Cost–Benefit Analysis

Cost–benefit analysis (CBA) is a systematic approach used to evaluate the strengths and weaknesses of available options through a critical comparison of benefits and costs. Within the educational environment, this is a strategy used to evaluate the worth of educational programs and determine the added value in relationship to the monetary cost of the program. CBA has two overarching purposes: (1) to determine whether a program, investment, or decision is sound through verifying if its benefits overshadow the costs and by how much and (2) to provide a basis for comparing programs or projects by matching the total expected costs of each option against the total cost of benefits. Although one might assume that money is the driving force behind CBA, it is primarily used as protection for the well-being of individuals affected by the project or program. True economists want to measure the welfare, which is often a challenge because welfare cannot be directly measured. Instead, they use money as an expression of welfare and to assign “worth” to the program, allowing people to make decisions about programs based on this worth. Education is a form of investment in human capital, yielding economic benefits and contributing to the productive capacity of society. In this entry, how CBA is used in educational settings is analyzed. A comparison of CBA and cost-effectiveness analysis (CEA) is also conducted. The steps of conducting a CBA are also provided. Finally, the entry examines how CBA research has supported the importance of quality preschool education programs and concludes with a debate about the overall benefits of CBA in education.