To select among alternative training systems, the cost and effectiveness of each must be measured and compared. For this paper it is assumed that effectiveness can be measured cardinally and costs are life cycle costs.

When evaluating life cycle costs of alternatives the time value of money must be considered. The life cycle costs must be presented in present value terms by discounting. Inflation should be considered only to the extent that it affects the real interest rate (the effective discount rate) or if differential price growth exists in resource prices of the alternatives.

Three methods to quantify and combine the costs and effectiveness of alternatives are evaluated: (1) cost-effectiveness ratio; (2) normalized cost and effectiveness measures; (3) marginal cost effectiveness. None of these approaches will select the "best" alternative because of the subjectivety of effectiveness measures. However, the marginal approach will enable one to eliminate alternatives.

Eric Green

Affiliation

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Methodologies for Comparing Cost/Effective Measures of Alternative Training Systems