Abstract
Cost–benefit analysis (CBA) is a collection of methods and rules for assessing the social costs and benefits of alternative public policies. It promotes efficiency by identifying the set of feasible projects that would yield the largest positive net benefits to society. The willingness of people to pay to gain or avoid policy impacts is the guiding principle for measuring benefits. Opportunity cost is the guiding principle for measuring costs. CBA requires that appropriate shadow prices be derived when policies have effects beyond those that can be taken into account as changes of prices or quantities in undistorted markets.
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Weimer, D.L. (2018). Cost–Benefit Analysis. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_381
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DOI: https://doi.org/10.1057/978-1-349-95189-5_381
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