Cost-Benefit vs. Cost-Effectiveness Analysis


A collective system that seeks to maximize outcomes with the least proficient input is vital in determining resources used to get the bounteous value of money. Efficiency analysis in cost-benefit analysis (CBA) and cost-effectiveness analysis (CEA) play a crucial part in the appraisal process. The course of action is predetermined by the timeline and the need of the route to take. These analysis methods help evaluate the best course of action depending on the pros and cons. Cost-benefit analysis and cost-effectiveness analysis differ in many different ways during an evaluation.

Cost-Benefit Analysis and Cost-Effectiveness Analysis

Ronet D.Bachman (2020) idealized that cost-benefit analysis (CBA) contrasts the total cost of a program concerning the benefit realizable from the technique, that is, the input cost with the benefits (profit) realized from taking the cause of action. The cost-effectiveness analysis (CEA) contrasts the total cost input against the outcomes and effects brought about by two or more alternating costs of actions taken. The effectiveness of an option taken in the physical unit is compared with the cost. Although cost and physical units are incommensurable, the ratio is obtained using a single criterion to measure the cost to effectiveness (ratio of effectiveness to cost or cost to effectiveness).

Cost-benefit analysis helps check whether the realized profits or benefits outweigh the input cost relative to any other alternative. The ranking of alternative policies determines the cost-benefit ratio. In comparison, cost-effectiveness analysis identifies the best alternative to redirect available resources to achieve more by allocating utilities from ineffective to practical, cost-effective interventions health-wise. It is a choice between the cost of a life saved determined by calculating the ratio of the cost of money input to a project by the lives saved and a life saved to cost input which is determined by calculating the ratio of life saved by the cost input.

The cost-effective analysis is appropriate in comparing health concerning cost impacted by different interventions that affect the same health outcome using a standard measure of output. In addition, CEA helps determine health service priorities, identify groups in need, and direct interventions effectively. At the same time, cost-benefit analysis is most appropriate before the initiation of any project to determine whether the project will be financially feasible or alternative should undertake new measures (direction). CBA also factors the opportunity cost into the decision-making process where the opportunities represent the available alternatives that are realizable when choosing one alternative over another. CBA helps determine the alternative with the highest revenue and sales, intangible benefits such as employee morale, and stand on the competitive advantage on market shares realizable. The ideal CBA is considered if the aggregate results of cost and benefits are comparatively compared quantitatively where the benefits outweigh the cost, which so happens. The coherent course of action is to go forward.


In summation, cost-benefit analysis (CBA) and cost-effectiveness analysis (CEA) analyses are supreme tools for comparing the cost, benefit, and effectiveness of an alternative course of action taken. Both techniques should be in play for efficient planning since CBA majorly focuses on the monetary outcomes of an intervention, and CEA focuses chiefly on the non-monetary benefits. When carrying out CBA, it is essential to enlist all the costs, benefits, and risks with rare certainty, even when CBA can overlook crucial aspects.


Bachman, R., & Schutt, R. K. (2007). The practice of research in criminology and criminal justice. Sage Publications.

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