The Robustness of Cost–Benefit Analyses

Abstract

In this chapter we address the robustness of cost–benefit analysis (CBA) from the perspective of its usefulness for decision-making. After summarizing how CBAs are preformed, we provide an example of how uncertainties in its parameters may jeopardize its usefulness as a decision-making tool. We also elaborate on how the robustness of CBAs is contextual, depending on what they are expected to serve, together with the fact that CBAs are either ex-ante or ex-post. More generally, the chapter provides an overview of the inherent uncertainties in CBAs. Major sources of uncertainties in CBAs are addressed and we point out that the robustness of CBAs can be improved by performing ex-post evaluations. Additionally, the issue of the robustness of CBAs in a future perspective is addressed.