The Value & Economic Measures of Libraries - Economic Perspective
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Transcript of The Value & Economic Measures of Libraries - Economic Perspective
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The Value & Economic
Measures of Libraries
10th Northumbria InternationalLibrary Conference
Joe MatthewsJuly 25, 2013
Afternoon Session – Economic Perspective
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Agenda
Return on Investment (ROI) Cost-Benefit Methodologies Direct Use Benefits
Economic Impact Benefits Indirect Use Benefits
Consumer Surplus Method Contingent Valuation Method
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Agenda
ROI in Libraries
What to do? Communicate Value
Orr’s Fundamental Questions
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Financial
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Library Budgets
Competition for scarce resources
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At the table or
On the menu?
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Perspectives on Value
Benefits
Use
Nonuse
Direct
Indirect
Option – Preservation of option for
future use by meExistence – Perceived value and significance
to the communityLegacy – Value of preservation for
future generations
Personal
Organizational
Financial
Impacts
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Financial Impacts• Direct use benefits– Cost savings– Access to other resources– Access to trained professionals
• Indirect use benefits– Estimated value
• Non-use benefits– Benefits that arise to you in the
future– Benefits that arise to others in the
future
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What is ROI?
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ROI Applications
• Projects
• Services
• Organization
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ROI in Library Contexts
• Demonstrating the value of libraries
• Evaluating existing services, collections, etc.
• Making the case for additional services or resources
• Recruiting support for a program or initiative
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ROI Terminology
• Cost-Benefit Analysis (CBA)– Compares cost or purchase price with estimated
value of variables that are difficult to measure
• Consumer Surplus– Value that consumers place on the consumption
of a good or service in excess of what they paid for it
• Cost of Time and Effort–Measures time and effort expended by users
• Contingent Valuation–Measures value of use and non-use of non-
priced goods and services, e.g., a library
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Cost/Benefit Methodologies
• Maximize the benefits for given costs• Minimize the costs for a given level
of benefits• Maximize the ratio of benefits over
costs• Maximize the net benefits (present
value of benefits minus the present value of costs)
• Maximize the internal rate of return
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Ratio of Benefits to Costs
Value of benefitsdivided by
Costs
ROI = Benefit – CostCost
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Challenge
Estimating the value of the benefits
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Direct Use Benefits
• Cost savings – the “free” stuff
• Free or low-cost access to equipment, programs, meeting rooms, etc.
• Access to trained professional librarians
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Identify a Competing Service
• Establish price of competing service
• Identify library’s annual volume or use
• Multiply to establish value of annual benefits
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ROI 2.80:1
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Challenge
What is the value of an item in a collection?
• Purchase price
• Purchase price + processing costs
• Discount the purchase price to 20 – 25 %
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Challenge
• Difficult to identify all services
• Difficult to establish a value for some services
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Generate Revenue
Ask the library user to:
• Estimate revenue generated
• Estimate costs saved
Library then calculates totals
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Estimate Time Saved
Ask library customer to:
• Estimate time saved
• Multiple by hourly salary (plus benefits)
Library then calculates savings
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Economic Impact Analysis
Compares local/regional economic activity
of the library to the local/regional economic activity
without the library
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Economic Impact Analysis
• Salaries for library employees plus supplies/services purchased locally
• PLUS the multiplier or ripple effect
• The resulting data is entered into a input-output econometric model
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A Destination
Major libraries and museums will attract visitors from out-of-town. These visitors spend money on:– Car rentals– Hotels– Restaurants– Tours– Etc.
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Seattle Public Library
$16 Million Dollars Annually
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Carnegie Library of Pittsburgh
$9.8 to $15.6 Million Annually
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Ripple Effect
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Return on Capital Investment
Valuing the physical assets of the library, including
– Land– Buildings– Furniture– Equipment– Collections
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Cost
Savi
ngs
$193.4 million ROI = 49.6:1
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Indirect Use Benefits
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Nonmarket Valuation• Stated preference methods– Consumer surplus– Contingent valuation– Attribute-based methods– Paired choice comparisons
• Revealed preference methods– Travel cost models (Environmental quality)– Hedonic models (Property values)– Defensive behavior models (Offset effect of
exposure)– Damage cost models (Environmental
contamination)
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Consumer Surplus
Monetary value consumers associate with a good or service in
excessof any costs they incur to get it
Data collected using a survey
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Contingent Valuation
• Economic method of evaluation for non-priced goods and services
• Looks at the implications of not having the goods/services
• Identifies the cost to use alternative sources of information, should people choose to do so
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Contingent Valuation
Exercise
Willingness-to-Pay (WTP)
Willingness-to-Accept (WTA)
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Willingness-to-Pay (WTP)
Suppose that no libraries had ever existed
and taxes for libraries had never existed.
How many tax dollars or fees would your
household be willing to pay annually to create and maintain your library
as it exists today?$ __________
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Willingness-to-Accept (WTA)
Suppose that in the next election the ballot
contained an option for closing all public libraries.
The budget savings would be used to lower taxes.
How much should the yearly tax saving be
in order for you to vote to close the libraries?
$ _____________
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Contingent Valuation Questions
• If there were no library, what would you do to obtain the information on this visit?
• How much time and money do you think it would take to find & use an alternative source?
• How far would you have had to travel to use this other source?
• Please estimate the additional costs of using this other source.
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Contingent Valuation Challenges
• Depends on ability to pay• Whose money? Yours or mine• Immaterial goods (info) are undervalued• Values influenced by the “warm glow”
effect• Are values suggested (multiple choice)• WTP & WTA produce different results• Telephone survey is long, costly
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Library Valuation StudiesCountry National State Regional Individual Total
Australia 1 1 2
Germany 1 1
New Zealand 1 1
Norway 1 1
South Korea 2 2
UK 2 2
USA 7 8 19 34
Totals 5 7 8 23 43
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ROI in Academic Libraries
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Drexel University
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University of Pittsburgh ROI
• If the library’s journal collection (print & electronic) were not available, faculty would use 250,000 hours and $2.1 million to find alternative sources for the articles
• It would cost the university 4.38 times the cost of the current library journal collections for the same amount of information gathering to be carried out
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University of Illinois, Urbana-Champaign
Connected citations to resources in the library’s collection to successful grant proposals, and the income the grants generated
ROI = 4.38:1Other studies – 0.27:1 to 15.54:1
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ROI may provide us with calculations thatseek to document a financial relationship between action and benefit, but too often in the library community these studies are poorly constructed, ineffectively executed, and naïvely communicated. And in the final analysis, do not respond to the legitimate questions being raised by our administrators and funders, and do not advance the academic library as a critical factor in institutional success.
James Neal
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15:1 ROI
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• Comprehensive assessment of the library
• ROI of the journal collection & readership
• ROI for support of teaching & learning
• ROI of digitized special collections• ROI of eBooks• Value of library commons• Bibliography
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Bryant University – Faculty Access
Article ROI = 3.2:1Book ROI = 3.5:1
Other publications ROI = 3.2:1
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Syracuse University – ROI 4.49:1
Faculty Students
Economic
In Person $13.6 $23.1
Remote 19.0 14.5
TOTAL $32.6 $37.6
Environmental
Remote access $1.6 $3.7
Read not-printed 0.1 0.7
Social ? ?
TOTAL $34.3 $42.0
(Millions of Dollars)
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Journal Collections & Reading
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ROI for Support of Teaching & Learning
Perceived Benefits –• Savings …– Of own time– Of own money– Of other resources – printing,
copier
• Improvements …– Teaching– Course-related materials– Student performance
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ROI of Digitized Special Collections
User• What is the value to a user in terms
of time and money spent?Prestige• What is the prestige to the institution
for high visibility digital special collection?
Development• What value accrues to the
development effort of the institution?
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ROI of Digitized Special Collections
Environmental• What is the value of the environmental
savings from limited physical access to unique and often fragile material?
Scholars• What value accrues from the role of
special collections in attracting graduate students?
Collections• What is the value of digital collection in
attracting additional special collections?
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ROI of eBooks
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The Commons
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ROI = 26:1
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ROI inPublic
Libraries
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ROI in Public Libraries
• Value of direct use benefits usually determined by consumer surplus method
• Value of indirect use benefits determined by contingent valuation estimates
• Value of nonuse benefits determined by contingent valuation estimates
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State of FloridaTotal annual investment in Florida’s public libraries was $449 million
Total economic returns (direct and indirect) was $2.9 billion
For every $1 invested the library returned $6.54 in direct benefits
Using input-output model called REMI to measure indirect benefits:
• For every $6,448 spent on public libraries, 1 Job was created
• For every dollar spent on public libraries, Gross Regional Product
increased by $9.08
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Suffolk Cooperative Library System
Benefit-to-cost-ratio methods to measure direct benefits:
Total Value of library services ÷ Tax dollars supporting service:$509,415,038 ÷ $131,647,566 = $3.87 : 1 benefit/cost ratio
For every $1 invested the library returned $3.87 in direct benefits
Using input-output model called RIMS II to measure indirect benefits:
• Library generated $26 million in goods and services
• Library enabled local earnings to increase by more than $50 million
• Created more than 1,200 jobs for the local economy
• Total multiplier effect of SCLS spending = $232 million.•
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Carnegie Library of Pittsburgh
Consumer surplus method used to estimated direct benefits.
Library is the most visited regional destination
Indirect benefit estimates suggested that:
• Library provides some 700 jobs
• $63 million in economic output is attributable to the library
• $75 of benefits for every resident of the County
For every $1 invested the library returned $3.00 in direct benefits
$5.50 of benefits if only local tax dollars are considered.
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Philadelphia Free Library
Literacy
Learn to read and acquire working skills totals $21.8 millionWorkforce Development
Locate job opportunities and develop career skills totals $6 million979 people found jobs in one year ($30.4 million in earned income)
generating $1.2 million annually in wage tax revenue for the city
Business DevelopmentDevelop or enhance their own businesses total $3.8 millionValue to Homes and NeighborhoodsHomes within ¼ mile of a library are worth $9,630 more than other homes
These homes produce an additional $18.5 million in property taxes
Economic value of library services that help Philadelphians:
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Charlotte Mecklenburg Library
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Library Use Valuation Calculator
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Priceless
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Victoria Public Libraries ROI = 3.56:1
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Economic value= 36% higher than budget
Economic benefit = $ 4.24:1
Economic activity= $ 2.82:1
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New Zealand V+LM
• Market price proxy
• Replacement cost
• Opportunity cost
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ROI in Public Libraries
• Largest number of ROI studies
• Single library study, libraries with branches, & group of public libraries, state studies
• ROI ranges from a low of 1.02:1 to 31.07:1
• Location and size of library influences the results
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Social Return on Investment Models
Expected Return =
Benefit X Probability of success ÷ Cost
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• How are outcomes or benefits estimated? Over what timeframe?
• How are outcomes or benefits monetized?
• How are costs calculated?
• How are risks and uncertainties accounted for?
Social Return on Investment Models
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• The inconsistent use of language• The lack of common measures in the
social sector• The lack of quality data on social
impacts, outcomes, outposts, and cost• The lack of incentives for transparency• Unintended consequences• Inadequate utilization• The cost of measurement.
SROI Challenges
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ROI in National Libraries
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British Library
ROI = 4.4:1
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Australian National Library
ROI = 2.0:1
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New Zealand National Library
ROI = 3.50:1
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National Library of Norway
ROI = 4.0:1
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New Zealand Parliamentary Library
ROI ranges from 2:1 to 20:1
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Latvia National Library
WTP 3.88:1WTA 9.96:1
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ROI Challenges
Lack of consistency in methodologieslimits the ability to replicate research,
compare valuation results, and apply the research findings
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Value of Benefits
• Materials for adults35%
• Staff interactions30%
• Materials for children20%
• Information technology15%
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Library Valuation Frameworks
• Marketing – promote communication between libraries and their stakeholders to affect the future state of a library
• Evaluation – Describe the current state of the library and predict its future state
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ROIStrengths
– Average ROI of $4:1 to $6:1– Wide variation in establishing a service value– Different user groups receive different levels of
benefits– The value of a library will vary over time, as users
and uses change– The consumer surplus method (or the shortcut
method) has been used successfully by a number of libraries
– Multiple methods lead to increased confidence in the results
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ROIWeaknesses– Assigning value for indirect (intangible)
benefits is problematical– Comparing ROI studies is impossible– Variety of methodologies leads to
variation in results– Policy-makers are uncertain of how to
use the results–May involve large surveys (and costs)– ROI for small libraries may not be so
good
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Not only must a ROI study consider dollars and cents
but it must also
make dollars and sense
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A great resource http://microsites.oii.ox.ac.uk/tidsr/welcome
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What to do?
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Good Assessment is Good Research
• An important question
• An approach to answer the question
• Data collection
• Analysis
• Report
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Problems with Library Assessment
• Some studies correlate library use and retention, but no causative links
• Strength of correlations is weak – at best
• Problem with almost all existing library research are the small sample size
• Only a handful of research has been done and a lot of it is old
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“While satisfaction and service quality measures like LibQUAL+ demonstrate librarians commitment to user feedback, they do not focus on the outcomes of interaction with library services and resources.”
Megan Oakleaf
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Library Assessment
• Inward looking
• Focuses on collections and services
This needs to change ….
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Collaboration
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Layers of Data
Library DataCirculation, Logins, Downloads, Reference,
Instruction, …
Demographic DataCollege, Level, Major, Gender, Ethnicity, Age,
…
Performance DataCumulative GPA, ACT score, CLA score, ….
Other University-wide DataStudent Surveys, Faculty Surveys, Alumni
Surveys, …
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PrivacyUse student IDs to match records
from one data set to another and then
Strip the student ID number from thecombined record
Work with Office of Institutional Research &
Institutional Review Board
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• WCET project – data mining
• 6 institutions + 10 more (Phase 2)
• Analyzing 640,000 student records & more than 3 million course records
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Next Steps
• Clearly understand the goals and concerns of top campus stakeholders
• Become engaged with the assessment process at your institution
• Partner with your campus Office of Institutional Research
• Create a library assessment plan• Conduct “big picture” research
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Next Steps
• Collect new data (individual students)
• Find “new” (& existing) data sets• Combine existing data sets (library
data & student information systems – registrar’s office)
• Use assessment management systems or a metric management system (LibPAS)
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Past Future
Focus
Structure
Change
Outreach
Decision making
Measures of Success
Building & maintainingcollections
Engaging students &
faculty
Internal silos University priorities
Incremental Transformational
Top down
Periodic
Shared
Deliberative
Traditional Impact
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Library Value
• How integral it is to the community
• How well it supports learning and teaching
• How well it supports research
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Communicating Value
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What your library does well
What your customers value
Value Proposition
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• An offer, not a demand
• Not what you value
• Only valuable perspective is the customer’s
• Valuable in a competitive environment
The Value Proposition
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Or
The promise that a library makes to its
customers about what they can
expectto receive in return for their time,
their effort, their loyalty, and especially their dollars.
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The library needs to …
Focus on customers
and what they want and need
as well as
how they want and need it.
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Economic
ValueBenefitActivity
Value
DirectIndirectNonuse
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Stories + Stats = Success
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Is the value in the glass, the wine or the savoring?
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The financial crisis is looking even worse,
but you will pleased to know that the director reports that the library
performancewent up a half a point on the
“library goodness scale” last week.
Michael Buckland
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www.joematthews.org
Joe MatthewsLibrary Consultant
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Cornell University Library Value
http://research.library.cornell.edu/value
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The value is in the worth,
not in the number..