Misperception #3: Cost-benefit analysis should be applied to all policy and program decisions.

By , March 30, 2012

Conducting a cost-benefit analysis (CBA) makes sense when you have an important policy decision to make, along with the time, budgetary resources, analytic resources, and data to do a good study. In other instances, though, doing a CBA may not be the best option. Consider the following situations: 

  • You don’t have enough information. If you don’t know what impact an initiative has on reducing crime, making justice-system operations more efficient, or meeting other goals, try to get that information through a reliable evaluation or meta-analysis. Assigning costs and benefits to an initiative may be premature if you don’t know what outcomes it’s producing.
  • You have just enough information. If you’re trying to decide between programs or policies that achieve the same outcome and you know how effective each option is, you may find it more feasible to conduct a cost-effectiveness analysis than a CBA.
  • Information isn’t the issue. As Campbell’s Law warns, “The more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures.” If you get the impression that someone is requesting a CBA to support a foregone conclusion or advocate for a specific position, proceed with caution and inform decision makers about what it would take to do a credible CBA. They may determine that a CBA isn’t suitable for their needs.

The bottom line: do a “cost-benefit analysis” of doing a cost-benefit analysis before committing your time and resources to carrying out this kind of study.

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