Question

Read and comment about the following statement and question. The Benefit – Cost analysis is a well – rooted method of evaluating public projects (Rigs, J, & West, T., 1986, page 234.). Do you think the government use this economic method or use other criteria for project evaluation?

Answer 1

In my opinion the U.S. government is using the Benefit - Cost analysis in evaluating the potential projects. The Cost benefit analysis refers to a systematic process for calculating and comparing benefits and costs of a decision. US state and federal transport departments usually apply CBA with a numerous software tools, including BCA.Net, HERS, Cal-BC, TRDIS and StatBenCost. It is commonly used by governments for evaluating the desirability of a provided market intervention. Earlier the Benefit - Cost analysis was applied to water quality, land conservation, water quality however now it is expanded to address the tangible as well as intangible benefits of public policies relating to education, mental illness, substance abuse, chemical waste and health. The main motive is to gauge the efficiency of the intervention in regard to the status quo. The benefits and costs of the impacts of an intervention are evaluated in terms of the willingness to pay to avoid them (costs) or willingness of public to pay for them (benefits). Inputs are often measured in terms of opportunity costs, which means the value best alternative usage value. However this practice of cost-benefit analysis differs between the sectors such as transport, health due to the differences in the discount rate.