ABSTRACT
Economic evaluation is concerned with the costs and benefits of programmes or projects and with the distributional effects of these. In principle, both costs and benefits are broad concepts and far broader than the common misconception that they refer only to money. 'Ben efits' may encompass any consequences of a project that are relevant to human well-being. Costs (or 'opportunity costs') refer to the value of any opportunity or benefit forgone because of resources used by the project. The cost of buying this book is a certain number of dollars, or pounds, or whatever the currency may be. The opportu nity cost of buying it is whatever else you could have bought with those pounds or dollars. Once you have bought the book, it will not cost you any more money to read it, though reading it still carries an opportunity cost. The opportunity cost of reading this book is the forgone opportunity of carrying out some other activity: reading another book, earning income or enjoying leisure time. Clearly, op portunity costs only arise because resources are finite. Without this constraint every desirable activity could be carried out and there would be no need for economic evaluation. Conceptually the most fundamental rule of economic evaluation, that benefits must exceed costs, may therefore be translated as the dictum that to be worth while the benefits arising from a project must be greater than the benefits lost because of the project. 'Benefit-cost analysis' could easily be relabelled 'benefit-benefit analysis.'
