BULLET Placing a Value on Public Library Services
Glen E. Holt, Donald Elliott, and Amonia Moore

Economic Impact Analysis and Cost Benefit Analysis

At the outset of this project, the principal investigators considered two different measurement methodologies. The two methodologies were economic-impact analysis and cost-benefit analysis.

This choice to use cost-benefit analysis was made after considerable discussion. Holt had taken part in three previous studies of St. Louis museums that employed economic-impact analysis to estimate their contribution to the regional economy. These studies added credibility to the claims of area museums for public funding as regional cultural attractions.2

In economic-impact analysis, the magnitude of an institution’s impact on the regional economy is directly dependent on the extent to which it attracts new dollars to the region. For example, a major museum attracts visitors from outside of the region. While visiting the museum, these tourists or convention-goers stay at local hotels, eat at area restaurants and shop in area malls. When visitors spend in this way, a museum like the Art Institute of Chicago or the St. Louis Art Museum generates a significant net impact on the area economy. Similarly, when a museum receives national or international grants to engage a local construction company to add a new wing, the institution stimulates employment and income in the regional economy. Most public libraries, however, are fundamentally different from major museums. Most are not "national libraries" like New York Public Library in New York, NY, the Library of Congress in Washington, DC, or the Huntington Library in San Marino, CA. Most public libraries do not attract substantial numbers of visitors or extensive funding from outside the region and, thus, do not attract new dollars into the region. Because they are locale-serving institutions, most public libraries have little short-term net economic impact on their communities. The wages they pay, the services they purchase, and the buildings they construct or remodel merely recycle local dollars. For the most part, such local tax dollars still would have been spent in the region. Like local school districts, locally funded libraries’ fiscal operations have little short-term net impact on the economies of the regions they serve.

Libraries have an essential but different job from attracting tourists. Like school districts, community colleges and area universities, libraries are critically important to the long-term economic health of the regions they serve. Along with these other critical education and information institutions, libraries sustain the human capital that enriches a region in the long run.

Economic impact analysis is merely the wrong tool to measure and report this vital contribution. A different economic methodology, cost-benefit analysis, is a more appropriate tool for measuring the benefits of the services a library delivers in carrying out its mission.

Cost-benefit analysis is a tool that economists use to evaluate the benefits of education, pollution control and locks and dams – to name only a few applications. The SLPL project researchers chose CBA as its benefits-measurement tool because this economic methodology matches the way public libraries deliver services and the way benefits flow from library services. The methodology also tends to fit the way that citizens think about the taxes that they elect to invest in such public-service organizations.

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