Question

In: Economics

Discuss the strengths and weaknesses of social costs benefits analysis.

Discuss the strengths and weaknesses of social costs benefits analysis.

Solutions

Expert Solution

Cost benefit analysis is an objective examintaion of what you spend, relative to what you gain to achieve an outcome. The analysis can be laid out in dollars and cents; or in term of an investment, im revenue and in profit. Alternatively, it can evaluate intangibles suc as social advantage and disadvantage. The strength of cost analysis approach are closely tied to its wraknesses: it provides clarity but somtimes does so in situations that aren't as clear cut as they seem.

STRENGTH

1. The analysis give the clarity to unpredictable situations. The listing of costs and benefits helps the analyst to identify and later evaluate each cpst and benefit.

2. It helps to figure out whether the benefits outweigh the cost and is it financially strong and stable to pursue it.

3. It is easy to compare projects of every type in spite of being dissimilar.

4. The cost benefit analysis removes any emotional element and helps to overcome biases.

5. It takes into account a btoad spectrum of benefits and costs and covert them into currency to simplify matters.

6. Suitable for all projects small or large.

7. The cost benefit analysis helps to make a rational decision by looking at thr figures expressed in the same units.

8. A cost benefit analysis simplifies the complex decisions in a project.

WEAKNESSES

1. There are lots of benfits that are hard to quantify and measure items that are considered un-measurable. The chances of inaccuracies are great due to lack of true estimated value.

2. The project manager relies on data and information from past projects, but the facts are ever changing in the current scenerio.

3. The evaluation are subjective and cannot be considered absolute accurate. Since some of the benefits and costs are non-monetory, it becomes difficult to estimate, quantify and identify them in monetory terms. This can lead to wrong evaluation.

4. Sometimes a cost benefit analysis turns into a project budget and leads to unrealistic goals and error.

5. The cost benefit analysis estimates the value over sometime and can cause serious miscalculations in present value. This leads to inaccurate analysis.

6. The supposed clarity in determining and listing costs and benefits can prove harmful as the actual outcome is dependent on several variables that you can know with time.


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