What is cost-benefit analysis in public policy?

What is cost-benefit analysis in public policy?

Cost-benefit analysis (CBA) is a systematic approach to evaluating the strengths and weaknesses of alternatives in public policy. It helps decision-makers assess the economic feasibility of projects by comparing the expected costs to the anticipated benefits.

How do you conduct a cost-benefit analysis?

To conduct a CBA, you typically follow these steps: 1) Define the project scope, 2) Identify costs and benefits, 3) Quantify them in monetary terms, 4) Discount future values to present value, and 5) Compare total costs to total benefits.

What are some common challenges in CBA?

Common challenges include accurately estimating costs and benefits, accounting for intangible factors, and dealing with uncertainty in projections.

Can you give an example of CBA in action?

Sure! A city might use CBA to evaluate a new public transportation system by comparing the costs of construction and operation against the benefits of reduced traffic congestion and improved air quality.

What are the limitations of cost-benefit analysis?

Limitations include potential bias in estimating costs and benefits, difficulty in quantifying non-monetary impacts, and the challenge of incorporating long-term effects.