Introduction

Cost-benefit (or cost-effectiveness) analysis has become in recent years a rapidly developing and highly fashionable tool in defence and other governmental operations. This is as it should be. Such analysis can be an invaluable aid to systematic and rational decision making in complex situations. Yet the proper application of cost-benefit analysis requires more than just the use of the appropriate words. Complicated questions are likely to require sophisticated analysis, and proper use of the techniques of cost-benefit analysis requires detailed attention to the very hard problems that arise in particular cases. It may be all too easy to pass over such problems with a relatively perfunctory treatment, believing that one cost-benefit analysis is much the same as another.

In the present paper, I shall discuss some of the hard problems that arise in cost-benefit analysis, particularly in defence manpower planning. Some of these problems have no easy solution in practice, and the analyst may have to get along with approximate or makeshift solutions. All these problems, however, must be faced as matters for conscious decision if a proper analysis with valid and useful answers is to be performed. While it may turn out in particular cases that some problems can be set aside, this cannot be assumed ab initio and careful attention rather than unconscious choice must be exercised.

The problems that I shall discuss do not form an exhaustive list of those that arise, nor can I give entirely satisfactory solutions to all of them. Indeed, in some cases I can do little more than call attention to the need for further analysis.