, observations, 

prior research and a variety of other sources of information. We discuss 

some examples in the next section. 

After deciding which impacts to include, the researchers determine the 

measure (quantity) and value (price) of the impacts and then multiply the 

quantity (e.g., number of additional drug treatment episodes) by the price 

(e.g., cost of a drug treatment episode) to get the cost (e.g., additional 

drug treatment episodes). The researchers then can add together a range 

of different costs and benefits to create a measure of “net benefits.” Net 

benefits refers to the benefits minus the costs. For instance, if a program 

costs $50 per participant but yields $150 in social welfare per participant, 

on average, then we say the program yields $100 in net benefits (per 

participant). The resulting net benefits yield an estimate of how participants 

improved or harmed society, combining an array of different types of 

impacts.
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RESEARCH IN BRIEF 11

The key question is whether the net benefits to society are greater for the 

treatment group (i.e., program participants) than for the comparison group. 

If so, this finding suggests that the program improved societal well-being, 

either by reducing the harm that participants would have done to society 

without the program (i.e., decreasing costs) or by increasing the value of 

participants’ societal contributions (i.e., increasing benefits). Because the 

researchers estimated the quantities using rigorous methods (as developed 

in the impact analysis), we have some confidence that the program itself 

caused the difference. 

Cost-Benefit Analysis in Action: NIJ’s MADCE

In this section, we illustrate the general principles previously described 

with a practical example, relying on the CBA component of NIJ’s MADCE. 

We discuss the evaluation of the MADCE only briefly. For more information 

about NIJ’s MADCE, readers may access NIJ’s website, which includes 

links to a number of related publications (search NIJ.gov, keyword: 

MADCE). 

In fiscal year 2003, NIJ awarded a grant to the Urban Institute for a 

multisite process, impact and cost evaluation of adult drug courts in 

partnership with the Center for Court Innovation and RTI International. The 

study included 23 drug courts in eight states, with the comparison group 

drawn from six comparison groups where drug court access was limited. 

Overall, 1,787 individuals participated in the study, with about two-thirds 

of them in the treatment group. Study participants were interviewed at the 

time they enrolled in drug court (or would have enrolled for the comparison 

group) and then were interviewed again both six months and 18 months 

later. At the 18-month interview, the study participants also received a 

drug test. Finally, at 24 months, the researchers collected official records 

describing participants’ contact with the criminal justice system. The 

researchers also collected cost data from interviews, document review 

and direct observation of court practices. They analyzed the data using 

statistical procedures that accounted for differences between people 

based on a large list of personal characteristics and site-specific effects, 

thereby effectively isolating the impact of drug court participation on each 

individual’s outcomes.
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12 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

Figure 1. NIJ’s Multi-site Adult Drug Court Evaluation Conceptual Framework

The conceptual framework for the MADCE shows how resources (called “inputs”) are invested to create activities 

designed to produce program outputs. The framework proposes that program activities will result collectively in 

immediate or short-term outcomes for the participants. These immediate and short-term outcomes typically are 

measured while the participants are still in the program and include changes in perception and behavior, such as 

drug use and participation in treatment. Program participation also is expected to result in long-term outcomes, 

such as changes in drug use, criminal behavior and other functions. The framework controls for characteristics of 

the target population relating to drug use, criminality and other risk factors. The framework also recognizes external 

conditions beyond the program’s control. These conditions relate to the general community, legal and penal codes, 

and the criminal court. NIJ’s MADCE tested the impact of court-mandated treatment in a drug court context. The 

MADCE comparison groups are not “controls” that receive no treatment; some of the probationers receive courtordered drug treatment, and other probationers use treatment alternatives for safe communities models.

Drug Court 

Context

Community Setting

• Demographics

• Urbanicity

• Drug arrest rate

• Poverty/economics

Drug Laws

• Mandatory sentences

• Drug law severity

Court Characteristics

• Court size

• Court resources

Target Population 

Severity

Drug Use

• Addiction severity

• Drugs of abuse

• Drug use history

Criminality

• Felony/misdemeanor 

charge

• Recidivism risk — prior 

arrests/convictions

• Opportunity to offend 

(street days)

Other Risk Factors

• Health problems

• Mental health problems

• Employment problems

• Housing instability

• Family conflict

• Family support

• Close ties to drug users

• Close ties to lawbreakers

Demographics

• Age, gender, race

• Marital status, children

• Education, income

Drug Court 

Practices

Use of Legal Pressure

• Severity of consequences 

for failure

Individual Court 

Experiences

•

 I

Drug court participation

• Drug testing requirements, 

practices

• Sanctions rules, practices

• Supervision requirements/

practices

• Prosecution involvement

• nteractions with judge and 

supervising officers

• Court appearances

Drug Court Practices

• Leverage

• Program intensity

• Predictability

• Rehabilitation focus

• Timeliness of intervention

• Admission requirements

• Completion requirements

Drug Treatment

• Treatment history

• Days of treatment by type

• Treatment requirements

• Support services by type 

— offered and used
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RESEARCH IN BRIEF 13

Offender 

Perceptions

Perceived Legal Pressure

• Severity and likelihood of 

termination and alternative 

sentence

Motivations

• Readiness to change stage

Understanding of Rules

• Received expected 

sanctions and rewards

• Understood expected 

Perceived Risk of 

Sanctions and Rewards

• General deterrence

• Certainty/severity of 

sanctions

• Certainty and value of 

Perceptions of Court 

Fairness

• Procedural justice

• Distributive justice

• Personal involvement of 

In-Program 

Behavior

Compliance With 

Drug Intervention

• Likelihood of entry

• Number and type of drug 

test violations

• Percentage of treatment 

• Treatment duration and 

retention

• Treatment graduation and 

termination

Compliance with 

Supervision

• Court FTAs — percentage

of scheduled

• Case management 

• Violations of supervision 

requirements

• Drug court graduation

Post-Program 

Outcomes

Reduced Drug Use

• Any, type, and frequency 

of self-reported use 

post-program

• Results of saliva test

Reduced Recidivism

• Any, type, and frequency 

of self-reported offending 

post-program

• Any, type, and number 

of arrests/convictions 

post-program

• Decrease in postintervention incarceration

Improved Functioning

• Reduction in health and 

mental health problems

• Increase in likelihood and 

days of employment

• Gains in economic 

self-sufficiency

• Reductions in family 

problems

Post-Program Use 

of Services

• Type and amount of drug 

treatment/aftercare

• Type and amount of other 

support services
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14 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

Defining impacts and estimating quantities. As discussed earlier, 

we began our analysis by identifying our population of interest 

(standing). In principle, the standing could include the program participants 

themselves. Based on prior research, however, we expected drug court to 

lead to a variety of quality-of-life improvements, such as less severe drug 

addiction or improved self-esteem. Estimating an individual’s personal 

value from these benefits seemed difficult or impossible. To simplify the 

analysis, we excluded participants from our standing and valued only 

drug court’s impacts on broader society. Note that societal benefits 

indirectly caused by reduced addiction (such as reduced criminal activity) 

or improved self-esteem (such as social benefits of employment) would 

still be valued. We simply excluded the direct benefits, which only the 

participants experienced.

Next, we sought to define the impacts to be considered. We asked the 

following questions: “Did the program participants come into contact with 

or directly affect society in some way? Did the program affect someone in 

a way that would not have otherwise happened? Did this impact require the 

use of some resources? Could this effect plausibly be valued?” Through 

these questions, we developed a list of potentially measurable drug court 

impacts (see Table 1, Outcomes Measured by NIJ’s Multi-site Adult Drug 

Court Evaluation). Certainly, other impacts may exist,ii but we believe this 

list strikes a balance between comprehensiveness and feasibility. 

Based on the impact evaluation designed as part of NIJ’s larger MADCE 

effort, we then sought to estimate the size of these impacts (“finding 

the quantities”). This step was straightforward, because a rigorous 

research design already had been developed and implemented for the 

impact analysis. We used two types of information: (a) the three in-depth 

interviews and (b) administrative records from state departments of 

corrections, the FBI and state data repositories. We estimated the impacts 

of drug court on arrests, incarcerations and criminal activity based on 

iiFor instance, the interviewer also asked about needle use, which could have allowed us 

to estimate the impact of drug court on HIV/AIDS risk. However, after initially investigating 

this approach, we determined that making this additional calculation was unnecessarily 

complicated to estimate, and, therefore, we excluded it.
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RESEARCH IN BRIEF 15

Table 1. Outcomes Measured by NIJ’s Multi-site 

Adult Drug Court Evaluation

Category Subcategory Examples

Social 

productivity

Employment Earnings

Education Schooling

Services and 

support given

Child support payments, community 

service

Monitoring Probation officer time, drug tests, 

electronic monitor

Police Arrests

Criminal 

justice 

system

Courts Hearings

Corrections Jail, prison (sanction or otherwise)

Drug court Case manager, administrative costs

Crime and 

victimization Crimes committed*

Service use

Drug treatment Emergency room, detoxification, 

residential care, outpatient, methadone

Medical treatment Hospital stays unrelated to drugs

Mental health 

treatment

Stays in mental health facilities unrelated 

to drugs

Other Halfway houses, public housing, 

homeless shelters

Financial 

support use

Government Welfare, disability, other entitlements

Other Money from family and friends

*Thirty-two subcategories of crime as defined by the National Incident-Based Reporting System.
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16 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

administrative records, and we estimated the impacts of drug court on 

hearings, meetings, monitoring, treatment, and other services and support 

based on self-reported survey data. 

Finally, we had to value those impacts (“finding the prices”). We used 

two types of prices: (a) site-specific prices from the participating courts 

and (b) national data. Although we preferred site-specific data, often it 

wasn’t possible to obtain separate prices for each site in the study. When 

site-specific data were not available, we relied on national price data. 

Because many of the data resources used in NIJ’s MADCE have potential 

applications in a range of contexts, we discuss them in some detail here. 

However, this is a brief overview; interested readers should see the 

full report from the MADCE evaluation for a thorough discussion 

(see NCJRS.gov, keyword: 237112).

Site-specific prices

Prices of operating drug courts. In CBA, the first attempt to gather price 

information usually entails reaching out directly to the programs. In NIJ’s 

MADCE, to determine the costs of operating drug courts (including, for 

example, regular hearings, meetings and drug tests), we conducted phone 

interviews with all 23 drug courts. We asked questions about the salaries 

of program staff and their level of involvement with the program, the 

costs of any outsourced treatment or drug testing, and the frequency and 

intensity of various activities. We complemented this survey with courtroom 

observation during site visits. Together, this information allowed us to 

translate the interview responses of program participants into specific 

values. For instance, we were able to convert interview data, such as “I 

was tested for drugs twice,” into costs using the drug court’s report of what 

types of drug testing it used, whether it outsourced those tests and how 

much it paid.

Prices of stays in homeless shelters. Sometimes a more involved or 

complicated approach is needed to estimate prices. Consider the price of 

stays in homeless shelters. In NIJ’s MADCE, we relied on self-reported 

stays to estimate quantities, and we estimated the prices based on grant 

applications through the National Alliance to End Homelessness. These 
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RESEARCH IN BRIEF 17

applications included the costs of operating a homeless shelter in a 

particular city. For cities that did not submit applications, we used publicly 

available data on house prices from the Department of Housing and Urban 

Development to find cities with similar housing costs. We assumed that the 

costs of homeless shelters in cities without applications were equal to costs 

in comparable cities with applications. 

Prices of wages and salaries of key individuals in the criminal justice 

system. Some prices are relatively easy to come by using publicly available 

external data. For example, because NIJ’s MADCE included so many 

jurisdictions and programs, key individuals (e.g., court personnel, law 

enforcement officers, treatment providers, probation officers) worked 

in too many different agencies for us to survey all of them. Instead, we 

estimated their wages and salaries using the Bureau of Labor Statistics’ 

(BLS’) Occupational Employment Statistics (OES). This publicly available 

information includes the average wages for very specific occupational 

categories for every metropolitan area in the country. We found that 

using the OES data, which is an accurate and easy-to-access source of 

information, was a more efficient approach than using widespread surveys.

Costs of incarceration. The final site-specific price we used was an 

estimate of the costs of incarceration. To estimate the costs of prison, 

we relied on the annual reports of state departments of corrections 

and followed an approach described in the Bureau of Justice Statistics 

(BJS) report State Prison Expenditures, 2001.1

 Essentially, the approach 

focuses on prison operating costs (excluding, for instance, land costs) and 

approximates the cost of an additional prisoner as the average operating 

cost of each prisoner. We took the same approach for jails. However, rather 

than obtaining annual reports for the large number of jails in the sample, 

we turned to BJS’ Census of Jail Facilities, which contained the necessary 

information for all jails in the country.2

National prices

Site-specific prices are, in some ways, ideal for a CBA. These prices 

provide the jurisdictions being evaluated with the most accurate and 

relevant information for their costs and benefits of operation. However, if 
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18 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

the target audience is a larger (e.g., national) array of stakeholders that 

are considering program implementation, you may want to consider basing 

estimates on national average prices, which can be useful. Moreover, in 

many domains, site-specific price information is not publicly available. As 

a result, researchers must rely on national information. In NIJ’s MADCE, 

we used a variety of national data sources that included simple national 

averages, past-published analyses and our own analyses of national data.

Value of earnings and employment. For example, to estimate the value of 

earnings and employment when such data were missing in the interview, 

we relied on the BLS’ Current Population Survey (CPS), the same data 

set on which monthly reports of the U.S. unemployment rate are based. 

The CPS asks thousands of respondents each month a variety of social 

and employment questions. We used characteristics such as age, race, 

education, gender and other established predictors to estimate what 

each program participant might be expected to earn in the labor market. 

This information allowed us to value contributions from employment 

when, for example, a participant reported being employed but did not 

report the wage.

Prices of drug treatment. The interview data also allowed us to measure 

the number of drug treatment episodes for a range of treatment types. 

We used averages drawn from the U.S. Department of Health and Human 

Services’ Healthcare Cost and Utilization Project (HCUP) to estimate the 

costs of drug- or alcohol-related emergency room visits. The HCUP collects 

data from every hospital in the country and computes averages for specific 

types of visits (which also allowed us to use separate prices for participants 

of different ages). We also used the HCUP to estimate the costs of 

hospitalizations not related to drugs or alcohol. To estimate the costs of 

other types of drug treatment, we relied on the U.S. Substance Abuse 

and Mental Health Services Administration’s Alcohol and Drug Services 

Study (ADSS).3

 ADSS surveyed hundreds of drug treatment providers in 

the United States (albeit nearly a decade ago) and estimated the costs of a 

variety of drug treatment modalities. Finally, because ADSS respondents do 

not include men and women living in prisons, we had to turn to an alternate 

source to estimate the costs of in-prison therapy. Here we used estimates 

from the CBA of Roebuck, French and McClellan.4
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RESEARCH IN BRIEF 19

Prices of mental health treatment. Similar to determining the prices for 

drug treatment, we based many other national prices used in NIJ’s MADCE 

on past-published cost-benefit studies. To estimate the price of residential 

mental health treatment, we used a large study published by the U.S. 

Department of Veterans Affairs (VA) that was based on cost analyses of 

services provided in its hospitals.5

 Although these data aren’t likely to be 

representative of treatment facilities not associated with VA hospitals, the 

prices of mental health treatment are difficult to obtain, and approximations 

like these are sometimes necessary in CBA. 

Costs of stays in halfway houses. To estimate the costs of stays in halfway 

houses, we relied on a study by Klein-Saffran.6 For the costs of arrests, 

we based our estimates on a study by Cohen and colleagues.7 Although 

these estimates are now quite dated, they are still the main source in most 

CBA studies, because replicating the studies would be very expensive. 

In practice, CBA often involves relying on older information updated for 

inflation. 

Social costs of victimization. Estimates of the social costs of victimization 

(i.e., the financial and nonfinancial harm inflicted on victims by criminal 

activity) came from Roman’s analysis of jury data, which is also commonly 

cited.8 This example illustrates another core principle of CBA: When 

possible, it is generally preferred that prices be based on what economists 

call “revealed preferences,” or behavior we actually observe in society 

(such as the harm that actual juries have associated with certain types of 

victimization), rather than estimates based on surveys of perceptions (in 

which respondents have little at stake and often aren’t expected to provide 

reasonable answers). Of course, this isn’t a completely settled matter,9

 but, 

as a rule of thumb, economists prefer revealed preferences.

In summary, we took a variety of approaches in estimating quantities 

(including surveys, interviews, courtroom observations and administrative 

data records) and prices (including peer-reviewed articles, published and 

unpublished evaluations, large-scale data collection efforts, and original 

analyses of individual-level data) (see sidebar, “Practical Considerations of 

Conducting a Cost-Benefit Analysis”).
20 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

PRACTICAL CONSIDERATIONS OF 

CONDUCTING A COST-BENEFIT ANALYSIS

Key practical considerations in conducting a cost-benefit analysis (CBA) are as follows:

• Make simplifying assumptions based only on convenience and feasibility. For instance, 

NIJ’s Multi-site Adult Drug Court Evaluation (MADCE) analysis excluded direct benefits to 

program participants, such as reduced addiction or improved self-esteem. We made this 

decision not on any principled theoretical grounds but rather because valuing direct benefits 

would be too difficult. 

• Use agency financial reports. One common technique used in the MADCE analysis was 

using reports from state departments of corrections to estimate the costs of prison and similar 

information (which had already been gathered and aggregated) to estimate the costs of jails. 

• Substitute general data for specific data. For instance, although the use of wages for drug 

court employees in the MADCE analysis would have been preferable, it also was impractical. 

Instead, the analysis relied on average wages of people within the same occupation. Similarly, 

the analysis often resorted to national data in the absence of city-level data. 

• Use older data. For example, it is nearly universal in the literature to use estimates of the 

costs of arrest that are based on analyses of 20-year-old data. 

• Use data based on observed behavior if possible rather than people’s self-reported 

claims of how they would value something. For instance, to estimate the social costs of an 

assault, one may rely on (a) jury data reflecting court awards related to an assault or (b) surveys 

about how people think assaults should be valued. Although the literature includes some debate 

on this topic, the first approach is generally preferable. 

• Combine various data from diverse sources. The prices gathered in NIJ’s MADCE come from 

a range of sources, many of which may be useful in future criminal justice CBAs.

Combining prices and quantities to estimate net benefits

A common approach. When researchers estimate the actual net benefits 

of a program, they usually make separate estimates for each type of 

impact. For instance, when using a standard impact analysis, researchers 

might conclude that, on average, the program led to one additional 
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RESEARCH IN BRIEF 21

drug treatment episode and 0.5 fewer arrests. Then, with each impact 

separately estimated, the researchers value the estimated difference. 

Thus, in this example, if a treatment episode costs $100 and an arrest 

costs $300, on average, the program led to $100 in additional costs 

and $150 in benefits. The researchers then combine these two figures to 

estimate that the program had $50 in net benefits. In brief, it is standard to:

1. Estimate each impact,

2. Value each impact, and then

3. Combine the different impacts.

NIJ’s approach in MADCE. We used a different approach than most 

researchers to estimate the actual net benefits of the program. First, we 

valued the domains listed in Table 1 (see page 15). We then combined the 

different activities within the same person. Suppose, for instance, that the 

comparison individual received three drug treatment episodes (each costing 

$100) and was arrested once (costing $300). We valued these events 

and combined them within the same person. Thus, we estimated that this 

individual had $600 of social costs ($100 for each of the three treatments 

and $300 for the arrest). If a treatment individual had five drug treatments 

and no arrests, we would estimate this individual had $500 of social 

costs ($100 for each treatment). With societal costs/benefits measured 

at the individual level, we can simply analyze this variable using the impact 

analysis approach developed for NIJ’s main MADCE analyses. Because 

the treatment individual had $100 less in social costs than the comparison 

individual, we estimate that the program yielded $100 in net benefits. In 

other words, we conducted the following steps:

1. Valued the behaviors considered, 

2. Combined the different behaviors, and then 

3. Estimated the impact of the program.

The research community accepts both of these approaches. Each approach 

has the same steps (estimate the impacts, value them, aggregate them) 

but in a different order. Each approach also yields similar conclusions, but 
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22 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

we believe that the second approach gives more accurate estimates of 

statistical significance. The debate, which centers on covariance between 

different types of effects, is somewhat technical, and we leave it for the 

research literature to determine. Our purpose in this section is to present a 

simple illustration of how analyses are conducted in CBA. In NIJ’s MADCE, 

we used the prices previously discussed to value all of the domains listed 

in Table 1 (see page 15), then aggregated the results within each individual 

and estimated the program’s impact using the statistical procedures briefly 

mentioned at the beginning of the next section, “NIJ’s MADCE Results.”

NIJ’s MADCE Results

In this section, we present some main results from the cost-benefit portion 

of NIJ’s MADCE. Our focus is on illustrating the types of conclusions to 

which CBA might lead, rather than on discussing the implications for drug 

courts. For more information and a discussion of policy implications, see 

the National Association of Drug Court Professionals’ 2012 publication 

What Have We Learned from the Multisite Adult Drug Court Evaluation? 

Implications for Practice and Policy.10

As we discussed earlier, we valued a variety of domains and aggregated 

them for each individual to estimate that individual’s impact on the 

well-being of society. We then used statistical procedures to estimate 

how program participation changed societal impacts. The main 

cost-benefit results are presented in Table 2, Net Benefits by 

Category for Drug Court Participants and Comparison Probationers.

The key conclusion from NIJ’s MADCE is that the benefits from 

participating in drug court do not appear to exceed the costs of 

participating — that is, the net benefits do not differ significantly from the 

status quo. On the one hand, opponents reviewing this conclusion might 

think, “Drug courts are not cost-beneficial; they don’t have positive net 

benefits.” On the other hand, advocates might think, “Drug courts pay 

for themselves; the benefits cover the costs.” Both views are accurate 

descriptions of the results, highlighting the importance of being able to 

understand and interpret the underlying study. 
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RESEARCH IN BRIEF 23

Table 2. Net Benefits by Category for Drug Court 

Participants and Comparison Probationers 

Hierarchical Results (over the full follow-up)

Category Drug Court 

Participants

Comparison 

Probationers Net Benefit

Social productivity $20,355 $18,361 $1,994

Criminal justice system – $4,869 – $5,863 $994

Crime and victimization* – $6,665 – $18,231 $11,566

Service use* – $15,326 – $7,191 – $8,135

Financial support use – $4,579 – $3,744 – $835

Total – $11,206 – $16,886 $5,680

*Difference is statistically significant (p < 0.01).

Readers should recall that CBA is naturally comparative and that when 

comparing the results to zero, we compare them to the status quo. If we 

believe that society places some inherent value on rehabilitation, then that 

isn’t captured here, and drug courts are a way of expanding rehabilitation 

without the cost of losing social welfare. If we believe that society places 

some inherent value on being tough on crime, that perception also isn’t 

captured here, and drug courts weaken that position without providing the 

social welfare benefits to justify such a stance.

Regardless of these headline findings, we can look beyond them to 

better explore the value of CBA. The results illustrate the unique 

ability of CBA to balance different types of impacts. The key insights 

of Table 2 are that the dominant cost of drug courts is drug treatment 
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24 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

and that the dominant benefit is reduced crime/victimization. Although it’s 

true that drug courts seemed to improve employment outcomes and save 

the justice system money by reducing arrests and incarcerations, these 

benefits pale in comparison with the benefits of averted victimizations. 

Similarly, although drug courts carry some processing costs (e.g., additional 

hearings, meetings with probation officers, carrying out administrative 

responsibilities), these costs are small compared with the costs of drug 

treatment. CBA has enabled us to narrow our focus by offering some 

guidance on how significant some of these gains (i.e., benefits) or losses 

(i.e., costs) are. The CBA implies that drug courts can be motivated 

primarily by crime reduction and that the key concern is treatment costs.

Finally, a key implication of the CBA results is that drug courts are doing 

exactly what they are supposed to do. Drug courts raised the costs 

of government financial support by connecting clients to government 

assistance programs for which they were qualified. Drug courts 

dramatically increased supervision costs because the drug courts involve 

so many additional meetings with probation officers and case managers. 

Drug courts increased treatment costs because clients are much more 

likely to receive drug treatment and receive it in greater intensity. These 

are the intended functions of drug courts, and they seem to be achieving 

these procedural goals well.

Concluding Thoughts

In this report, we have sought to illustrate what we view as the key 

theoretical and practical issues in conducting a CBA. We believe that 

CBA can be a useful research tool in the coming years because it offers 

a comprehensive framework for combining a range of impacts. 

Throughout this report, we have strived to bridge the gap between how 

researchers and policymakers and other criminal justice stakeholders 

interpret CBA and to make it clear that CBA is about social well-being 

and resources, not about fiscal impacts. Although we think of a cost (or 

benefit) as a price multiplied by a quantity, these prices are not transaction 

prices (such as the price of groceries at the store) but, rather, the value of 
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RESEARCH IN BRIEF 25

a particular outcome or action in society. We have provided a conceptual 

framework and an applied process (see “The Basics of Cost-Benefit 

Analysis” on page 5), illustrated these with an example (see “CostBenefit Analysis in Action: NIJ’s MADCE” on page 11), and noted some 

common challenges and realities that are faced in conducting a CBA 

(see “What Cost-Benefit Analysis Can and Cannot Do” on page 7). We 

have acknowledged that CBA is not a magic bullet that can answer all 

policy questions, and we have touched on some of its key limitations. We 

repeat that a good CBA makes its assumptions transparent and determines 

how sensitive the results are to those assumptions. 

Finally, we want to reemphasize the point that CBA is only one element 

of the research portfolio, and it can say nothing without a strong impact 

evaluation. In other words, data about program participants alone are 

insufficient for a CBA, and researchers must use rigorous research 

designs to develop and follow a comparison group. 

In this report, we have focused on providing the reader with the tools to 

interpret CBAs appropriately and use them responsibly in making decisions. 

Although no analysis will be perfect, a good CBA can serve as a critical 

pillar of policy debate and can inform decisions responsibly. 
National Institute of Justice | NIJ.gov

26 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

Notes

1. Stephan, James J., State Prison Expenditures, 2001, Bureau of Justice 

Statistics Special Report, Washington, D.C.: U.S. Department of 

Justice, Office of Justice Programs, June 2004, NCJ 202949, 

http://www.bjs.gov/content/pub/pdf/spe01.pdf.

2. Stephan, James, and Georgette Walsh, Census of Jail Facilities, 

2006, Washington, D.C.: U.S. Department of Justice, Office of Justice 

Programs, Bureau of Justice Statistics, December 2011, NCJ 230188, 

http://www.bjs.gov/content/pub/pdf/cjf06.pdf.

3. Substance Abuse and Mental Health Services Administration, The 

ADSS Cost Study: Costs of Substance Abuse Treatment in the Specialty 

Sector, Rockville, Md.: Substance Abuse and Mental Health Services 

Administration, Office of Applied Studies, 2003, http://samhsa.gov/

data/adss/ADSSCostStudy.pdf.

4. Roebuck, M. Christopher, Michael T. French, and A. Thomas McClellan, 

“DATStats: Results from 85 Studies Using the Drug Abuse Treatment 

Cost Analysis Program (DATCAP),” Journal of Substance Abuse 

Treatment 25 (2003): 51-57.

5. Barnett, Paul G., and Magda Berger, “Indirect Costs of Specialized 

VA Inpatient Mental Health Treatment,” Technical Report No. 6, U.S. 

Department of Veterans Affairs, Menlo Park, Ca.: Health Economics 

Resource Center, April 2003.

6. Klein-Saffran, Jody. “Electronic Monitoring vs. Halfway Houses: 

A Study of Federal Offenders.” Alternatives to Incarceration (Fall 1995): 

24-28, http://www.bop.gov/resources/research_projects/published_

reports/gen_program_eval/orepralternatives.pdf.

7. Cohen, Mark A., Ted R. Miller, and Shelli B. Rossman, “The Costs and 

Consequences of Violent Behavior in the United States,” in ed. National 

Research Council, Understanding and Preventing Violence, Volume 4: 

Consequences and Control, Washington, D.C.: National Academies 

Press, 1994: 67-166. 

8. Roman, Jonathan Kilbourn, “What Is the Price of Crime? New 

Estimates of the Cost of Criminal Victimization,” Dissertation, University 

of Maryland, College Park, 2009. Available through UMD Theses and 

Dissertations, http://hdl.handle.net/1903/9868.
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RESEARCH IN BRIEF 27

9. Cohen, Mark A., Roland T. Rust, Sara Steen, and Simon T. Tidd, 

“Willingness-to-Pay for Crime Control Programs,” Criminology 42 

(February 2004): 89-110.

10. Rossman, Shelli B., and Janine M. Zweig, What Have We Learned from 

the Multisite Adult Drug Court Evaluation? Implications for Practice 

and Policy, Alexandria, Va.: National Association of Drug Court 

Professionals, 2012, http://www.nadcp.org/sites/default/files/

nadcp/Multisite%20Adult%20Drug%20Court%20Evaluation%20-%20

NADCP.pdf.
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28 Cost-Benefit Analysis: A Guide for Drug Courts and Other Criminal Justice Programs

About the Authors

Mitch Downey is currently pursuing a Ph.D. in economics at 

the University of California, San Diego.

John K. Roman is a senior fellow in the Justice Policy Center at 

the Urban Institute.

For more information on analyzing the costs and benefits of crime 

interventions, see John Roman’s NIJ Journal article, “Cost-Benefit 

Analysis of Criminal Justice Reforms,” at http://nij.gov/journals/272/

Pages/cost-benefit.aspx.
The National Institute of Justice is the research, development and 

evaluation agency of the U.S. Department of Justice. NIJ’s mission is to 

advance scientific research, development and evaluation to enhance the 

administration of justice and public safety.

The National Institute of Justice is a component of the Office of Justice 

Programs, which also includes the Bureau of Justice Assistance; the 

Bureau of Justice Statistics; the Office for Victims of Crime; the Office 

of Juvenile Justice and Delinquency Prevention; and the Office of 

Sex Offender Sentencing, Monitoring, Apprehending, Registering, 

and Tracking (SMART).

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