The Tools of Policy Formulation

The Tools of Policy Formulation

Actors, Capacities, Venues and Effects

New Horizons in Public Policy series

Edited by Andrew J. Jordan and John R. Turnpenny

A PDF version of this book is available for free in open access via the Elgaronline platform - Policy analysts are accustomed to thinking in terms of tools and instruments. Yet an authoritative examination of the tools which have been developed to formulate new policies is missing. This book is the first of its kind to distinguish the defining characteristics of the main policy formulation tools, and offer a fresh way of understanding how, why and by whom they are selected, as well as the effects they produce in practice.

Chapter 7: Cost–benefit analysis: a tool that is both useful and influential?

Giles Atkinson

Subjects: economics and finance, valuation, politics and public policy, european politics and policy, public administration and management, public policy


The recommendation that policymakers should go ahead with public policies and projects only if the benefits of these proposals outweigh the costs has a common-sensical appeal. Articulating this intuition more rigorously in policy formulation is the domain of cost–benefit analysis (CBA), or variants which draw on the same conceptual framework. There is an extensive academic literature on CBA, some of which may not use the term ‘cost–benefit analysis’ but instead refers to ‘benefit–cost analysis’, ‘policy evaluation’ or ‘project appraisal’. Numerous texts and manuals have appeared covering CBA generally (for example, Boardman et al. 2011), in developing countries (for example, Londero 2003) and applications such as environment (Hanley and Barbier 2009; Pearce et al. 2006). A number of characteristics make CBA distinctive as a policy formulation tool. Perhaps most notably, it is an attempt to quantify costs and benefits in monetary terms. This, in turn, relies on an assessment of how people whose wellbeing is affected by policy actions value those losses and gains.