To what extent might CBA be a useful method of evaluating this proposal?
A government is considering subsidising a series of high-speed rail lines in order to reduce short-haul air flights.
To what extent might CBA be a useful method of evaluating this proposal?
The Basic Economic Problem is that needs and wants are unlimited but resources are limited. Cost Benefit analysis (CBA) is a technique for assessing the monetary and social costs and benefits of a capital investment project over a given time period. It is by this method that we decide to which project proposal our limited resources go. CBA has traditionally been applied to big public sector projects, therefore in theory it would be a good method of working out whether to consider subsidizing a series of high-speed rail lines in order to reduce short-haul air flights, however this does not necessarily mean that it is a useful method for this proposal.
The best thing about CBA is that it leads to a clear decision, which is necessary, as the problem presented needs a distinct outcome. How else would you make this decision, whatever method you are going to comparing the pros and cons, this is human nature’s way of addressing a problem. This is also a benefit of CBA as it is easy to understand you are simply looking at whether the benefits out weigh the costs. Although the monetizing all the costs and benefits is tricky once you have got a quantitate measurement then the cost benefit is very easy to see. This clarity means that everyone involved will understand the monetary nature of the project and this causes it to be an extremely powerful tool.
However this simplicity also brings complications. Using whether to build a series of high-speed trains as an example, CBA means that you have to be able to generate accurate estimations about the benefits and costs you would receive from the project. If your calculations are inaccurate, you could deem a project a viable option and good use of resources only to discover later that it ended up costing the company money. Also the
To what extent might CBA be a useful method of evaluating this proposal?
The Basic Economic Problem is that needs and wants are unlimited but resources are limited. Cost Benefit analysis (CBA) is a technique for assessing the monetary and social costs and benefits of a capital investment project over a given time period. It is by this method that we decide to which project proposal our limited resources go. CBA has traditionally been applied to big public sector projects, therefore in theory it would be a good method of working out whether to consider subsidizing a series of high-speed rail lines in order to reduce short-haul air flights, however this does not necessarily mean that it is a useful method for this proposal.
The best thing about CBA is that it leads to a clear decision, which is necessary, as the problem presented needs a distinct outcome. How else would you make this decision, whatever method you are going to comparing the pros and cons, this is human nature’s way of addressing a problem. This is also a benefit of CBA as it is easy to understand you are simply looking at whether the benefits out weigh the costs. Although the monetizing all the costs and benefits is tricky once you have got a quantitate measurement then the cost benefit is very easy to see. This clarity means that everyone involved will understand the monetary nature of the project and this causes it to be an extremely powerful tool.
However this simplicity also brings complications. Using whether to build a series of high-speed trains as an example, CBA means that you have to be able to generate accurate estimations about the benefits and costs you would receive from the project. If your calculations are inaccurate, you could deem a project a viable option and good use of resources only to discover later that it ended up costing the company money. Also the