Cost-benefit analysis (CBA) is the systematic and analytical process of comparing benefits and costs in evaluating the desirability of a project or programme – often of a social nature. It attempts to answer such questions as whether a proposed project is worthwhile, the optimal scale of a proposed project and the relevant constraints. CBA is fundamental to government decision making and is established as a formal technique for making informed decisions on the use of society’s scarce resources. This timely sixth edition of the classic Cost-Benefit Analysis text continues to build on the successful approach of previous editions, with lucid explanation of key ideas, simple but effective expository short chapters and an appendix on various useful statistical and mathematical concepts and derivatives. The book examines important developments in the discipline, with relevant examples and illustrations as well as new and expanded chapters which build upon standard materials on CBA. Highlights include: updated historical background of CBA extended non-market goods valuation methods the impact of uncertainty evaluation of programmes and services behavioural economics decision rules and heuristics CBA and regulatory reforms CBA in developed and developing countries value of household production other topics frequently encountered in CBA, such as costs of diseases and air pollution, and value of statistical life. This book is a valuable source and guide to international funding agencies, governments, interested professional economists and senior undergraduate and graduate students. The text is fully supported by a companion website, which includes discussion questions and PowerPoint slides for each chapter.

Governments, corporations, and nonprofit agencies regularly embark on large projects and programs that require significant sums of money and have major impacts, both positive and negative. Since the funds used to execute these projects are limited, the stakeholders of the organizations that pursue such projects need justification that the funds are being used effectively and deserve funding more than competing projects. Cost-benefit analysis is a set of techniques for assessing the benefits and costs of a project and measuring its worthiness. The text presents the fundamentals of cost-benefit analysis, with particular emphasis on aiding readers of cost-benefit analysis reports to better understand the rationale behind the tables, graphs, and conclusions that appear in those reports, as well as to be able to critically assess the impact of the assumptions being made. The main challenge of any cost-benefit study is how to measure the costs and benefits in monetary units. We address methods typically used for assessment of both direct and indirect effects of projects, as well as both economic and non-economic impacts. Two other key challenges in a cost-benefit study are timing and uncertainty. A dollar of benefits in several years is generally not viewed as sufficient return for incurring a dollar of cost today. To measure the net impact of a project, future costs and benefits need to be adjusted in order to be compared to current costs. Discount rates are a common tool for making these adjustments in cost-benefit analysis and are addressed here. While costs and benefits can be quantified, they remain estimates and are likely to be in error due to future uncertainty. A good cost-benefit analysis will explicitly consider the potential for, and possible consequences of, uncertainty. Cost-benefit analysis is often applied in public sector decisions where there are proponents and opponents. As such, cost-benefit analyses generally become part of a politically-charged dialogue and are viewed by advocates as either an ally to be touted or an adversary to be discredited. We discuss the interaction between cost-benefit analysis and politics. A main thesis of this book is that these political processes can be improved if those involved have a good understanding of the strengths and limitations of cost-benefit analysis.

This book shows that cost-benefit analysis does not need to be an esoteric and arcane subject. In a step-by-step presentation, with little more than introductory microeconomics, some clear reasoning, and many examples, Professor Ginés De Rus presents the essentials of applied welfare economics concepts. Any undergraduate student or practitioner who wants to start his training in CBA should consider reading this text.

This Element on cost-benefit analysis provides a summary of recent theoretical and empirical developments and summarizes state-of-the-art stated-preference and revealed-preference valuation methods. The Element discusses how to assess small (or marginal) as well as large (or non-marginal) projects that have a significant impact on prices and/or other economic variables. It also discusses distortions like taxes, market power, and sticky prices. In addition, risk/uncertainty is considered. A novel feature is the elaboration on flexible evaluation rules for reasonably small projects. Conventional point-estimates of projects should be used with care, because they typically give biased results.

Textbook on the theory and methodology of cost benefit analysis - covers criteria for decision making, shadow pricing, discount rate, etc. Bibliography pp. 175 to 177, graphs and statistical tables.