Cost-Benefit Analysis

Cost-benefit analysis (CBA) is a decision-making support tool widely used to evaluate public sector interventions from a social perspective and in monetary terms. CBA is used to assess projects (e.g., roadway construction) as well as policies (e.g., environmental regulation). On the premise that decision making should include a comprehensive account of costs and benefits, CBA aims to provide a balance sheet of these costs and benefits.

To take the long-term impacts of a given intervention (e.g., a project) into consideration, CBA contrasts the costs and benefits of the project over its anticipated lifespan by discounting the future value of money. Essentially, the aim of CBA is to provide a net present value of the benefit-cost ratio. If this value is positive for any given project under ...