Question

Although cost benefit analysis provides important insides in regards to the admissibility of alternative projects these types of analysis are also known to be used incorrectly, especially by politicians. These misuses of cost benefit analysis are grouped under three categories. Please name only two of these categories and explain.

Answer 1

Ans.

Yes, it is true that although cost benefit analysis provides important insides in regard to the admissibility of alternative projects these types of analysis are also known to be used incorrectly, especially by politicians.
Key categories of the misuse can be under the safety, health and environment.
Specifically, politicians are many times faced with situations to in these areas of safety, health and environment where they need to take the deciions on projects . The reasons being many times in such projects its very difficult to measure the benefits of health or environment.
Also for e.g. in case of safety it may be non negotiable that even if the benefit can not be measured it has to be spent to ensure safety of the people.
For e.g. the decision to increase more fire engines to the community , it is to be more on the safety of people then by cost benefit analysis.
Similarly when spending on the education and creating new schools , it is very difficutl to measure through the cost and benefit analysis.