Cost–benefit analysis
Systematic approach to estimating strengths and weaknesses of alternatives.
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The analysis helps determine whether an investment's benefits outweigh its costs and provides a basis for comparing different options.[1] A systematic method for assessing the advantages and disadvantages of different options is what cost–benefit analysis (CBA) provides.[2] Evaluating business decisions, policy choices, commercial deals, and project investments frequently involves this technique.[3]
Quick Facts
- Field
- Economics and public policy analysis
- Known for
- Systematic approach to comparing benefits and costs of decisions, projects, or policies
- Key application
- Evaluating business and public policy decisions, including U.S. Securities and Exchange Commission regulations
Facts from the source article.
Key facts and history
The concept of cost–benefit analysis dates back to an 1848 article by Jules Dupuit, who first calculated the social profitability of projects like road or bridge construction.[4] The Flood Control Act of 1939 established CBA as federal policy, requiring benefits to exceed estimated costs.[5] Following the 1936 Federal Navigation Act, which required cost–benefit analysis for proposed federal-waterway infrastructure, the U.S. Corps of Engineers began applying CBA.[5] In 1958, Otto Eckstein established a welfare economics basis for CBA and demonstrated its use in water-resource development.[6]
The European Union's HEATCO project examined transport appraisal guidance across member states and discovered substantial national variations.[7] Decisions about cybersecurity investments have more recently been subjected to cost–benefit analysis.[8]
What the cited sources add
Boadway's 2006 article explains that social cost–benefit analysis uses the net present value criterion and includes shadow pricing of market products and inputs affected by a project.[9] Huesemann and Huesemann argue that powerful actors in society control the technology assessment process and define cost–benefit analysis boundaries to allow externalization of costs.[10] They note that profit maximization creates a strong incentive to ignore environmental and social costs by externalizing them onto unsuspecting people and future generations.[10] Huesemann and Huesemann also state that it is difficult to assign market prices to indeterminant values that may be harmed by new technologies.[10]
The same source observes that efficiency improvements serve as techno-fixes by incrementally increasing benefits while reducing costs of a particular technology.[10]
References
- Wikipedia, "Cost–benefit analysis" (CC BY-SA 4.0) en.wikipedia.org
- Wikipedia, "Cost–benefit analysis" (CC BY-SA 4.0), which cites: David, "A cost–benefit analysis of document management strategies used at a financial institution in Zimbabwe: A case study", SA Journal of Information Management, 16 July 2013 (original not read by us) en.wikipedia.org
- Wikipedia, "Cost–benefit analysis" (CC BY-SA 4.0), which cites: Hirst, "The Case for Investor Ordering", The Harvard Law School Program on Corporate Governance Discussion Paper, 2018-07-01 (original not read by us) en.wikipedia.org
- Wikipedia, "Cost–benefit analysis" (CC BY-SA 4.0), which cites: Wiener, "The Globalization of Cost–Benefit Analysis in Environmental Policy", Oxford University Press, 2013; Sandmo, Agnar, "Economics evolving : a history of economic thought", Princeton University Press, 2011 (original not read by us) en.wikipedia.org
- Wikipedia, "Cost–benefit analysis" (CC BY-SA 4.0), which cites: "History of Benefit–Cost Analysis", Proceedings of the 2006 Cost Benefit Conference; Guess, "Cases in Public Policy Analysis", Georgetown University Press, 2000, p. 304–308 (original not read by us) en.wikipedia.org
- Wikipedia, "Cost–benefit analysis" (CC BY-SA 4.0), which cites: Eckstein, "Water Resource Development: The Economics of Project Evaluation", Harvard University Press, 1958 (original not read by us) en.wikipedia.org
- Wikipedia, "Cost–benefit analysis" (CC BY-SA 4.0), which cites: "HEATCO project site", Heatco.ier.uni-stuttgart.de; Guide to Cost–Benefit Analysis of Major Projects. Evaluation Unit, DG Regional Policy, European Commission, 2008. (original not read by us) en.wikipedia.org
- Wikipedia, "Cost–benefit analysis" (CC BY-SA 4.0), which cites: Gordon, "The Economics of Information Security Investment", ACM Transactions on Information and System Security, November 2002, p. 438–457 (original not read by us) en.wikipedia.org
- Boadway, "Principles of Cost–Benefit Analysis", Public Policy Review, 2006, p. 1–44. facts only, no text reused. econpapers.repec.org
- Huesemann, Michael H., and Joyce A. Huesemann (2011). Technofix: Why Technology Won't Save Us or the Environment, Chapter 8, "The Positive Biases of Technology . facts only, no text reused. newtechnologyandsociety.org
Each numbered sentence above was checked against the source it cites before publication. Sentences citing Wikipedia adapt text from the English Wikipedia article Cost–benefit analysis (contributors), used under CC BY-SA 4.0; this entry is available under the same licence. Other sources were used for facts only; no text or images are copied from them.
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Sources
Compiled from Wikipedia and the sources listed below. Text from Wikipedia is available under CC BY-SA 4.0; this entry is adapted from it.
- Wikipedia: Cost–benefit analysis (CC BY-SA 4.0).
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