Cost-Benefit Analysis: Concepts and Practice 4th Edition

This is a fantastic text covering both the mechanics of CBA and its ethical dilemmas. The authors cover a wide array of CBA-related concepts, many of which are interesting in their own right. Thus the text may be read start to finish or just referenced for particular topics.The authors begin by introducing readers to the different types of CBA (ex ante, ex post, in medias res), basic steps, purpose, and ethical considerations. CBA has deep foundations in economics, with emphasis on Pareto efficiency, consumer and producer surplus, compensating variation/surplus, Marshallian vs. Hicksian demand, marginal excess tax burden, and opportunity cost. They differentiate between general and partial equilibrium, and explain the CBA implications of price effects in primary and secondary market. They explore deviations from market perfection, including monopoly, natural monopoly, information asymmetry, externalities, addiction, and public goods.Much discussion surrounds the topic of discounting, through both a private and public lens. The authors introduce the consumption rate of interest (marginal rate of time preference), returns to private investment, the shadow price of capital and consumption equivalents, the Ramsey framework, uncertainty and time-declining discount rates (certainty-equivalent rates), and the Fisher identity. Uncertainty is further covered, including expected value (surplus) analysis, quasi-option value (i.e. real options), and ex-ante willingness to pay (option price).The authors explain the difference between active and passive use value, how the former can be estimated using revealed preference approaches, while the latter can be estimated using contingent valuation approaches (dichotomous choice, etc.). They cover experimental designs and detail estimation of shadow prices using directly observed behavior (i.e. constructing demand curves using price elasticity) or indirect methods (market analogy, trade-off, intermediate good, or asset valuation methods). They do deep dives into travel cost method and hedonic price methods.Well known work on shadow prices is provided, including the value of a statistical life, as well as metrics covering crime, injury, damage, noise, pollution, etc. Included is discussion of “benefit transfer” and meta-analysis. They also provide guidance on applying shadow prices to developing country CBAs, including the LMST method and its nuances.Alternatives to CBA are discussed, including cost-effectiveness analysis and cost-utility analysis, describing the benefits and limitations of each, particularly avoiding the need to monetize highly intangible costs and benefits but losing the ability to rank-order mutually exclusive projects. Lastly, distributionally weighted CBA is explained for situations in which distribution is given emphasis over pure efficiency. Common justifications are also described, including diminishing marginal utility of income, more equal income distribution, and “one-person-one-vote” arguments, as well as the strengths and shortcomings of each.

Exactly as advertised, a new book is in perfect condition.

Fantastic textbook! Very clearly outlines the concepts involved and links CBA to its microeconomic roots in an approachable way.

Book is pretty academic and not much use for the practitioner. It is meant for the classroom. There are other books out there as good, but this one has the glossy look that students like. The later chapters are actually good for reference by a practitioner. Uneven chapter quality as expected with a number of authors each dividing up the work.

A very good book.

Book was in perfect condition. Very satisfied with purchase.

we didn't really use the book much!

Useful textbook for understanding cost-benefit analysis. Example problems are provided throughout the chapters.