Cost-Benefit Analysis: Then and Now

TTPI - Working Paper 6/2022

30 Pages Posted: 6 May 2022 Last revised: 20 May 2022

See all articles by Peter Abelson

Peter Abelson

Applied Economics P/L; Macquarie University

Date Written: April 5, 2022

Abstract

This paper describes and analyses the evolution of cost-benefit analysis to the present day. The paper starts with a brief history of cost-benefit analysis to the early 1970s. By this time, the core principles of CBA had been established and applied to some major projects. But CBA was in its youth and not widely accepted. The paper then discusses these core principles of CBA and concludes that these are largely unchanged in the last 50 years. However, the paper also describes some major issues of principle that remain largely unresolved over the 50 years. Turning to the practice of CBA, the paper describes the huge increase (internationally) in the applications of CBA over the last 50 years. It also describes some of the major developments in CBA methods, especially valuation methods, and the quality of CBA work that have enabled these major new applications. Despite these developments, the paper finds that there remain some significant practical difficulties in the use of CBA, albeit some a function of the political environment in which CBA is applied. There is then a brief concluding section.

Keywords: Cost-benefit analysis, allocative efficiency, equity and distributional issues, non-market values, stated preference, social discount rate, appraisal optimism

Suggested Citation

Abelson, Peter and Abelson, Peter, Cost-Benefit Analysis: Then and Now (April 5, 2022). TTPI - Working Paper 6/2022, Available at SSRN: https://ssrn.com/abstract=4080682 or http://dx.doi.org/10.2139/ssrn.4080682

Peter Abelson (Contact Author)

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Applied Economics P/L ( email )

3 Wolger Road, Mosman 2088
Mosman, 2088
Australia

HOME PAGE: http://www.appliedeconomics.com.au

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