View source for Cost–benefit analysis

{{short description|Systematic approach to estimating the strengths and weaknesses of alternatives}}
'''Cost–benefit analysis''' ('''CBA'''), sometimes also called '''benefit–cost analysis''', is a systematic approach to estimating the strengths and weaknesses of alternatives. It is used to determine options which provide the best approach to achieving benefits while preserving savings in, for example, transactions, activities, and functional business requirements.<ref>{{cite journal|last1=David|first1=Rodreck|last2=Ngulube|first2=Patrick|last3=Dube|first3=Adock|title=A cost–benefit analysis of document management strategies used at a financial institution in Zimbabwe: A case study|journal=SA Journal of Information Management|date=16 July 2013|volume=15|issue=2|doi=10.4102/sajim.v15i2.540|doi-access=free}}</ref> A CBA may be used to compare completed or potential courses of action, and to estimate or evaluate the value against the [[Finance:Cost|cost]] of a decision, project, or policy. It is commonly used to evaluate business or policy decisions (particularly [[Social:Public policy|public policy]]), commercial transactions, and project investments. For example, the U.S. Securities and Exchange Commission must conduct cost-benefit analyses before instituting regulations or deregulations.<ref>{{Cite journal|last=Hirst|first=Scott|date=2018-07-01|title=The Case for Investor Ordering|url=https://scholarship.law.bu.edu/faculty_scholarship/343|journal=The Harvard Law School Program on Corporate Governance Discussion Paper|volume=No. 2017-13}}</ref>'''{{rp|6}}'''

CBA has two main applications:<ref>[http://www.dot.ca.gov/hq/tpp/offices/ote/benefit_cost/index.html] {{webarchive|url=https://web.archive.org/web/20081016040649/http://www.dot.ca.gov/hq/tpp/offices/ote/benefit_cost/index.html|date=October 16, 2008}}</ref>
# To determine if an investment (or decision) is sound, ascertaining if – and by how much – its benefits outweigh its costs.
# To provide a basis for comparing investments (or decisions), comparing the total expected cost of each option with its total expected benefits.

CBA is related to [[Cost-effectiveness analysis|cost-effectiveness analysis]]. Benefits and costs in CBA are expressed in monetary terms and are adjusted for the [[Time value of money|time value of money]]; all flows of benefits and costs over time are expressed on a common basis in terms of their [[Finance:Net present value|net present value]], regardless of whether they are incurred at different times. Other related techniques include [[Cost–utility analysis|cost–utility analysis]], [[Risk–benefit ratio|risk–benefit analysis]], [[Finance:Economic impact analysis|economic impact analysis]], fiscal impact analysis, and [[Finance:Social return on investment|social return on investment]] (SROI) analysis.

Cost–benefit analysis is often used by organizations to appraise the desirability of a given policy. It is an analysis of the expected balance of benefits and costs, including an account of any alternatives and the ''[[Philosophy:Status quo|status quo]]''. CBA helps predict whether the benefits of a policy outweigh its costs (and by how much), relative to other alternatives. This allows the ranking of alternative policies in terms of a cost–benefit ratio.<ref>{{cite web|first1=Stephanie Riegg|last1=Cellini|first2=James Edwin|last2=Kee|title=Cost-Effectiveness and Cost–Benefit Analysis|url=http://home.gwu.edu/~scellini/CelliniKee21.pdf|access-date=2012-09-24|archive-url=https://web.archive.org/web/20130526110811/http://home.gwu.edu/~scellini/CelliniKee21.pdf|archive-date=2013-05-26|url-status=dead}}</ref> Generally, accurate cost–benefit analysis identifies choices which increase [[Finance:Welfare economics|welfare]] from a utilitarian perspective. Assuming an accurate CBA, changing the ''status quo'' by implementing the alternative with the lowest cost–benefit ratio can improve [[Pareto efficiency]].<ref>{{Cite web |url=http://www.finance.gov.au/obpr/docs/Decision-Rules.pdf |title=Archived copy |access-date=2012-09-20 |archive-url=https://web.archive.org/web/20121102145516/http://www.finance.gov.au/obpr/docs/Decision-Rules.pdf |archive-date=2012-11-02 |url-status=dead }}</ref> Although CBA can offer an informed estimate of the best alternative, a perfect appraisal of all present and future costs and benefits is difficult; perfection, in economic efficiency and social welfare, is not guaranteed.<ref>{{cite book|title=Policy Analysis: Concepts and Practice|last1=Weimer|first1=D.|last2=Vining|first2=A.|publisher=Pearson Prentice Hall|year=2005|isbn=978-0-13-183001-1|edition=Fourth|location=Upper Saddle River, NJ|url-access=registration|url=https://archive.org/details/policyanalysisco0000weim_u3o9}}</ref>

The value of a cost–benefit analysis depends on the accuracy of the individual cost and benefit estimates. Comparative studies indicate that such estimates are often flawed, preventing improvements in [[Pareto efficiency|Pareto]] and [[Finance:Kaldor–Hicks efficiency|Kaldor–Hicks efficiency]].<ref>{{Cite web|last=Pamela|first=Misuraca|date=2014|title=The Effectiveness of a Costs and Benefits Analysis in Making Federal Government Decisions: A Literature Review|url=https://www.mitre.org/sites/default/files/publications/cost-benefit-analysis-govt-decisions-14-0929.pdf|publisher=The MITRE Corporation}}</ref> Interest groups may attempt to include (or exclude) significant costs in an analysis to influence its outcome.<ref>Huesemann, Michael H., and Joyce A. Huesemann (2011). [http://www.newtechnologyandsociety.org ''Technofix: Why Technology Won't Save Us or the Environment''], Chapter 8, “The Positive Biases of Technology Assessments and Cost Benefit Analyses”, New Society Publishers, Gabriola Island, British Columbia, Canada, {{ISBN|0865717044}}, 464 pp.</ref>

== History ==
[[File:Julesdupuit.jpg|thumb|alt=Small, blue-tinted picture of Jules Depuit|French engineer and economist Jules Dupuit, credited with the creation of cost–benefit analysis]]
The concept of CBA dates back to an 1848 article by Jules Dupuit, and was formalized in subsequent works by Alfred Marshall.<ref>{{cite book|title=The Globalization of Cost–Benefit Analysis in Environmental Policy|last=Wiener|first=Jonathan B.|publisher=Oxford University Press|year=2013|isbn=978-0-199-93438-6|editor-last1=Livermore|editor-first1=Michael A.|location=New York|chapter=The Diffusion of Regulatory Oversight|editor-last2=Revesz|editor-first2=Richard L.|editor-link2=Richard Revesz}}</ref> Jules Dupuit pioneered this approach by first calculating "the social profitability of a project like the construction of a road or bridge"<ref>{{Cite book|title=Economics evolving : a history of economic thought|last=Sandmo, Agnar|date=2011|publisher=Princeton University Press|isbn=9780691148427|oclc=799499179}}</ref> In an attempt to answer this, Dupuit began to look at the utility users would gain from the project. He determined that the best method of measuring utility is by learning one's willingness to pay for something. By taking the sum of each user's willingness to pay, Dupuit illustrated that the social benefit of the thing (bridge or road or canal) could be measured. Some users may be willing to pay nearly nothing, others much more, but the sum of these would shed light on the benefit of it. It should be reiterated that Dupuit was not suggesting that the government perfectly price-discriminate and charge each user exactly what they would pay. Rather, their willingness to pay provided a theoretical foundation on the societal worth or benefit of a project. The cost of the project proved much simpler to calculate. Simply taking the sum of the materials and labor, in addition to the maintenance afterward, would give one the cost. Now, the costs and benefits of the project could be accurately analyzed, and an informed decision could be made.

The Corps of Engineers initiated the use of CBA in the US, after the Federal Navigation Act of 1936 mandated cost–benefit analysis for proposed federal-waterway infrastructure.<ref>{{cite web|url=http://www.chicagoasa.org/downloads/CostBenefitConference2006/benefit%20cost%20history.pdf|title=History of Benefit–Cost Analysis|work=Proceedings of the 2006 Cost Benefit Conference|archive-url=https://web.archive.org/web/20060616003822/http://chicagoasa.org/downloads/CostBenefitConference2006/benefit%20cost%20history.pdf|archive-date=2006-06-16|url-status=dead}}</ref> The Flood Control Act of 1939 was instrumental in establishing CBA as federal policy, requiring that "the benefits to whomever they accrue [be] in excess of the estimated costs."<ref>{{cite book|title=Cases in Public Policy Analysis|url=https://archive.org/details/casesinpublicpol00gues|url-access=registration|last1=Guess|first1=George M.|last2=Farnham|first2=Paul G.|publisher=Georgetown University Press|year=2000|isbn=978-0-87840-768-2|location=Washington, DC|pages=[https://archive.org/details/casesinpublicpol00gues/page/304 304–308]}}</ref>

More recently, cost-benefit analysis has been applied to decisions regarding investments in cybersecurity-related activities (e.g., see the [[Gordon–Loeb model]] for decisions concerning cybersecurity investments).<ref name="GordonLoeb">{{Cite journal|first1=Lawrence A. |last1=Gordon|first2=Martin P. |last2=Loeb |author-link2=Martin P. Loeb|journal=ACM Transactions on Information and System Security|volume=5|issue=4| pages=438–457|doi=10.1145/581271.581274|title= The Economics of Information Security Investment|s2cid=1500788|url=http://tissec.acm.org/|date=November 2002}}</ref>

===Public policy===
CBA's application to broader public policy began with the work of Otto Eckstein,<ref>{{cite book|title=Water Resource Development: The Economics of Project Evaluation|last=Eckstein|first=Otto|publisher=Harvard University Press|year=1958|location=Cambridge}}</ref> who laid out a welfare economics foundation for CBA and its application to [[Earth:Water resources|water-resource]] development in 1958. It was applied in the US to water quality,<ref>{{cite book|title=The Economics of Regional Water Quality Management|last=Kneese|first=A. V.|publisher=Johns Hopkins Press|year=1964|location=Baltimore}}</ref> recreational travel,<ref>{{cite book|title=Economics of Outdoor Recreation|url=https://archive.org/details/economicsofoutdo00claw|url-access=registration|last1=Clawson|first1=M.|last2=Knetsch|first2=J. L.|publisher=Johns Hopkins Press|year=1966|location=Baltimore}}</ref> and land conservation during the 1960s,<ref>{{cite journal|last=Krutilla|first=J. V.|year=1967|title=Conservation Reconsidered|journal=[[Finance:American Economic Review|American Economic Review]]|volume=57|issue=4|pages=777–786|jstor=1815368}}</ref> and the concept of option value was developed to represent the non-tangible value of resources such as national parks.<ref>{{cite journal|last=Weisbrod|first=Burton A.|year=1964|title=Collective-Consumption Services of Individual-Consumption Goods|journal=[[Finance:Quarterly Journal of Economics|Quarterly Journal of Economics]]|volume=78|issue=3|pages=471–477|doi=10.2307/1879478|jstor=1879478|s2cid=154873105}}</ref>

CBA was expanded to address the intangible and tangible benefits of public policies relating to mental illness,<ref>{{cite journal|last=Weisbrod|first=Burton A.|year=1981|title=Benefit–Cost Analysis of a Controlled Experiment: Treating the Mentally Ill|journal=Journal of Human Resources|volume=16|issue=4|pages=523–548|doi=10.2307/145235|jstor=145235|pmid=6799568}}</ref> substance abuse,<ref>{{cite journal|last=Plotnick|first=Robert D.|year=1994|title=Applying Benefit–Cost Analysis to Substance Abuse Prevention Programs|journal=International Journal of the Addictions|volume=29|issue=3|pages=339–359|doi=10.3109/10826089409047385|pmid=8188432}}</ref> college education,<ref>{{cite book|title=Benefits, Costs, and Finance of Public Higher Education|last1=Weisbrod|first1=Burton A.|last2=Hansen|first2=W. Lee|publisher=Markham|year=1969}}</ref> and chemical waste.<ref>{{cite book|title=Hazardous wastes: A Risk-Benefit Framework Applied to Cadmium and Asbestos|last=Moll|first=K. S.|publisher=Stanford Research Institute|year=1975|location=Menlo Park, CA|display-authors=0}}</ref> In the US, the National Environmental Policy Act of 1969 required CBA for regulatory programs; since then, other governments have enacted similar rules. Government guidebooks for the application of CBA to public policies include the Canadian guide for regulatory analysis,<ref>Canadian Cost–Benefit Guide: Regulatory Proposals, Treasury Canada, 2007. [http://sciencepolicy.colorado.edu/students/envs_5120/CanadaCBA.pdf]</ref> the Australian guide for regulation and finance,<ref>Australian Government, 2006. Introduction to Cost–Benefit Analysis and Alternative Evaluation Methodologies and Handbook of Cost–Benefit Analysis, Finance Circular 2006/01.  http://www.finance.gov.au/publications/finance-circulars/2006/01.html {{Webarchive|url=https://web.archive.org/web/20140201130830/http://www.finance.gov.au/publications/finance-circulars/2006/01.html |date=2014-02-01 }}</ref> and the US guides for health-care<ref>US Department of Health and Human Services, 1993. Feasibility, Alternatives, And Cost/Benefit Analysis Guide, Administration for Children and Families, and Health Care Finance Administration.
http://www.acf.hhs.gov/programs/cb/systems/sacwis/cbaguide/index.htm {{Webarchive|url=https://web.archive.org/web/20120720114913/http://www.acf.hhs.gov/programs/cb/systems/sacwis/cbaguide/index.htm |date=2012-07-20 }}</ref> and emergency-management programs.<ref>Federal Emergency Management Administration, 1022. Guide to Benefit Cost Analysis. http://www.fema.gov/government/grant/bca.shtm</ref>

===Transportation investment===
CBA for transport investment began in the UK with the M1 motorway project and was later used for many projects, including the London Underground's Victoria line.<ref name="CoombsJenkins2005">{{cite book|url=https://books.google.com/books?id=V8ZuvceuZPsC&pg=PA278|title=Management Accounting: Principles and Applications|author1=Hugh Coombs|author2=Ellis Jenkins|author3=David Hobbs|date=18 April 2005|publisher=SAGE Publications|isbn=978-1-84787-711-6|pages=278–}}</ref> The [[New Approach to Appraisal]] (NATA) was later introduced by the Department for Transport, Environment and the Regions. This presented balanced cost–benefit results and detailed [[Engineering:Environmental impact assessment|environmental impact assessment]]s. NATA was first applied to national road schemes in the 1998 Roads Review, and was subsequently rolled out to all transport modes. Maintained and developed by the Department for Transport, it was a cornerstone of UK transport appraisal in 2011.

The [[Social:European Union|European Union]]'s Developing Harmonised European Approaches for Transport Costing and Project Assessment (HEATCO) project, part of the EU's Sixth Framework Programme, reviewed transport appraisal guidance of EU member states and found significant national differences.<ref>{{cite web|url=http://heatco.ier.uni-stuttgart.de|title=HEATCO project site|publisher=Heatco.ier.uni-stuttgart.de|access-date=2013-04-21|archive-url=https://web.archive.org/web/20150524014343/http://heatco.ier.uni-stuttgart.de/|archive-date=2015-05-24|url-status=dead}}</ref> HEATCO aimed to develop guidelines to harmonise transport appraisal practice across the EU.<ref>[http://ec.europa.eu/regional_policy/sources/docgener/guides/cost/guide2008_en.pdf] Guide to Cost–Benefit Analysis of Major Projects. Evaluation Unit, DG Regional Policy, European Commission, 2008.</ref>

Transport Canada promoted CBA for major transport investments with the 1994 publication of its guidebook.<ref>Guide to Benefit–Cost Analysis in Transport Canada. Transport Canada. Economic Evaluation Branch, Transport Canada, Ottawa, 1994 [http://www.tc.gc.ca/eng/corporate-services/finance-bca-101.htm] {{Webarchive|url=https://web.archive.org/web/20131221154518/http://www.tc.gc.ca/eng/corporate-services/finance-bca-101.htm|date=2013-12-21}}</ref> US federal and state transport departments commonly apply CBA with a variety of software tools, including HERS, BCA.Net, StatBenCost, Cal-BC, and TREDIS. Guides are available from the Federal Highway Administration,<ref>US Federal Highway Administration: Economic Analysis Primer: Benefit–Cost Analysis 2003 [http://www.fhwa.dot.gov/infrastructure/asstmgmt/primer05.cfm]</ref><ref>US Federal Highway Administration: Cost–Benefit Forecasting Toolbox for Highways, Circa 2001 [http://www.fhwa.dot.gov/planning/toolbox/costbenefit_forecasting.htm] {{Webarchive|url=https://web.archive.org/web/20120112145606/http://www.fhwa.dot.gov/planning/toolbox/costbenefit_forecasting.htm|date=2012-01-12}}</ref> Federal Aviation Administration,<ref>US Federal Aviation Administration: Airport Benefit–Cost Analysis Guidance, 1999 [http://www.faa.gov/airports/aip/bc_analysis/media/faabca.pdf]{{Dead link|date=July 2019|bot=InternetArchiveBot|fix-attempted=yes}} [http://www.faa.gov/regulations_policies/policy_guidance/benefit_cost/]</ref> Minnesota Department of Transportation,<ref>Minnesota Department of Transportation: Benefit Cost Analysis. MN DOT Office of Investment Management [http://www.oim.dot.state.mn.us/EASS/] {{Webarchive|url=https://web.archive.org/web/20090813173354/http://www.oim.dot.state.mn.us/EASS/|date=2009-08-13}}</ref> California Department of Transportation (Caltrans),<ref>California Department of Transportation: Benefit–Cost Analysis Guide for Transportation Planning [http://www.dot.ca.gov/hq/tpp/offices/ote/benefit_cost/index.html]</ref> and the Transportation Research Board's Transportation Economics Committee.<ref>Transportation Research Board, Transportation Economics Committee: Transportation Benefit–Cost Analysis [http://bca.transportationeconomics.org/]</ref>

== Accuracy ==

In health economics, CBA may be an inadequate measure because willingness-to-pay methods of determining the value of human life can be influenced by income level. Variants, such as [[Cost–utility analysis|cost–utility analysis]], [[Medicine:Quality-adjusted life year|QALY]] and DALY to analyze the effects of health policies, may be more suitable.<ref>{{cite book|title=Health Economics|last=Phelps|first=Charles|publisher=Pearson/Addison-Wesley|year=2009|isbn=978-0-321-59457-0|edition=4th|location=New York}}</ref><ref name="Buekers">{{cite journal|last=Buekers|first=J|year=2015|title=Health impact model for modal shift from car use to cycling or walking in Flanders: application to two bicycle highways|journal=Journal of Transport and Health|volume=2|issue=4|pages=549–562|doi=10.1016/j.jth.2015.08.003}}</ref>

For some environmental effects, cost–benefit analysis can be replaced by [[Cost-effectiveness analysis|cost-effectiveness analysis]]. This is especially true when one type of physical outcome is sought, such as a reduction in energy use by an increase in energy efficiency. Using cost-effectiveness analysis is less laborious and time-consuming, since it does not involve the monetization of outcomes (which can be difficult in some cases).<ref>{{Cite journal|last1=Tuominen|first1=Pekka|last2=Reda|first2=Francesco|last3=Dawoud|first3=Waled|last4=Elboshy|first4=Bahaa|last5=Elshafei|first5=Ghada|last6=Negm|first6=Abdelazim|year=2015|title=Economic Appraisal of Energy Efficiency in Buildings Using Cost-effectiveness Assessment|journal=Procedia Economics and Finance|volume=21|pages=422–430|doi=10.1016/S2212-5671(15)00195-1|doi-access=free}}</ref>

It has been argued that if modern cost–benefit analyses had been applied to decisions such as whether to mandate the removal of lead from gasoline, block the construction of two proposed dams just above and below the [[Earth:Grand Canyon|Grand Canyon]] on the [[Earth:Colorado River|Colorado River]], and regulate workers' exposure to [[Chemistry:Vinyl chloride|vinyl chloride]], the measures would not have been implemented (although all are considered highly successful).<ref name="Ackermanetal2005">{{cite journal|last=Ackerman|display-authors=0|year=2005|title=Applying Cost–Benefit to Past Decisions: Was Environmental Protection ''Ever'' a Good Idea?|url=http://heinonlinebackup.com/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/admin57&section=16|journal=Administrative Law Review|volume=57|pages=155}}</ref> The US Clean Air Act has been cited in retrospective studies as a case in which benefits exceeded costs, but knowledge of the benefits (attributable largely to the benefits of reducing particulate pollution) was not available until many years later.<ref name="Ackermanetal2005" />

==Process==
A generic cost–benefit analysis has the following steps:<ref>{{cite book |last=Boardman |first=N. E. |year=2006 |title=Cost–benefit Analysis: Concepts and Practice |edition=3rd |location=Upper Saddle River, NJ |publisher=Prentice Hall |isbn=978-0-13-143583-4 }}</ref>
# Define the goals and objectives of the action.
# List alternative actions.
# List [[Social:Stakeholder (corporate)|stakeholders]].{{dubious|date=March 2019|reason=This step seems unrelated to all other steps, and it's not clear why it's even relevant to the analysis as a whole.}}
# Select measurement(s) and measure all cost and benefit elements.
# Predict outcome of costs and benefits over the relevant time period.
# Convert all costs and benefits into a common currency.
# Apply [[Finance:Annual effective discount rate|discount rate]].
# Calculate the [[Finance:Net present value|net present value]] of actions under consideration.
# Perform [[Sensitivity analysis|sensitivity analysis]].
# Adopt the recommended course of action.

In United States regulatory policy, cost-benefit analysis is governed by OMB Circular A-4.

==Evaluation==
CBA attempts to measure the positive or negative consequences of a project. A similar approach is used in the environmental analysis of total economic value. Both costs and benefits can be diverse. Costs tend to be most thoroughly represented in cost–benefit analyses due to relatively-abundant market data. The net benefits of a project may incorporate cost savings, public [[Finance:Willingness to pay|willingness to pay]] (implying that the public has no legal right to the benefits of the policy), or [[Finance:Willingness to accept|willingness to accept]] compensation (implying that the public has a right to the benefits of the policy) for the policy's welfare change. The guiding principle of evaluating benefits is to list all parties affected by an intervention and add the positive or negative value (usually monetary) that they ascribe to its effect on their welfare.

The actual compensation an individual would require to have their welfare unchanged by a policy is inexact at best. Surveys (stated preferences) or market behavior ([[Revealed preference|revealed preference]]s) are often used to estimate compensation associated with a policy. Stated preferences are a direct way of assessing willingness to pay for an environmental feature, for example.<ref>{{cite book|last1=Field|first1=Barry C|last2=Field|first2=Martha K|title=Environmental Economics: An Introduction |edition=7th |date=2016|publisher=McGraw-Hill|location=America|isbn=978-0-07-802189-3|page=144}}</ref> Survey respondents often misreport their true preferences, however, and market behavior does not provide information about important non-market welfare impacts. Revealed preference is an indirect approach to individual willingness to pay. People make market choices of items with different environmental characteristics, for example, revealing the value placed on environmental factors.<ref>{{cite book|last1=Field|first1=Barry C|last2=Field|first2=Martha K|title= Environmental Economics: An Introduction |edition=7th  |date=2016|publisher=McGraw-Hill|location=America|isbn=978-0-07-802189-3|page=138}}</ref>

The value of human life is controversial when assessing road-safety measures or life-saving medicines. Controversy can sometimes be avoided by using the related technique of cost–utility analysis, in which benefits are expressed in non-monetary units such as [[Medicine:Quality-adjusted life year|quality-adjusted life year]]s. Road safety can be measured in cost per life saved, without assigning a financial value to the life. However,  non-monetary metrics have limited usefulness for evaluating policies with substantially different outcomes. Other benefits may also accrue from a policy, and metrics such as cost per life saved may lead to a substantially different ranking of alternatives than CBA.In some cases, in addition to changing the benefit indicator, the cost-benefit analysis strategy is directly abandoned as a measure. In the 1980s, to ensure workers' safety, the US Supreme Court made an important decision to abandon the consideration of return on investment and instead seek the lowest cost-benefit to meet specific standards.<ref>
  PHILIP SHABECOFF Special to The New York Times. (1981). Safety Agency to Forgo 'Cost-Benefit Analysis' New York Times (1923-), A11.
</ref>

Another metric is valuing the environment, which in the 21st century is typically assessed by valuing [[Biology:Ecosystem services|ecosystem services]] to humans (such as air and [[Earth:Water quality|water quality]] and pollution).<ref>{{cite book |last1=Campbell |first1=Harry F. |last2=Brown |first2=Richard |year=2003 |title=Benefit–Cost Analysis: Financial and Economic Appraisal using Spreadsheets |chapter=Valuing Traded and Non-Traded Commodities in Benefit–Cost Analysis |location=Cambridge |publisher=Cambridge University Press |isbn=978-0-521-52898-6 }} Ch. 8 provides a useful discussion of non-market valuation methods for CBA.</ref> Monetary values may also be assigned to other intangible effects such as business reputation, market penetration, or long-term enterprise strategy alignment.

==Time and discounting==
CBA generally attempts to put all relevant costs and benefits on a common temporal footing, using [[Time value of money|time value of money]] calculations. This is often done by converting the future expected streams of costs (<math>C</math>) and benefits (<math>B</math>) into a [[Finance:Present value|present value]] amount with a [[Philosophy:Intertemporal choice|discount rate]] (<math>r</math>) and the net present value defined as:<math display="block">\text{NPV} = \sum_{t=0}^{\infty}{B_{t}-C_{t}\over{(1+r)^{t}}}</math>The selection of a discount rate for this calculation is subjective. A smaller rate values the current generation and future generations equally. Larger rates (a market rate of return, for example) reflects human present bias or [[Philosophy:Hyperbolic discounting|hyperbolic discounting]]: valuing money which they will receive in the near future more than money they will receive in the distant future. Empirical studies suggest that people discount future benefits in a way similar to these calculations.<ref>{{cite book|title=Public Policy Analysis: An Introduction|last=Dunn|first=William N.|publisher=Longman|year=2009|isbn=978-0-13-615554-6|location=New York}}</ref> The choice makes a large difference in assessing interventions with long-term effects. An example is the [[Finance:Equity premium puzzle|equity premium puzzle]], which suggests that long-term returns on equities may be higher than they should be after controlling for risk and uncertainty. If so, market rates of return should not be used to determine the discount rate because they would undervalue the distant future.<ref>{{cite journal |first=R. G. |last=Newell |year=2003 |title=Discounting the Distant Future: How Much Do Uncertain Rates Increase Valuations? |journal=Journal of Environmental Economics and Management |volume=46 |issue=1 |pages=52–71 |doi=10.1016/S0095-0696(02)00031-1 |hdl=10161/9133 |url=http://ageconsearch.umn.edu/record/10743/files/dp000045.pdf |hdl-access=free }}</ref>

=== Methods for choosing a discount rate ===
For publicly traded companies, it is possible to find a project's discount rate by using an equilibrium [[Finance:Asset pricing|asset pricing]] model to find the required [[Finance:Return on equity|return on equity]] for the company and then assuming that the risk profile of a given project is similar to that the company faces. Commonly used models include the [[Finance:Capital asset pricing model|capital asset pricing model]] (CAPM):<math display="block">r = r_{f} + \beta\left[\mathbb{E}(r_{M}) - r_{f} \right]</math>and the [[Finance:Fama–French three-factor model|Fama-French model]]:<math display="block">r = \underbrace{r_{f}}_{\text{Risk-Free Rate}} + \beta_{M}\underbrace{\left[\mathbb{E}(r_{M}) - r_{f} \right]}_{\text{Market Risk}} + \beta_{SMB}\underbrace{\left[\mathbb{E}(r_{S}) - \mathbb{E}(r_{B}) \right]}_{\text{Size Factor}} + \beta_{HML}\underbrace{\left[\mathbb{E}(r_{H}) - \mathbb{E}(r_{L}) \right]}_{\text{Value Factor}}</math>where the <math>\beta_{i}</math> terms correspond to the factor loadings. A generalization of these methods can be found in [[Finance:Arbitrage pricing theory|arbitrage pricing theory]], which allows for an arbitrary number of risk premiums in the calculation of the required return.

==Risk and uncertainty==
Risk associated with project outcomes is usually handled with [[Probability theory|probability theory]]. Although it can be factored into the discount rate (to have uncertainty increasing over time), it is usually considered separately. Particular consideration is often given to agent [[Risk aversion|risk aversion]]: preferring a situation with less uncertainty to one with greater uncertainty, even if the latter has a higher [[Expected return|expected return]].

Uncertainty in CBA parameters can be evaluated with a [[Sensitivity analysis|sensitivity analysis]], which indicates how results respond to parameter changes. A more formal risk analysis may also be undertaken with the [[Monte Carlo method]].<ref>{{cite book|title=Benefit–Cost Analysis: Financial and Economic Appraisal using Spreadsheets|last1=Campbell|first1=Harry F.|last2=Brown|first2=Richard|publisher=Cambridge University Press|year=2003|isbn=978-0-521-52898-6|location=Cambridge|chapter=Incorporating Risk in Benefit–Cost Analysis}} Ch. 9 provides a useful discussion of [[Sensitivity analysis|sensitivity analysis]] and risk modelling in cost benefits analysis. CBA.</ref> However, even a low parameter of uncertainty does not guarantee the success of a project.

=== Principle of maximum entropy ===
{{Main|Principle of maximum entropy}}

Suppose that we have sources of uncertainty in a CBA that are best treated with the Monte Carlo method, and the distributions describing uncertainty are all continuous. How do we go about choosing the appropriate distribution to represent the sources of uncertainty? One popular method is to make use of the [[Principle of maximum entropy|principle of maximum entropy]], which states that the distribution with the best representation of current knowledge is the one with the largest [[Entropy (information theory)|entropy]] - defined for continuous distributions as:<math display="block">H(X) = \mathbb{E}\left[ -\log f(X) \right] = -\int_{\mathcal{S}}f(x)\log f(x) dx</math>where <math>\mathcal{S}</math> is the support set of a [[Physics:Probability density function|probability density function]] <math>f(x)</math>. Suppose that we impose a series of constraints that  must be satisfied:

# <math>f(x) \geq 0</math>, with equality outside of <math>\mathcal{S}</math>
# <math>\int_{\mathcal{S}}f(x) dx =1</math>
# <math>\int_{\mathcal{S}}r_{i}(x)f(x) dx = \alpha_{i}, \quad i = 1,...,m</math>

where the last equality is a series of [[Moment (mathematics)|moment]] conditions. Maximizing the entropy with these constraints leads to the [[Functional (mathematics)|functional]]:<ref>{{Cite book|title=Elements of Information Theory|url=https://archive.org/details/elementsinformat00cove|url-access=registration|last1=Cover|first1=Thomas M.|last2=Thomas|first2=Joy A.|publisher=John Wiley & Sons|year=2006|isbn=0471241954|edition=2nd|series=Wiley-Interscience|location=Hoboken, NJ|pages=[https://archive.org/details/elementsinformat00cove/page/n434 409]–412}}</ref><math display="block">J = \max_{f} \; \int_{\mathcal{S}} \left( -f\log f + \lambda_{0}f + \sum_{i=1}^{m}\lambda_{i}r_{i}f\right) dx</math>where the <math>\lambda_{i}</math> are [[Lagrange multiplier]]s. Maximizing this functional leads to the form of a maximum entropy distribution:<math display="block">f(x) = \exp\left[ \lambda_{0} - 1 + \sum_{i=1}^{m}\lambda_{i}r_{i}(x) \right]</math>There is a direct correspondence between the form of a maximum entropy distribution and the [[Exponential family|exponential family]]. Examples of commonly used continuous maximum entropy distributions in simulations include:

* '''[[Uniform distribution (continuous)|Uniform distribution]]'''
** No constraints are imposed over the support set <math>\mathcal{S}\in[a,b]</math>
** It is assumed that we have maximum ignorance about the uncertainty
* '''[[Exponential distribution]]'''
** Specified mean <math>\mathbb{E}(X)</math> over the support set <math>\mathcal{S}\in[0,\infty)</math>
* '''[[Gamma distribution]]'''
** Specified mean <math>\mathbb{E}(X)</math> and log mean <math>\mathbb{E}(\log X)</math> over the support set <math>\mathcal{S}\in[0,\infty)</math>
** The exponential distribution is a special case
* '''[[Normal distribution]]'''
** Specified mean <math>\mathbb{E}(X)</math> and variance <math>\text{Var}(X)</math> over the support set <math>\mathcal{S}\in(-\infty,\infty)</math>
** If we have a specified mean and variance on the log scale, then the [[Log-normal distribution|'''lognormal distribution''']] is the maximum entropy distribution

==={{anchor|CBA and regulation under various US administrations}}CBA under US administrations===
The increased use of CBA in the US regulatory process is often associated with President Ronald Reagan's administration. Although CBA in US policy-making dates back several decades, Reagan's Executive Order 12291 mandated its use in the regulatory process. After campaigning on a deregulation platform, he issued the 1981 EO authorizing the Office of Information and Regulatory Affairs (OIRA) to review agency regulations and requiring federal agencies to produce regulatory impact analyses when the estimated annual impact exceeded $100 million. During the 1980s, academic and institutional critiques of CBA emerged. The three main criticisms were:<ref>http://regulation.huji.ac.il/papers/jp5.pdf {{Bare URL PDF|date=March 2022}}</ref>
# That CBA could be used for political goals. Debates on the merits of cost and benefit comparisons can be used to sidestep political or philosophical goals, rules and regulations. 
# That CBA is inherently anti-regulatory, and therefore a biased tool. The monetization of policy impacts is an inappropriate tool for assessing mortality risks and distributional impacts.
# That the length of time necessary to complete CBA can create significant delays, which can impede policy regulation.

These criticisms continued under the Clinton administration during the 1990s. Clinton furthered the anti-regulatory environment with his Executive Order 12866.<ref>{{cite web|url=http://govinfo.library.unt.edu/npr/library/direct/orders/2646.html|title=Executive Order 12866: Regulatory Planning and Review|website=govinfo.library.unt.edu}}</ref> The order changed some of Reagan's language, requiring benefits to justify (rather than exceeding) costs and adding "reduction of discrimination or bias" as a benefit to be analyzed. Criticisms of CBA (including uncertainty valuations, discounting future values, and the calculation of risk) were used to argue that it should play no part in the regulatory process.<ref>Heinzerling, L. (2000), "The Rights of Statistical People", Harvard Environmental Law Review 24, 189–208.</ref> The use of CBA in the regulatory process continued under the Obama administration, along with the debate about its practical and objective value. Some analysts oppose the use of CBA in policy-making, and those in favor of it support improvements in analysis and calculations.

== Criticisms ==
As a concept in economics, cost-benefit analysis has provided a valuable reference for many public construction and governmental decisions, but its application has gradually revealed a number of drawbacks and limitations. A number of critical arguments have been put forward in response. That include concerns about measuring the distribution of costs and benefits, discounting the costs and benefits to future generations, and accounting for the diminishing [[Finance:Marginal utility|marginal utility]] of income.<ref name=":0" /><ref name=":1">{{Cite book |last=Boardman |first=Anthony E. |url=https://www.worldcat.org/oclc/1014011028 |title=Cost-benefit analysis : concepts and practice |date=2018 |others=David H. Greenberg, Aidan R. Vining, David Leo Weimer |isbn=978-1-108-41599-6 |edition=5th |location=Cambridge, United Kingdom |page=542 |oclc=1014011028 |quote=The final part of this argument is analogous to the "one-person, one vote" voting principle: in a democracy, low-income persons should have as much influence over decisions on whether to undertake public projects as high-income persons.  In other words, measures of changes in consumer surplus for different persons should be adjusted to what they would be if everyone had the same income.}}</ref><ref name=":2">{{Cite book |last=Wenz |first=P.R. |url=https://www.worldcat.org/oclc/61151356 |title=Encyclopedia of philosophy |date=2006 |publisher=Thomson Gale/Macmillan Reference USA |others=Donald M. Borchert |isbn=0-02-865780-2 |edition=2nd |location=Detroit |pages=285–261 |chapter=Environmental Ethics |oclc=61151356 |quote=Exclusively monetary evaluations jeopardize future generations through the use of a discount rate that renders impacts 500 years from now insignificant.}}</ref><ref>{{Cite book |last1=Adler |first1=Matthew D. |title=Cost-benefit analysis: legal, economic, and philosophical perspectives |last2=Posner |first2=Eric A. |publisher=University of Chicago Press |year=2001 |location=Chicago}}</ref> in addition, relying solely on cost-benefit analysis may lead to neglecting the multifaceted value factors of a project.

=== Distribution ===
CBA has been criticized in some disciplines as it relies on the [[Finance:Kaldor–Hicks efficiency|Kaldor-Hicks]] criterion which does not take into account distributional issues. This means, that positive net-benefits are decisive, independent of who benefits and who loses when a certain policy or project is put into place. Phaneuf and Requate phrased it as follows "CBA today relies on the Kaldor-Hicks criteria to make statements about efficiency without addressing issues of income distribution. This has allowed economists to stay silent on issues of equity, while focusing on the more familiar task of measuring costs and benefits".<ref>{{Cite book |last1=Phaneuf |first1=Daniel J. |url=https://books.google.com/books?id=70H4DQAAQBAJ&q=Phaneuf%2C+D.+J.+and+T.+Requate+%282016%29.+A+course+in+environmental+economics%3A+theory%2C+policy%2C+and+practice.+Cambridge+University+Press.&pg=PT26 |title=A Course in Environmental Economics: Theory, Policy, and Practice |last2=Requate |first2=Till |date=2016-12-24 |publisher=Cambridge University Press |isbn=9781316867358 |page=648}}</ref> The challenge raised is that it is possible for the benefits of successive policies to consistently accrue to the same group of individuals, and CBA is ambivalent between providing benefits to those that have received them in the past and those that have been consistently excluded.<ref>{{Cite book |last=Sunstein |first=Cass R. |url=https://www.worldcat.org/oclc/1022976976 |title=The cost-benefit revolution |date=2018 |isbn=978-0-262-03814-0 |location=Cambridge, Massachusetts |pages=61–62 |oclc=1022976976}}</ref><ref name=":0">{{Cite book |last=Carneades |url=https://www.researchgate.net/publication/361535357 |title=Are All Lives Equal? Why Cost-Benefit Analysis Values Rich Lives More and How Philosophy Can Fix It |publisher=Carneades.org |year=2022 |isbn=979-8-98-612861-0 |pages=320 |quote=One may be concerned that Kaldor-Hicks allows for unequally distributed benefits regardless of whether absolute or percentage willingness to pay is used.  If policies always benefit one group and never benefit another group, it may not matter how those benefits are measured.}}</ref><ref>{{Cite book |last=Ackerman |first=Frank |url=https://www.worldcat.org/oclc/52819812 |title=Priceless : on knowing the price of everything and the value of nothing |date=2004 |others=Lisa Heinzerling |isbn=1-56584-850-0 |location=New York |pages=34–35 |oclc=52819812}}</ref><ref>{{Cite journal |last1=Stephen |first1=John D. |last2=Curran |first2=Emma J. |date=2022 |title=Costa, cancer, and coronavirus: contractualism as a guide to the ethics of lockdown |url=https://jme.bmj.com/content/48/9/643.info |journal=Journal of Medical Ethics |volume=48 |issue=9 |pages=643–650|doi=10.1136/medethics-2020-107103 |pmid=33741680 |s2cid=232289041 |doi-access=free }}</ref> Policy solutions, such as [[Finance:Progressive tax|progressive tax]]ation can address some of these concerns.

=== Discounting and future generations ===
Others have critiqued the practice of discounting future costs and benefits for a variety of reasons, including the potential undervaluing of the temporally distant cost of climate change and other environmental damage, and the concern that such a practice effectively ignores the preferences of future generations.<ref name=":2" /><ref>{{Cite book |last=Ball |first=T. |url=https://www.worldcat.org/oclc/38096851 |title=Routledge encyclopedia of philosophy |date=1998 |publisher=Routledge |others=Edward Craig, Routledge |isbn=0-415-07310-3 |volume=4 |location=London |chapter=Green Political Philosophy |oclc=38096851 |quote=A second, and scarcely less controversial, practice is that of discounting the wellbeing of future generations by means of the social rate of discount....The green critique of social discounting is easily summarized.  It is one thing to discount one's own future wellbeing; it is a morally much more questionable matter to discount other people's wellbeing.}}</ref><ref>{{Cite book |last=Carneades |url=https://www.researchgate.net/publication/361535357 |title=Are All Lives Equal? Why Cost-Benefit Analysis Values Rich Lives More and How Philosophy Can Fix It |publisher=Carneades.org |year=2022 |isbn=979-8-98-612861-0 |pages=30–31 |quote=This practice leads to more concerning conclusions such as the lower valuing of future lives due to discounting of future benefit streams.  This can have a significant impact, especially when looking at environmental policies that have costs far into the future.}}</ref>  Some scholars argue that the use of discounting makes CBA biased against future generations, and understates the potential harmful impacts of climate change.<ref>{{Cite journal |last=Lind |first=Robert C |date=1995-04-01 |title=Intergenerational equity, discounting, and the role of cost-benefit analysis in evaluating global climate policy |journal=Energy Policy |series=Integrated assessments of mitigation, impacts and adaptation to climate change |language=en |volume=23 |issue=4 |pages=379–389 |doi=10.1016/0301-4215(95)90162-Z |issn=0301-4215|doi-access=free }}</ref><ref>{{Cite journal |last=Tarsney |first=Christian |date=2017 |title=Does a discount rate measure the cost of climate change? |journal=Economics and Philosophy |volume=33 |issue=3 |pages=337–365|doi=10.1017/S0266267117000049 |s2cid=157388595 }}</ref> The growing relevance of climate change has led to a re-examination of the practice of discounting in CBA.<ref>{{Cite journal |last=Dennig |first=Francis |date=2018-11-01 |title=Climate change and the re-evaluation of cost-benefit analysis |journal=Climatic Change |language=en |volume=151 |issue=1 |pages=43–54 |doi=10.1007/s10584-017-2047-4 |bibcode=2018ClCh..151...43D |issn=1573-1480|doi-access=free }}</ref><ref>{{Cite journal |last=Aldred |first=Jonathan |date=2009-12-01 |title=Ethics and Climate Change Cost-Benefit Analysis: Stern and After |url=https://doi.org/10.1080/13563460903288221 |journal=New Political Economy |volume=14 |issue=4 |pages=469–488 |doi=10.1080/13563460903288221 |s2cid=154411163 |issn=1356-3467}}</ref><ref>{{Cite journal |last=Rendall |first=Matthew |date=2019 |title=Discounting, Climate Change, and the Ecological Fallacy |journal=Ethics |volume=129 |issue=3 |pages=441–463|doi=10.1086/701481 |s2cid=171808946 |url=https://nottingham-repository.worktribe.com/output/1145321 }}</ref>

=== Marginal utility ===
The main criticism stems from the diminishing marginal utility of income.<ref>{{Cite journal|last1=Nurmi|first1=Väinö|last2=Ahtiainen|first2=Heini|date=2018-08-01|title=Distributional Weights in Environmental Valuation and Cost–Benefit Analysis: Theory and Practice|journal=Ecological Economics|volume=150|pages=217–228|doi=10.1016/j.ecolecon.2018.04.021|issn=0921-8009}}</ref><ref>{{Cite journal|last=Persky|first=Joseph|date=November 2001|title=Retrospectives: Cost–Benefit Analysis and the Classical Creed|journal=Journal of Economic Perspectives|volume=15|issue=4|pages=199–208|doi=10.1257/jep.15.4.199|issn=0895-3309|doi-access=free}}</ref> According to this critique, without using weights in the CBA, it is not the case that everyone "matters" the same but rather that people with greater ability to pay receive a higher weight.<ref name=":3">{{Cite book |last=Boardman |first=Anthony E. |url=https://www.worldcat.org/oclc/1014011028 |title=Cost-benefit analysis : concepts and practice |date=2018 |others=David H. Greenberg, Aidan R. Vining, David Leo Weimer |isbn=978-1-108-41599-6 |edition=5th |location=Cambridge, United Kingdom |oclc=1014011028}}</ref><ref name=":4">{{Cite book |last=Carneades |url=https://www.researchgate.net/publication/361535357 |title=Are All Lives Equal? Why Cost-Benefit Analysis Values Rich Lives More and How Philosophy Can Fix It |publisher=Carneades.org |year=2022 |isbn=979-8-98-612861-0}}</ref> One reason for this is that for high income people, one monetary unit is worth less relative to low income people, so they are more willing to give up one unit in order to make a change that is favourable for them.<ref>{{Cite journal|last=Brekke|first=Kjell Arne|date=1997-04-01|title=The numéraire matters in cost–benefit analysis|journal=Journal of Public Economics|volume=64|issue=1|pages=117–123|doi=10.1016/S0047-2727(96)01610-6|issn=0047-2727}}</ref> This means that there is no symmetry in agents, i.e. some people benefit more from the same absolute monetary benefit. Any welfare change, no matter positive or negative, affects people with a lower income stronger than people with a higher income, even if the exact monetary impacts are identical.<ref name=":4" /> This is more than just a challenge to the distribution of benefits in CBA, it is a critique of the ability of CBA to accurately measure benefits as, according to this critique, using unweighted absolute willingness to pay overstates the costs and benefits to the wealthy, and understates those costs and benefits to the poor. Sometimes this is framed in terms of an argument about democracy, that each person's preferences should be given the same weight in an analysis (one person one vote), while under a standard CBA model the preferences of the wealthy are given greater weight.<ref name=":1" />

Taken together, according to this objection, not using weights is a decision in itself – richer people receive de facto a bigger weight. To compensate for this difference in valuation, it is possible to use different methods.  One is to use weights, and there are a number of different approaches for calculating these weights.<ref name=":3" /> Often, a Bergson-[[Biography:Paul Samuelson|Samuelson]] [[Social:Social welfare function|social welfare function]] is used and weights are calculated according to the [[Finance:Willingness to pay|willingness-to-pay]] of people.<ref>{{Cite journal|last=Boadway|first=Robin|date=2006|title=Principles of Cost–Benefit Analysis|url=https://econpapers.repec.org/article/mofjournl/ppr002a.htm|journal=Public Policy Review|volume=2|issue=1|pages=1–44}}</ref><ref>{{Cite journal|last=Samuelson|first=P. A.|date=1977|title=Reaffirming the Existence of "Reasonable" Bergson-Samuelson Social Welfare Functions|journal=Economica|volume=44|issue=173|pages=81–88|doi=10.2307/2553553|issn=0013-0427|jstor=2553553}}</ref>  Another method is to use percentage willingness to pay, where willingness to pay is measured as a percentage of total income or wealth to control for income.<ref name=":4" /> These methods would also help to address distributional concerns raised by the Kaldor-Hick criterion.

=== Limitations in the scope of assessment ===
Economic cost-benefit analysis tends to limit the assessment of benefits to economic values, ignoring the importance of other value factors such as the wishes of minority groups, inclusiveness and respect for the rights of others.<ref>T.O. McGarity
A cost-benefit-state?
Administrative Law Rev., 50 (1998), pp. 7-79</ref> These value factors are difficult to rank and measure in terms of weighting, yet cost-benefit analysis suffers from the inability to consider these factors comprehensively, thus lacking the integrity and comprehensiveness of social welfare judgements. Therefore, for projects with a higher standard of evaluation, other evaluation methods need to be used and referred to in order to compensate for these shortcomings and to assess the impact of the project on society in a more comprehensive and integrated manner.<ref>
  Hansjurgens, B. (2004). Economic valuation through cost-benefit analysis – possibilities and limitations. Toxicology (Amsterdam), 205(3), 241–252. https://doi.org/10.1016/j.tox.2004.06.054
</ref>

==See also==
{{div col}}
* [[Finance:Balance sheet|Balance sheet]]
* {{annotated link|Business case}}
* {{annotated link|Social:Calculus of negligence}}
* {{annotated link|Finance:Downside risk}}
* {{annotated link|Finance:Economic forecasting}}
* {{annotated link|Finance:Guns versus butter model}}
* {{annotated link|Philosophy:Law and economics}}
* {{annotated link|Finance:Opportunity cost}}
* {{annotated link|Finance:Scarcity}}
* {{annotated link|Shadow price}}
* {{annotated link|Social:Social impact assessment}}
* {{annotated link|Statistical murder}}
* {{annotated link|Social:Tax choice}}
* {{annotated link|Trade-off}}
* {{annotated link|True cost accounting}}
* {{annotated link|Uncertainty quantification}}
{{div col end}}

==References==
{{Reflist|30em}}

==Further reading==
{{div col}}
*{{cite book |last1=Campbell |first1=Harry |last2=Brown |first2=Richard |year=2003 |title=Benefit–Cost Analysis: Financial and Economic Appraisal Using Spreadsheets |publisher=Cambridge University Press |isbn=978-0-521-82146-9 }}
*{{cite book |last=Chakravarty |first=Sukhamoy |year=1987 |chapter=Cost–benefit analysis |title=The New Palgrave: A Dictionary of Economics |volume=1 |location=London |publisher=Macmillan |pages=687–690 |isbn=978-0-333-37235-7 |title-link=The New Palgrave: A Dictionary of Economics }}
*David, R., Ngulube, P. & Dube, A., 2013, [http://www.sajim.co.za/index.php/SAJIM/article/view/540/640 "A cost–benefit analysis of document management strategies used at a financial institution in Zimbabwe: A case study"], SA Journal of Information Management 15(2), Art. #540, 10 pages.
*{{cite book |last=Dupuit |first=Jules |chapter=On the Measurement of the Utility of Public Works |title=Readings in Welfare Economics |editor-first=Kenneth J. |editor-last=Arrow |editor2-first=Tibor |editor2-last=Scitovsky |year=1969 |location=London |publisher=Allen and Unwin |isbn=978-0-04-338038-3 }}
*{{cite book |last=Eckstein |first=Otto |title=Water-resource Development: The Economics of Project Evaluation |location=Cambridge |publisher=Harvard University Press |year=1958 }}
*{{cite book |last1=Folland |first1=Sherman |first2=Allen C. |last2=Goodman |first3=Miron |last3=Stano |title=The Economics of Health and Health Care |edition=Fifth |publisher=Pearson Prentice Hall |location=New Jersey |year=2007 |pages=[https://archive.org/details/economicsofhealt0000foll_w3b2/page/83 83–84] |isbn=978-0-13-227942-0 |url-access=registration |url=https://archive.org/details/economicsofhealt0000foll_w3b2/page/83 }}
*{{cite book |last=Ferrara |first=A. |year=2010 |title=Cost–Benefit Analysis of Multi-Level Government: The Case of EU Cohesion Policy and US Federal Investment Policies |location=London and New York |publisher=Routledge |isbn=978-0-415-56821-0 }}
*{{cite journal |last=Frank |first=Robert H. |title=Why is Cost–Benefit Analysis so Controversial? |journal=Journal of Legal Studies |volume=29 |issue=S2 |year=2000 |pages=913–930 |doi=10.1086/468099 |s2cid=153355929 }}
*{{cite book |last=Hirshleifer |first=Jack |title=Water Supply: Economics, Technology, and Policy |url=https://archive.org/details/watersupplyecono00hirs |url-access=registration |location=Chicago |publisher=University of Chicago Press |year=1960 }}
*Huesemann, Michael H., and Joyce A. Huesemann (2011). [http://www.newtechnologyandsociety.org ''Technofix: Why Technology Won't Save Us or the Environment''], Chapter 8, “The Positive Biases of Technology Assessments and Cost Benefit Analyses”, New Society Publishers, Gabriola Island, British Columbia, Canada, {{ISBN|0865717044}}, 464 pp.
*{{cite book|editor1-link=Arthur Maass|editor-last=Maass |editor-first=Arthur |title=Design of Water-resource Systems: New Techniques for Relating Economic Objectives, Engineering Analysis, and Governmental Planning |location=Cambridge |publisher=Harvard University Press |year=1962 }}
*{{cite book |last=McKean |first=Roland N. |title=Efficiency in Government through Systems Analysis: With Emphasis on Water Resources Development |url=https://archive.org/details/efficiencyingove00mcke |url-access=registration |location=New York |publisher=Wiley |year=1958 }}
*{{cite book |first=Tevfik F. |last=Nas |title=Cost–Benefit Analysis: Theory and Application |location=Thousand Oaks, CA |publisher=Sage |year=1996 |isbn=978-0-8039-7133-2 }}
*{{cite journal |last=Richardson |first=Henry S. |title=The Stupidity of the Cost–Benefit Analysis |journal=Journal of Legal Studies |volume=29 |issue=S2 |year=2000 |pages=971–1003 |doi=10.1086/468102 |s2cid=153426905 }}
*{{cite journal |last1=Quigley |first1=John |first2=Lesley |last2=Walls |title=Cost–Benefit Modelling for Reliability Growth |journal=Journal of the Operational Research Society |volume=54 |issue=12 |year=2003 |pages=1234–1241 |doi=10.1057/palgrave.jors.2601633 |s2cid=26862642 |url=https://strathprints.strath.ac.uk/4358/1/Cost_Benefit_Modelling_for_Reliability_Growth.pdf |access-date=2019-08-01 |archive-date=2020-10-10 |archive-url=https://web.archive.org/web/20201010124711/https://strathprints.strath.ac.uk/4358/1/Cost_Benefit_Modelling_for_Reliability_Growth.pdf |url-status=dead }}
*{{cite journal |last=Sen |first=Amartya |title=The Discipline of Cost–Benefit Analysis |journal=Journal of Legal Studies |volume=29 |issue=S2 |year=2000 |pages=931–952 |doi=10.1086/468100 |s2cid=106398171 |url=http://nrs.harvard.edu/urn-3:HUL.InstRepos:3444801 }}
{{div col end}}

==External links==
* [https://web.archive.org/web/20100609215810/http://evans.washington.edu/research/centers/benefit-cost-analysis Benefit–Cost Analysis Center] at the [[Organization:University of Washington|University of Washington]]'s Daniel J. Evans School of Public Affairs
*[http://bca.transportationeconomics.org/home Benefit–Cost Analysis] {{Webarchive|url=https://web.archive.org/web/20220118063814/http://bca.transportationeconomics.org/home |date=2022-01-18 }} site maintained by the Transportation Economics Committee of the Transportation Research Board(TRB).
* [http://www.conservation-strategy.org/en/csf-econ-video-lessons?term_node_tid_depth=384 Intro to Cost–Benefit Analysis]
*[https://ocw.mit.edu/courses/engineering-systems-division/esd-72-engineering-risk-benefit-analysis-spring-2007/ Engineering Risk-Benefit Analysis] (MIT OpenCourseWare)

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