Cost-Benefi t Analysis
CBA is most useful when you are analyzing a single program or policy to determine
whether the program’s total benefi ts to society exceed the costs or when you are
comparing alternative programs to see which one achieves the greatest benefi t to
society. The major diffi culty with CBA is that it is often diffi cult to place dollar values
on all (or most) costs and benefi ts.
Cost-Effectiveness Analysis
CEA is most useful when you know the outcome you desire and you are determining
which of a set of alternative programs or projects achieves the greatest
outcome for the costs. It is also useful in cases where major outcomes are either
intangible or otherwise diffi cult to monetize. The major diffi culty with CEA is that
it provides no value for the output, leaving that to the subjective judgment of
the policymaker.