Cost-Benefit Analysis

Cost-benefit analysis and cost-effectiveness analysis represent the principal tools for evaluating alternatives when economic constraints and limited resources are considered. Both tools embrace the usual methods of evaluating outcomes, but they also consider results in the light of the resource investments required to obtain them. In this way it is possible to identify and choose those intervention policies that will maximize desired results for any resource constraint.

Cost-benefit and cost-effectiveness analyses differ in a fundamental way. Cost-effectiveness analysis focuses on the costs for outcomes restricted to the measurable goals of an intervention, such as mortality rates, reading scores, and criminal recidivism. In contrast, cost-benefit analysis evaluates alternatives in terms of the monetary value of their goals or benefits in comparison to their costs. That is, ...

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