Cost Benefit Analysis (CBA) is well known as a rigorous approach to the evaluation of projects and policies- the objective is to measure how much better off an economy is. In recent years, particularly in Australia, computable general equilibrium (CGE) models have been used to answer the same question. This poses the question of how the two techniques are related. In this paper, it is argued that, in principle, the two should give the same result. In practice, both techniques involve approximates, and thus results can differ. It is possible, and practical, to take advantage of the strengths of both approaches to enhance evaluation.
Professor Forsyth is in the Department of Economics, Monash University. He graduated from the University of Sydney (MEc) and has a DPhil from Oxford. Peter's main research field has been applied microeconomics. He has a particular interest in transport economics, especially economics of air transport, and the economics of tourism. He is on the Scientific Committees of conferences on Air Transport, such as the Air Transport Research Society, and is an Associate Editor of journals in this field. He has recently undertaken considerable research in modelling the economic impacts and benefits of tourism. He has also undertaken a number of studies of the impact of climate change policies on aviation and tourism.