The Economic Evaluation of Construction Projects

Abstract

A central theme explored in Chapter 3 was the possibility that without government intervention, some markets may not function properly with respect to certain qualitative and quantitative criteria. Many of these market failures were seen to emerge for two basic reasons: (1) because many individuals do not always have all the information they need to make a rational decision, and (2) economic agents are more likely to calculate private costs and benefits when considering a particular action, rather than the wider social costs and benefits that may arise. It is usually expected that public bodies such as government departments or local authorities will take a broader perspective when committing themselves to a spending programme so as to ensure that public resources are directed towards investments that generate the largest net gain in social benefit. One appraisal method that provides a broad insight into the social gains and losses that could arise from particular projects is what economists refer to as cost-benefit analysis.