Cost-Benefit Analysis

Cost-benefit analysis (CBA) is a rational choice framework for identifying the best or most profitable option a decision maker can undertake. The decision maker may be a principal (i.e., an individual) or an agent (i.e., management or government) acting for others. The basic logic of CBA is that, for any specific course of action to be adopted, total expected benefits should exceed total expected costs to the principal or principals. If expected costs exceed expected benefits, the decision maker should not undertake the proposed action. If expected benefits and expected costs are equal, the principal or principals should be indifferent between the proposed action and the status quo. CBA is in the tradition of consequentialism and teleology. The logic of CBA, applicable with or ...

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