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The present article identifies the theoretical areas in substance abuse estimation that have not been sufficiently addressed. Those include issues relating to the definition of social costs, a more comprehensive labour market analysis, the social benefits of drug consumption and the distributional impacts of substance abuse. Examples are presented of types of cost estimates, how the results of estimates can be interpreted and the policy use of each type of cost.
Data requirements are identified and the process of proceeding from aggregate estimates to disaggregated evaluation is reviewed. Issues of attribution are considered, and the importance of calculation of avoidable costs of substance abuse is explained.
General issues are reviewed with regard to benefit-cost analysis and evaluation criteria applicable to substance abuse. The article presents as a case study the economic evaluation of Quit Victoria. It uses the calculations of the social costs of tobacco to provide the basis of benefit-cost evaluation of Quit Victoria. The study resulted in a positive benefit-cost ratio under all assumptions.
The article concludes with a review of the issues to be addressed in the economic evaluation of a medically supervised injecting room that is being undertaken in New South Wales, Australia. It emphasizes the importance of estimating social costs in project appraisal and public policy-making.
