Methods explained: Cost-benefi t analysis

Abstract

The concept of cost-benefit analysis (CBA) originated in the United States in the 1930s where it was used to create a solution to problems of water provision. The process arrived in the UK in the 1960s for use in the transportation sector, where it was applied to the construction of the M1 motorway and the Victoria Line on the London Underground. In recent years, CBA has found a new home in environmental policy, where there is increasing pressure to make informed policy decisions which take account of long-term costs and benefits. This article aims to explain the principles and methods behind CBA in a concise, introductory manner.