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By OECD Organisation for Economic Co-operation and Develop

This e-book offers an in-depth review of the latest conceptual and methodological advancements in cost-benefit research and the environment. It examines how expenditures and merits are evaluated and given financial price, the way to consider affects on destiny generations and affects of irreversible losses, and the way to house fairness and sustainability matters.

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Extra info for Cost-Benefit Analysis and the Environment: Recent Developments

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Greenberg, A. Vining, and D. Weimer (2001), Cost-benefit Analysis: Concepts and Practice, 2nd edition, Upper Saddle River NJ, Prentice Hall. An excellent and comprehensive COST-BENEFIT ANALYSIS AND THE ENVIRONMENT: RECENT DEVELOPMENTS – ISBN 92-64-01004-1 – © OECD 2006 49 2. , Hueth, D. and Schmitz, A. (2004), The Welfare Economics of Public Policy: a Practical Guide to Project and Policy Evaluation, Cheltenham, Edward Elgar. A provocative and clear critique of CBA (or, rather, neoclassical welfare economics) is given in John Gowdy’s “The revolution in welfare economics and its implications for environmental valuation and policy”, Land Economics, 2004, 80 (2): 239-257.

1. Utility, well-being and aggregation The theoretical foundations for CBA can be briefly summarised as: a) the preferences of individuals are to be taken as the source of value. To say that an individuals’ well-being, welfare or utility is higher in state A than in state B is to say that he/she prefers A to B. * c) it is assumed that individuals’ preferences can be aggregated so that social benefit is simply the sum of all individuals’ benefits and social cost is the sum of all individuals’ costs.

In the late 1960s and in the 1970s it was instrumental in developing social cost-benefit analysis. Since that time, cost-benefit analysis has enjoyed widespread application and the theory has developed further. In the last few years, some major advances have taken place in the underlying theory, and this is the justification for the current volume. This chapter outlines the history of costbenefit analysis (CBA), explains why it remains a powerful aid to decision-making, and gives a brief overview of the extent to which CBA is currently in use in OECD countries.

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