• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Explain the difficulties of carrying out cost-benefit analysis. [8]

Extracts from this document...

Introduction

Transfer-Encoding: chunked 1. Explain the difficulties of carrying out cost-benefit analysis. [8] Cost-Benefit analysis is a systematic method of analysis the potential social costs and benefits to a given decision, usually an investment project. It involves evaluation of these costs and benefits together with a comparison to the costs and benefits of alternatives in order to determine whether the given decision is justifiable. The process has multiple steps, it starts off by identifying the potential groups of people who are likely to be affected by the decision (IDK if stakeholders is an appropriate term in econ). Then, one the groups in question are determined, the potential costs and benefits start to be identified. ...read more.

Middle

Then, once all of the values have been determined, the costs and benefits are weighed up against what would be considered acceptable, together with the costs and benefits of other projects in order for a decision to be made. One potential difficulty arising from this system is the inherent inaccuracy of attempting to put a monetary value on a social costs or benefit. It is arguable that a faster commute to work has anywhere from no value to an incredibly high value depending on how much any individual analyst values their time. Similarly, it can be argued that the cost of not having to face pollution and the ability to enjoy clean air is virtually priceless, or, at the very least, incredibly valuable. ...read more.

Conclusion

Another difficulty arises form the process of forecasting the future value of certain costs or benefits as it is nigh on impossible to properly predict technological advancements and their impact on the significance of certain costs or benefits. For example, investments in theaters and museums might be analysed to conclude that the entertainment derived from these facilities is very valuable. However, if technological breakthroughs allow for more immersive and affordable digital entertainment, this value of added entertainment would be highly diminished. Thus, this constantly changing nature of the social costs and benefits leads to incredibly hard to predict values for the future, thus making forecasts more inaccurate and in turn causing the cost-benefit analysis system to be less effective. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Macroeconomics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Macroeconomics essays

  1. Why does smoking lead to an external cost?

    is a percentage of the price of the product or a fixed rate tax, and finally other government legislations are forms of protectionism B) Discuss whether protectionist policies will always produce benefits to an economy Protectionism is the economic policy of restraining trade between countries.

  2. Extended Project - Microcredit

    The Times, The Guardian * TV documentaries available on the web - "Millionaires' Mission" I can find the majority of these resources in a school, or at the local library. The internet is available at my home, as well at school.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work