Although cost-effectiveness (CE) analysis and benefit-cost (BC) analysis sound
alike and are frequent traveling companions, they are not the same, and their
uses can be quite different. True, both conceptualize a domain of benefits accruing
to individual citizens valued in terms of their utility. And both construe the policy
problem as involving some production relationship between resources and welfareincreasing
outcomes. However, CE takes one or the other of these (either resources
or outcomes) as fixed or targeted; the analysis then tries to find the best means
to manipulate the other one (either maximizing the benefits given the level of
assumed resources or minimizing the number of resources given the targeted
outcome requirement). BC, on the other hand, allows both resources and outcomes
to be treated as variable in scale. It is therefore more complicated than CE, for
while both BC and CE concern themselves with the productive efficiency of the
program or project, BC is additionally concerned with the program's scale.
CE analysis is much more common than BC analysis. Indeed, a surprisingly
large number of policy issues can be simplified and stylized as CE problems, even
though on the surface they may not appear to be likely candidates at all for this
sort of treatment, for example.