Abstract
BackgroundCost–benefit analysis (CBA), as a common instrument in the decision making process on how to allocate financial resources, has been widely used in various research areas and in almost all of countries over the world. However, the origin and the historical development of CBA has long been subject to neglect. We attempt to fill this gap and clarify the origin and the early development of CBA.MethodsA comparative analysis is used to investigate the origin and the early development of CBA in France and the USA. The comparison is focused on two questions: (1) which criteria should be applied to decide whether or not a project should be carried out, and (2) with which procedure these criteria can be used for real projects.ResultsThe origin of CBA can be dated back to the work of Saint-Pierre in France in 1708. Dupuit introduces the concept of consumer’s surplus that founds the economic basis of CBA. These works are not taken seriously in France and do not draw attention from other countries. Hence, until the 1930s, the principle of CBA is newly proposed in the US and the Green Book marks the mature of CBA.ConclusionsThe early development of CBA in France and the US is independent from the aspects of historical background, personnel, approaches and standardization. This study could help researchers of various disciplines be sure about the history of CBA when they perform this analysis in their research areas.
Highlights
Cost–benefit analysis (CBA) is defined as a systematic cataloguing of impacts as benefits and costs, valuing in dollars with assigned weights, and determining the proposal relative to the status quo by the net benefits or the benefit–cost ratio [4]
By 2020, CBA has been widely applied to various research areas in almost all countries over the world
CBA has been used in 146 research areas, among which the most applications with over 12,000 were found in
Summary
The comparative analysis method is used to investigate the origin of CBA. The comparison is focused on two questions: (1) which criteria should be applied to decide whether or not a project should be carried out, and (2) with which procedure these criteria can be used for real projects. As early as 1830, a prominent Ponts engineer named Henri Navier set up a cost–benefit principle that public works should be provided only if the total benefits exceeds the total costs by measuring the benefits of new transport facilities based on an estimate of cost savings His effort produced a decision rule that allowed for calculating minimum demand for new public works, below which the construction would be against the interests of the state. Some tangible effects that cannot be assessed based on market prices may be derived indirectly from prices for analogous effects or from the most economical costs of producing similar effects by an alternative means [18] Another advantage of the Green Book is to apply these principles to develop operational procedures for quantifying benefits of various project purposes, such as irrigation, flood control, navigation, electric power, and recreation, not in sufficient detail to serve as a manual. A still more significant breakthrough made by economists lies in the attempt to value recreational benefits, which leads to the flourishing developments of various environmental valuation techniques
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