ABSTRACT
Benefit–cost analysis (or cost–benefit analysis) allows decision makers to evaluate the overall effect of their decisions using a single measure: dollars. While commonly associated with public works projects, benefit–cost methodology can be applied to any public decision. While simple in concept, benefit–cost analysis remains controversial for many reasons, including: 1) all consequences of a public decision are measured in dollars, which requires extensive estimation of intangible benefits and costs; 2) future consequences must be discounted; and 3) the role of uncertainty and 4) distributional consequences must be subjectively considered. Despite the practical limitations of benefit–cost analysis, a well-prepared analysis can provide decision makers with useful information.
