The background to this manual is multifold. The authors publish on theoretical issues and teach graduate courses in cost–benefit analysis (CBA) and similar techniques, domestically as well as internationally. They have also been involved in a considerable number of empirical cost–benefit studies: forestry, labor market policies, plant relocations, alternative fuels for vehicles, river reregulation, and so on. In addition, the authors have been members of academic panels reviewing cost– benefit manuals produced by different national and international organizations and banks. Over time our interest in putting together our experiences on theoretical and empirical appraisals of CBA has evolved. In particular, tools are available to today's cost–benefit practitioners that were unavailable a decade or so ago. The world is also different, with flexible exchange rates (for some, but not for others), deregulated capital markets, liberalized trade flows, and so on, in comparison to what it was a few decades ago when the classic cost–benefit manuals were written. In addition, environmental concerns and concerns for the sustainability of resource stocks play a much more central role today. These are some of the reasons for providing a compact manual for CBA drawing on recent research results. We believe that a manual of this kind could be useful for graduate students in economics and for those evaluating projects and policies at governments, international organizations, and consulting firms. In particular, the manual provides a very straightforward toolkit that should be useful to the practitioner, particularly since virtually every actual evaluation provides the appraiser with surprises and effects that are not covered by existing “cookbooks.”
We are grateful to Martin Hill for providing us with references to computable general equilibrium (CGE) studies that are of relevance for CBA, and to Ginès de Rus for providing suggestions with respect to the measurement of benefits in transport studies. Karl-Gustaf Löfgren read an earlier draft and provided many useful comments and suggestions. Thanks to Maria Hedvall for pointing out an embarrassing error in an earlier draft of the manuscript. Three anonymous referees provided detailed comments and suggestions that were very helpful in revising the manuscript. We are also grateful to our editor at the CUP, Phil Good, for continuous support during the publication process.