This book is intended for people with a basic understanding of elementary economics who wish to learn how to conduct a social cost-benefit analysis. We use the term social benefit-cost analysis to refer to the appraisal of a private or public project from a public interest viewpoint. We follow professional practice in using the terms benefit-cost analysis and cost-benefit analysis (with or without the social prefix) interchangeably.

A social cost-benefit analysis of a publicly funded project may be commissioned by a municipal, state or federal government, or by an international agency such as the World Bank, IMF, UN or OECD. Proponents of private projects which have significant social impacts may also commission an economic analysis of this type in order to support an application for approval to proceed with the project. Sometimes the scope of the required analysis is broader than the evaluation of economic benefits and costs: an impact analysis may also be required to determine the effects of the project on employment and economic growth; an environmental impact statement may be required; and a social impact analysis dealing with factors such as crime and impacts on families may be sought. This book concerns itself mainly with the economic benefits and costs of projects, although it does touch on the question of economic impact. The main questions addressed are: Do the benefits of the project exceed the costs, no matter how widely they are spread? And which group benefits and which bears the costs?

Social cost-benefit analysis relies mainly on microeconomic theory, although some understanding of macroeconomics is also useful.