Extended cost‐benefit analysis involves an extension of standard cost‐benefit
calculation to encompass environmental impacts: environmental benefit and/or
environmental cost alike. This extended cost‐benefit analysis therefore provides a
more complete accounting of social welfare change after a project is implemented. In
this example, the total value of environmental change is required in order to compute
the net social welfare change.
Analyzing the impact of natural disaster on GDP has an interesting twist.
One generally believes that natural disasters, such as the 2004 tsunami, would entail a
great loss to a nation, especially when environmental stock has been swept away,
such as the losts of coral reef. However, it is often strangely reported that “…the
tsunami has had an impact of increasing GDP.” Ironic as this may seem, there is
nothing to be puzzled about in this statement. When the tsunami struck parts of