- Elgar original reference
Edited by Robert J. Brent
Chapter 1: Overview of the Field and the Contributions in the Handbook
Robert J. Brent 1 Introduction The basic principles of cost–benefit analysis (CBA) are not always well understood. An economist’s training usually covers the difference between the net present value and internal rates of return rules for deciding whether a project is worthwhile, and includes a statement that issues such as measuring the benefits and costs, determining the social discount rate, and estimating distribution weights are controversial and very subjective. The would-be economist is left with the impression that his or her professional life can proceed quite nicely without having to bother with the niceties of CBA. However, as is argued below, nothing is further from the truth than this false impression. CBA can be regarded as around half of economics, and possibly the more interesting part. This view can only be accepted if one first looks at what CBA is trying to do, examining what are the alternatives to undertaking a CBA, and then finding the alternative approaches lacking. This handbook is testimony to the fact that there is still a lot more work to do. But, CBA and public policy are inextricably linked. Public policy cannot progress without following the principles of CBA. Section 2 identifies those fundamental principles. Since there is much to do, the next step is to indicate what the contributors to this volume have identified as areas for further research. A guide to the rest of the chapters is given in Section 3. This section is built around an examination of some of the...
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