ADVANTAGES

One of the biggest stumbling blocks in economic impact analysis is determining which effects are real and which are merely transfers. What appears to be a cost may in fact be a transfer from one person or entity in society to another. For example, when a person borrows money to take a trip involving social or recreational gambling, the money borrowed is not a cost to society. Rather, the person is transferring consumption from the future, when the debt will be repaid, to the present, in much the same way as when he or she borrows money to purchase a new car. Thus, money is transferred from the future to the present through a lender, who is willing to forgo present consumption when the loan is made, in exchange for future consumption when the loan is repaid with interest.

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