The Principles and Objectives of Cost-Effectiveness Analysis

Abstract

The terms “cost-effectiveness” and to a lesser degree “cost-benefit” analysis have become familiar words in the technical and national press, the former usually in relation to defence projects—the latter in relation to social projects, such as transport, power generation and building. Indeed, at the time of the last General Election the political correspondent of a national newspaper wrote, “Mr. Heath and Mr. Callaghan, Chancellor of the Exchequer, vied with each other in stressing the importance of cost-effectiveness, which used to be known as getting value for money”. The apparently simple concept of “value for money” raises three important issues: (i) how is “value” of defence and social projects quantified? (ii) what is the “money” involved, i.e. what are all the relevant costs? and (iii) what are the information and decision processes that are used in attempting to obtain “value for money“?

The Influence of Aerospace on Future Transport Systems

“…We tend to dismiss too readily such simple model technique approaches and yet they are better than no approach at all, and they most certainly indicate the direction in which we ought to go and provide the basis for later and more complex models. A particularly apt example of the simple model approach has been demonstrated by Prof. A. Stratton, who, as already mentioned, has developed his mathematical model technique from initial aerospace application in the defence field' 40 '. Stratton and his colleagues are now applying this work to a cost effectiveness study for the Milton Keynes develop- ment' 41 '.…”