Cost-Benefit Analysis

Cost-benefit analysis (CBA) is one of the most favored and used techniques to estimate the economic value of the nonhuman world in order to inform economic and environmental policy. Its origins lie in welfare economics and it is perhaps the most dominant economic valuation technique used in policy making around the world, especially in the areas of environmental policy, transport, and healthcare.

The essential theoretical foundations of CBA are very simple. Benefits are defined as increases in human well-being (utility)—usually reduced to monetary values—and costs are defined as reductions in human well-being—again usually reduced to monetary values. For a project, proposal, or policy to qualify and be supported on cost-benefit grounds, its benefits must exceed its costs. And herein lies the simplicity (and problem) with CBA: ...