2.2. Valuation methods and techniques
2.2.1. Cost benefit assessments and total economic value
The aim of this paper is not to provide a review of the theoretical foundations of CBA, however, a few very brief aspects should be pointed out with regards to its framework. CBA involve a calculation of the aggregate monetary costs and benefits of often many projects or policies, aiming to establish the option with the greatest surplus in benefits. Economic benefits are considered to be utility generating and thus increase human economic welfare, while costs have the opposite effect (Pearce and Nash, 1981). All benefits and costs are discounted according to the time value of money concept to ensure a common ‘net present value’ basis for their comparison. For projects where the aggregate discounted benefits exceed aggregated discounted costs, a welfare gain to society accrues.