What is the difference between cost-benefit analysis and cost-effectiveness analysis?

What is the difference between cost-benefit analysis and cost-effectiveness analysis?

Cost-benefit analysis evaluates the total costs and benefits of a project, while cost-effectiveness analysis compares the relative costs of achieving specific outcomes.

Can you give me an example of each?

Sure! In cost-benefit analysis, you might assess a new highway project by comparing construction costs to the economic benefits of reduced travel time. In cost-effectiveness analysis, you might evaluate a health intervention by comparing the cost per life saved.

Which one should I use for my project?

It depends on your goals. Use cost-benefit analysis for projects with quantifiable monetary benefits, and cost-effectiveness analysis for projects focused on achieving specific outcomes.

Are there any limitations to these analyses?

Yes, both analyses have limitations. Cost-benefit analysis can oversimplify complex decisions, while cost-effectiveness analysis may not capture all benefits or costs.