Project Cost-Benefit Analysis
A Project Cost-Benefit Analysis is an economic analysis task for a project:
- AKA: CBA, BCA.
- Context:
- It can (typically) produce a Project Cost-Benefit Analysis Report (with project cost, project benefit and project ROI estimates - possibly also opportunity costs).
- It can (typically) be used to rank Project Approval Decisions.
- It can (often) report on Opportunity Costs.
- Example(s):
- …
- Counter-Example(s):
- See: Utility Function, Marginal Utility, Cost-Utility Analysis, Data-Driven Analysis, Data-Driven Decision.
References
2011
- (Wikipedia, 2011) ⇒ http://en.wikipedia.org/wiki/Cost-benefit_analysis
- QUOTE: Cost–benefit analysis (CBA), sometimes called benefit–cost analysis (BCA), is a systematic process for calculating and comparing benefits and costs of a project, decision or government policy (hereafter, "project"). CBA has two purposes:
- To determine if it is a sound investment/decision (justification/feasibility),
- To provide a basis for comparing projects. It involves comparing the total expected cost of each option against the total expected benefits, to see whether the benefits outweigh the costs, and by how much.[1]
- CBA is related to, but distinct from cost-effectiveness analysis. In CBA, benefits and costs are expressed in money terms, and are adjusted for the time value of money, so that all flows of benefits and flows of project costs over time (which tend to occur at different points in time) are expressed on a common basis in terms of their “net present value."
Closely related, but slightly different, formal techniques include cost-effectiveness analysis, cost–utility analysis, economic impact analysis, fiscal impact analysis and Social return on investment (SROI) analysis.
- QUOTE: Cost–benefit analysis (CBA), sometimes called benefit–cost analysis (BCA), is a systematic process for calculating and comparing benefits and costs of a project, decision or government policy (hereafter, "project"). CBA has two purposes:
- (Lomborg, 2012a) ⇒ Bjørn Lomborg. (2012). “An Economic Approach to the Environment: Resources are limited. Cost-benefit analysis can inform our decisions.” In: Wall Street Journal, April 23, 2012.
- QUOTE: … Cost-benefit analysis, in particular, is a far more effective and moral approach than basing decisions on the media's roving gaze or the loudness of competing interest groups.
In our time of austerity, policy makers are reducing spending across the board. This makes it especially vital that the money we do spend achieves as much as possible. Cost-benefit analysis can seem cold — a hard-nosed, money-focused, GDP-is-God approach. But a world of scarce and competing resources requires it, and proper cost-benefit analysis encompasses much more than simple economic costs.
- QUOTE: … Cost-benefit analysis, in particular, is a far more effective and moral approach than basing decisions on the media's roving gaze or the loudness of competing interest groups.
2007
- (Mishan & Quah, 2007) ⇒ Edward J. Mishan, and Euston Quah. (2007). “Cost-Benefit Analysis Routledge [ISBN:978-0-415-35037-2].
- QUOTE: It should be emphasized, however that useful as a cost-effective analysis can be, a cost-benefit analysis is effectively superior.
p.89 All of the variables in each person's utility function … are deemed to be entirely within his control. The parameters within each person's utility function, however, are the set of prices; and these are determined by the system as a whole.
- QUOTE: It should be emphasized, however that useful as a cost-effective analysis can be, a cost-benefit analysis is effectively superior.
1982
- (Ratchford, 1982) ⇒ Brian T. Ratchford. (1982). “Cost-Benefit Models for Explaining Consumer Choice and Information Seeking Behavior." INFORMS.
- ABSTRACT: While it provides excellent descriptions of behavior, existing consumer research on information seeking and processing largely fails to explain why consumers engage in various types of activities. This paper presents an economic framework for measuring costs/benefits of search behavior which can help to resolve these questions. This work shows how such a framework can lead to testable hypotheses about information seeking, and discusses how operational measures of economic incentives to search can be developed and employed.
1981
- (Graham, 1981) ⇒ Daniel A. Graham. (1981). “Cost-Benefit Analysis Under Uncertainty.” In: American Economic Association.