(b)A gain in wellbeing, i.e. a benefit, is measured byhow much an individual is willing to pay (WTP)to secure that gain, or how much they are willingto accept (WTA) in compensation to forgo thatgain.(c) A loss in wellbeing, i.e. a cost, is measured byhow much an individual is WTA to tolerate theloss, or how much they are WTP to prevent theloss.(d)WTP and WTA are measures of human prefer-ence. That human preferences should count andbe ‘sovereign’ is the fundamental value judge-ment in CBA. There is no social entity over andabove the individual, so that ‘society’ is alwaysthe aggregation of individuals.(e) If benefits exceed costs, the project or policy ispotentially worthwhile: potentially, because theremay be many such projects and policies andthere is always a limited budget. Hence thoseprojects and policies passing the initial benefit–cost test must be ranked in order of preference.This will usually be done by benefit–cost ratios,working down the list until the budget is ex-hausted.(f) Benefits and costs stretch out over time. Sinceindividuals tend to prefer the present to thefuture, and since human preferences are para-mount, this ‘present orientation’ has to be ac-counted for. Future benefits and costs are there-fore discounted at some ‘discount rate’. Theresulting sums are ‘present values’, i.e. sums ofdiscounted benefits and costs, and the benefit–cost rule becomes that the present value ofbenefits must exceed the present value of costs.