A Benefit-Cost Analysis of Benefit-Cost Analysis

Abstract

Benefit/Cost Analysis (BCA) has a long history of being used as the primary tool aiding public decision-making.

Two primary questions motivate this dissertation:

1. Do the results output by BCA add value and impact decision-making? and

2. Is BCA trustworthy enough that decision-makers should use it?

Grounded on more than 100 transport projects completed in Asian developing countries, the US, and Australia, this dissertation aims to understand and examine the benefits (if any) created by using BCA via five dimensions: accuracy, appropriateness & consistency, fiscal sustainability, transparency & replicability, and comprehensive.

Nemours practical issues related to BCA are observed and corroborated in this dissertation. These issues are classified into three categories: deficiencies in the inputs to BCA, the technique and empirical basis of BCA itself, as well as the limited role of BCA in decision-making.

The research and findings in this thesis are not challenging the theoretical basis for BCA.

Rather, this thesis proves that there are gaps between the theory and the practice.

In theory, theory should have precisely captured the truly additional benefits ascribed to transport investment.

However in practice, as demonstrated by numerous findings presented in this thesis, the empirical implementation of the theoretical practices, alongside the idealized assumptions, confronted many challenges.

In a nutshell, as the quote says, ``In theory, theory and practice are the same. But in practice, they are different".