Assessing Competing Projects: The Example of Cost-Benefit Analysis

Abstract

Decision-making inevitably implies, at some stage, the allocation of rare resources to some alternatives rather than to others (e.g. deciding how to use one’s income). It is therefore not at all surprising that the question of helping a decision-maker to choose between competing alternatives, projects, courses of action and/or to evaluate them, has attracted the attention of economists. Cost-Benefit Analysis (CBA) is a set of techniques that economists have developed for this purpose. It is based on the following simple and apparently inescapable idea: a project should only be undertaken when its “benefits” outweigh its “costs”.