Cost Benefit Analysis

An estimate of the total cost and equivalent monetary value of the potential social benefits of a process or service to a community to establish whether they are worthwhile. The placing of monetary values to social benefits is often problematic.

Extensive analysis of data of public investments in the USA and Europe has shown there is a cost-benefit fallacy where accurate and unbiased estimates do not prevail in many cases, with underestimates of costs (resulting in significant overrun of costs) and overestimates of benefits (resulting in benefit shortfalls). Addressing inaccurate and biased calculations and assumptions needs to be actively considered as part of the process in making better use of this approach in decision making.

(Source: Flyvbjerg, B., & Bester, D. (2021). The Cost-Benefit Fallacy: Why Cost-Benefit Analysis Is Broken and How to Fix It. Journal of Benefit-Cost Analysis, 12(3), 395-419. doi:10.1017/bca.2021.9, https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/article/costbenefit-fallacy-why-costbenefit-analysis-is-broken-and-how-to-fix-it/608C8A0D37D38653846B9CF9DBC1DB49 accessed 13th March 2022)