Cost-Benefit analysis -ch10

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  • Cost-Benefit Analysis
    • Chapter 10
    • Stages:
      • 1: Identification
        • Identify the relevant costs and benefits for a project
        • Difficult to do in reality - wide-ranging consequences
      • 2: Monetary Value
        • Putting a monetary value on the various costs/benefits
        • Easy: jobs created/profit made
          • Difficult: time or loss of lives
      • 3: Statistical Forecasting
        • Using statistical forecasting techniques to estimate costs/benefits over many years
      • 4: Decision
        • Drawing data together from previous stages to come to a decision
    • Limitations:
      • Distributional impacts
        • Does not take into account how the costs/benefits are distributed
        • i.e. highly localised or more wide-spread
      • Political implications
        • Choices may be made due to political reasons and the economists advice ignored
      • Pricing
        • Difficult to value things like environment
      • Tie consuming and expensive

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