Cost-benefit analysis explained
| Author | John Liddle,Matt Wright,Bronte Koop |
| DOI | 10.1177/1035719X1501500205 |
| Published date | 01 June 2015 |
| Date | 01 June 2015 |
| Subject Matter | Special Feature |
33
Liddle, Wright, Koop—Cost-benefit analysis explained
PRACTICE ARTICLE Evaluation Journal of Australasia Vol 15 | No 2 | 2015 | pp. 33–38
JOHN LIDDLE | MATT WRIGHT | BRONTE KOOP
Cost–benet analysis
explained
In every evaluation context, the question of worth underpins the motivation or role of the
evaluation, even if it is not explicitly stated.
Often, this question cannot be answered fully, simply because people or parties may make
varying subjective judgments about the value and likelihood of dierent outcomes—it is
at this juncture that cost–benet analysis (CBA) can be of use. For evaluations where most
signicant inputs and outcomes can be valued in monetary terms, CBA provides a systematic
methodology for reaching conclusions on ‘worth’.
CBA is best used in conjunction with traditional evaluation approaches rather than as a
replacement approach. The use of CBA can help an evaluator to be more condent in stating
the evaluation ndings, particularly in social policy settings where the use and importance of
CBA is growing.
This article aims to help evaluators learn more about CBA by demonstrating its use to analyse
an intervention designed to help young people disengaged from learning.
SPECIAL FEATURE
What is cost–benet analysis?
Cost–benefit analysis (CBA) provides a systematic
framework for assessing whether or not the costs of a
‘policy change’1 are outweighed by its benefits.
CBA can be both retrospective and prospective in
assessing the policy against a baseline of what the world
might reasonably be expected to look like in its absence.
It is only the incremental benefits and costs of the ‘policy
change’ scenario, over and above those that would have
occurred in the ‘do nothing’ scenario that are measured.
An eective CBA aims to reflect the best available
evidence and collective knowledge of the subject matter
experts in the particular domain(s). Furthermore, the
discipline of CBA can help articulate the intangibles
and communicate assumptions and judgements in
a transparent manner (that is, reduce uncertainty in
evaluation and complement other evaluation methods).
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