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Cost-benefit analysis (and its variant cost-effectiveness analysis)

Cost-benefit analysis (and its variant cost-effectiveness analysis) has been the most widely used method, primarily by public authorities and agencies to assess a particular proposal or project taking into account costs and benefits not reflected in market prices. An early example was undertaken in Holland to help the government decide how high to build its polder dams. It had to take into account the cost of raising the dam by an extra metre, the value of that money in alternative uses, the likelihood of the sea rising to a certain level, and the cost in terms of human life and lost output of the sea breaching the dam and flooding the land. As a method its goal is to quantify financially what is external to the market, and is now standard for assessing transport investment and large development projects.