Economics

367. BCA challenges: over-optimism

On 7 February 2022, I presented an online workshop called “Benefit-Cost Analysis: Traps, Challenges and Best Practice” as part of the Australasian Agricultural and Resource Economics Society Annual Conference. It addressed a range of challenges and complexities that arise when applying BCA in practice. Drawing from my 12-week online micro-credential course on BCA, I discussed a selection of challenges and proposed appropriate ways to address them.

I’m going to present some of the workshop recording as Pannell Discussions, in a series of segments. The first one is on avoiding over-optimism in the assumptions that are used in the BCA. This is a ubiquitous problem in BCA, and indeed in any other type of project evaluation. Dealing with it needs a multi-pronged approach.

Most of these segments will be about 10-15 minutes long, but this one is longer as there is so much to say about over-optimism. I think it’s one of the most important topics in BCA.