How to do an economic impact study, properly

My request for requests drew this topic.  I have two simple suggestions:

1. Use a multiplier of 1, not three or four.  The so-called multiplied funds are just sloshing around from one sector to another.  But if your economy is in deep Keynesian unemployment and the project is relatively large, use a multiplier of 1.3 to account for aggregate demand effects.

2. Compare your studied project to the best available alternatives.  Have you been hired to assess the benefits of a new stadium?  Perhaps you think the stadium would be better than the status quo.  But also list the forty-three projects that would be better than a stadium.

I am not aware of any economic impact studies that follow such procedures.  Too often such studies are political marketing rather than an attempt to discover truth.  Here is my previous post on the topic.


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