Demystifying Cost Benefit Analysis

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Nearly all decisions involve trade-offs: investment now to produce future benefits; spending a limited sum of money on one project rather than another. Or even where to go on holiday!

Cost Benefit Analysis is the main tool economists use to analyse these trade-offs to support decisions.

This demystifying paper is for those who would like to have an introduction to this analysis.  It covers the basic steps of CBA and puts it in the context of policy and public sector decision making in the UK (including the Treasury Green Book). Different applications of the analysis are covered and examples provided.

The paper was authored by Dr Martin Hurst, formerly a Commercial Director of Defra, with editorial assistance provided by Ece Ozdemiroglu, Economics Lead of the Valuing Nature Programme Coordination Team.

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