Cost Benefit Analysis
Why?
Help rank projects/policies
Don't do anything 'silly'
Think before implementing something
that only applies to small group
3 approaches
Benefit cost ratio (B/C)
Internal rate of return (IRR)
Net present value (NPV)
How?
Identify consequences - time order and monetary values
Identify costs and benefits
Define project
Adjust C's and B's using weights
Discount to obtain NPV
Sensitivity analysis
Key concepts
Income distribution
Externalities
Time preference
Shadow prices