Defining the baseline

Evaluating the benefits and costs of any action is fundamentally determined by the baseline, which determines the basis of comparison for the action. However, the topic of a baseline is often given limited attention in benefit-cost analysis (BCA) textbooks and journal articles, despite the fact that this is one of the first issues economists confront when doing applied analysis. This paper addresses the gap by discussing some of the nuances of defining and constructing a defensible baseline and illustrates these nuances with examples from the US Environmental Protection Agency (EPA). Core materials for BCA teachers include the narrative as well as links to documents, websites and regulatory impact analyses illustrating these baseline nuances.