A systematic approach to evaluating the strengths and weaknesses of alternatives by comparing the total expected costs against the total expected benefits of each option.
This term originated in the field of economics and public policy in the early 20th century, with formal development occurring in the 1930s and 1940s. It was initially used by government agencies to evaluate public works projects, particularly during the New Deal era, before spreading to business and other sectors.
The challenge with cost-benefit analysis is quantifying intangible benefits like employee morale or environmental impact - economists have developed sophisticated methods to assign monetary values to seemingly priceless things. Some critics argue this approach reduces complex human and social values to mere numbers, potentially missing important qualitative factors.
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