Table Of ContentF O U R T H E D I T I O N
COST-BENEFIT
ANALYSIS
Concepts and Practice
Anthony E. Boardman
University of British Columbia
David H. Greenberg
University of Maryland Baltimore County
Aidan R. Vining
Simon Fraser University
David L. Weimer
University of Wisconsin–Madison
Prentice Hall
Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam
Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi
Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo
THE PEARSON SERIES IN ECONOMICS
Abel/Bernanke/Croushore Cooter/Ulen Heyne/ Boettke/Prychitko
Macroeconomics* Law & Economics The Economic Way of
Thinking
Bade/Parkin Downs
Foundations of Economics* An Economic Theory Hoffman/Averett
ofDemocracy Women and the Economy:
Bierman/Fernandez
Family,Work,and Pay
Game Theory with Ehrenberg/Smith
Economic Applications Modern Labor Economics Holt
Markets,Games and
Blanchard Ekelund/Ressler/Tollison
StrategicBehavior
Macroeconomics Economics*
Hubbard
Blau/Ferber/Winkler Farnham
Money,the Financial
The Economics of Women, Economics for Managers
System,and the Economy
Men and Work
Folland/Goodman/Stano
Hubbard/O’Brien
Boardman/Greenberg/Vining/ The Economics of Health
Economics*
Weimer and Health Care
Cost-Benefit Analysis Hughes/Cain
Fort
American Economic History
Boyer Sports Economics
Principles of Transportation Husted/Melvin
Froyen
Economics International Economics
Macroeconomics
Branson Jehle/Reny
Fusfeld
Macroeconomic Theory Advanced Microeconomic
The Age of the Economist
andPolicy Theory
Gerber
Brock/Adams Johnson-Lans
International Economics
The Structure of American A Health Economics Primer
Industry Gordon
Keat/Young
Macroeconomics
Bruce Managerial Economics
Public Finance and the Greene
Klein
American Economy Econometric Analysis
Mathematical Methods
Carlton/Perloff Gregory for Economics
Modern Industrial Essentials of Economics
Krugman/Obstfeld
Organization
Gregory/Stuart International Economics:
Case/Fair/Oster Russian and Soviet Economic Theory & Policy*
Principles of Economics* Performance and Structure
Laidler
Caves/Frankel/Jones Hartwick/Olewiler The Demand for Money
World Trade and Payments: The Economics of Natural
Leeds/von Allmen
An Introduction Resource Use
The Economics of Sports
Chapman Heilbroner/Milberg
Leeds/von Allmen/Schiming
Environmental Economics: The Making of the
Economics*
Theory,Application,and Policy Economic Society
Lipsey/Ragan/Storer O’Sullivan/Sheffrin/Perez Sawyer/Sprinkle
Economics* Economics:Principles, International Economics
Applications and Tools*
Lynn Scherer
Economic Development: Parkin Industry Structure,Strategy,
Theory and Practice for Economics* and Public Policy
a Divided World
Perloff Schiller
Melvin Microeconomics* The Economics of Poverty
International Money and and Discrimination
Microeconomics:Theory and
Finance
Applications with Calculus Sherman
Miller Market Regulation
Perman/Common/
Economics Today*
McGilvray/Ma Silberberg
Understanding Modern Natural Resources and Principles of Microeconomics
Economics Environmental Economics
Stock/Watson
Miller/Benjamin Phelps Introduction to Econometrics
The Economics of Macro Health Economics
Introduction to Econometrics,
Issues
Pindyck/Rubinfeld Brief Edition
Microeconomics*
Miller/Benjamin/North Studenmund
The Economics of Public Riddell/Shackelford/Stamos/ Using Econometrics:A
Issues Schneider Practical Guide
Economics:A Tool for
Mills/Hamilton Tietenberg/Lewis
CriticallyUnderstanding
Urban Economics Environmental and Natural
Society
Resource Economics
Mishkin
Ritter/Silber/Udell
The Economics of Money, Environmental Economics
Principles of Money,Banking
Banking,and Financial and Policy
& Financial Markets*
Markets*
Todaro/Smith
Roberts
The Economics of Economic Development
The Choice:A Fable of Free
Money,Banking,and
Trade and Protection Waldman
Financial Markets,
Microeconomics
Business School Rohlf
Edition* Introduction to Economic Waldman/Jensen
Reasoning Industrial Organization:
Murray
Theory and Practice
Econometrics:A Modern Ruffin/Gregory
Introduction Principles of Economics Weil
Economic Growth
Nafziger Sargent
The Economics of Rational Expectations and Williamson
Developing Countries Inflation Macroeconomics
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Includesbibliographicalreferencesandindex.
ISBN-13:978-0-13-700269-6(alk.paper)
ISBN-10:0-13-700269-6(alk.paper)
1. Costeffectiveness. I.Boardman,AnthonyE.
HD47.4.C6692011
658.15’54–dc22 2010019030
10 9 8 7 6 5 4 3
ISBN13:978-0-13-700269-6
ISBN10: 0-13-700269-6
To
Barbara, Linda, Melanie, and Ulrike
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Brief Contents
Preface xv
PART I: OVERVIEW
Chapter 1 Introduction to Cost-Benefit Analysis 1
Chapter 2 Conceptual Foundations of Cost-Benefit Analysis 27
PART II: FUNDAMENTALS OF CBA
Chapter 3 Microeconomic Foundations of Cost-Benefit Analysis 52
Chapter 4 Valuing Benefits and Costs in Primary Markets 78
Chapter 5 Valuing Benefits and Costs in Secondary Markets 115
Chapter 6 Discounting Benefits and Costs in
Future Time Periods 133
Chapter 7 Dealing with Uncertainty:Expected Values,Sensitivity Analysis,and the
Value of Information 167
Chapter 8 Option Price and Option Value 202
Chapter 9 Existence Value 224
Chapter 10 The Social Discount Rate 238
Chapter 11 Predicting and Monetizing Impacts 274
PART III: VALUATION OF IMPACTS
Chapter 12 Valuing Impacts from Observed Behavior:Experiments and
Quasi Experiments 288
Chapter 13 Valuing Impacts from Observed Behavior:
Direct Estimation of Demand Curves 320
Chapter 14 Valuing Impacts from Observed Behavior:Indirect
Market Methods 341
Chapter 15 Contingent Valuation:Using Surveys to Elicit Information
about Costs and Benefits 372
vii
viii Brief Contents
Chapter 16 Shadow Prices from Secondary Sources 406
Chapter 17 Shadow Prices:Applications to Developing Countries 443
PART IV: RELATED METHODS
Chapter 18 Cost-Effectiveness Analysis 464
Chapter 19 Distributionally Weighted Cost-Benefit Analysis 489
Chapter 20 How Accurate is CBA? 507
Name Index 521
Subject Index 527
Contents
Preface xv
PART I: OVERVIEW
CHAPTER 1 Introduction to Cost-Benefit Analysis 1
Individual versus Social Costs and Benefits 1
Types of CBAAnalyses and Their Purposes 2
The Basic Steps of CBA:Coquihalla
Highway Example 5
Bureaucratic and Political “Lenses” 15
The Demand for CBA 20
The Cost of Doing CBA 22
Readers of this Book 22
CHAPTER 2 Conceptual Foundations of Cost-Benefit Analysis 27
CBA as a Framework for Measuring Efficiency 27
Using CBA for Decision Making 31
Fundamental Issues Related to Willingness to Pay 34
Concerns about the Role of CBA
in the Political Process 40
Limitations of CBA:Other Analytical Approaches 42
PART II: FUNDAMENTALS OF CBA
CHAPTER 3 Microeconomic Foundations of Cost-Benefit Analysis 52
Demand Curves 52
Supply Curves 57
Social Surplus and Allocative Efficiency 59
Government Surplus and Allocative Efficiency 62
Measuring Changes in Welfare 66
ix
