The fundamental principles of cost‐benefit analysis

Abstract

Cost‐benefit analysis is reducible to several major principles that collectively describe the assumption base, objectives, analytical tasks, and merits of this important project assessment methodology. Here, these principles are identified and described using basic economic terms and concepts. The deficiencies of cost‐benefit analysis also emerge from these principles, and these issues are also observed in this article. Further discussion investigates high‐profile issues in the economic assessment of environmental affects and the economic effects on sectors linked to water‐project‐impacted sectors.