Communication, Economics

Decision criteria for Benefit-Cost Analysis – A world of confusion

Speaker: David Pannell
A seminar presented by Agricultural and Resource Economics (University of Western Australia) and the Australian Agricultural and Resource Economics Society (WA Branch)
Time: 11-12noon, Friday, 07 May 2021 (Perth time)

33 minutes plus 20 minutes of questions and discussion.


BCA is probably the most widely used economic tool in the world. Its results feed into several decision criteria that are commonly used to guide decisions about which projects or policies to implement: Net Present Value, Benefit: Cost Ratio and Internal Rate of Return. Textbooks and government guidelines vary greatly in what they say about which decision criteria to use in which situations. They can’t all be right. David is part of a team of economists who are in the midst of auditing 56 textbooks and guidelines to see how many of them provide accurate and complete advice on this issue. Was the textbook you learned BCA from correct? Are the government guidelines you refer to correct? Do you know the correct guidelines yourself? Are you sure? How can something so basic and fundamental generate so many myths and misconceptions?


David Pannell is Professor of Agricultural and Resource Economics and Co-Director of the Centre for Environmental Economics and Policy at UWA. He has conducted or advised on hundreds of BCAs on a wide range of issues, including agriculture, the environment, water, bush fires, and research. He has developed a widely-used BCA spreadsheet tool and provided BCA training to hundreds of people.

Watch past ARE/AARES WA seminars on this YouTube channel: