Guide

Guide to Social Cost Benefit Analysis

Publication type:
Guide
Status:
Current
Issue date:
Corporate author:
The Treasury
Publication category:
Guidance
Copyright:
© Crown Copyright, Attribution 4.0 International (CC BY 4.0)
ISBN:
978-0-478-43698-3
Last updated:
Formats and related files
Table of Contents

Table of contents

  • Introduction
  • Part 1: Guide to Cost Benefit Analysis
    • Step 1: Define policy and counterfactual
    • Step 2: Identify who gains and who loses
      • Transfer payments
      • Contrast with financial analysis and fiscal costings
    • Step 3: Identify the costs and benefits
      • Negative costs and ‘dis-benefits’
      • Avoidance of double counting
      • Externalities
      • Induced behaviour
      • Deadweight cost of taxation
    • Step 4: Value the costs and benefits
      • Measure of Value: Willingness to pay
      • Opportunity cost
      • Valuation techniques
      • When market prices are not available
      • Related market (revealed preference) methods
      • Hypothetical market (stated preference) methods
      • Thought experiments
      • Taxes and subsidies
      • Sunk costs
      • Real option values
      • Uncertainty: Use of Ranges
      • Optimism Bias
      • Adjustment for Risk
      • Evaluation Period
      • Nominal vs Real
      • Truly unquantifiable benefits
    • Step 5: Discount and compare costs and benefits
      • Discounting
      • Discount rate
      • The discount rate for Public Private Partnerships (PPPs)
      • Calculation of the NPV, BCR and/or MIRR
      • Monte Carlo Simulations
    • Step 6: Assess the CBA: Is more research required?
      • How much to invest in a CBA
      • Who should do a CBA?
    • Step 7: Prepare final report
      • Summary Cost-Benefit Analysis Table
  • Part 2: Issues in Cost Benefit Analysis
    • CBA’s limitations and common criticisms
    • How CBA fits in with Government decision-making processes
      • The general decision-making process
      • Business Cases
      • Regulatory Impact Statements (RIS)
      • Living Standards Framework
    • How to do a rough CBA
      • The roughest CBA
      • The next level up
    • Relationship to Gross Domestic Product (GDP)
    • Equity
    • Standard values
      • Discount rate
      • Deadweight cost of taxation
      • Value of life
      • Air pollution
    • Risk and uncertainty
    • Contingency sums
    • Sensitivity analysis
    • Point estimates
    • Financing components
    • Alternatives to CBA
      • Multi-criteria analysis
      • Economic Impact Analysis
      • General equilibrium analysis
      • Other forms of partial CBA
  • References
  • Appendix 1: Monte Carlo Simulationn
  • Appendix 2: Example of a ‘Rough’ CBA
  • Appendix 3: Example CBAs
    • Bid to host the 2018 Commonwealth Games in Auckland
    • The Effectiveness of Alcohol Pricing Policies
  • Index