Cost-Benefit Analysis and Related Ethical Issues

Topic: Business Ethics
Words: 591 Pages: 2

Welfare economics provides the theoretical underpinnings for cost-benefit analysis (CBA) since it focuses on consequentialism. The cost-benefits analysis aims to maximize the societal surplus, which means maximizing the overall good for humankind. Conducting a cost-benefit analysis entails identifying the expenses considered as negative implications and the benefits called positive effects and evaluating if a project, plan, or initiative will provide an advantage to society (Choy, 2018). The practical cost-benefit analysis relies on a multifaceted approach that includes establishing a practical framework, consequential analysis, and tallying the benefits (Choy, 2018). Therefore CBA analysis, ethical consideration, and how implementation analysis is addressed.

CBA is integral in business entities since it helps determine the efficacy of a project to the expected returns. In addition, it focuses on opportunity costs and the alternative benefits that should be realized to make profits. These factors indicate that CBA is a necessary process that should be done with a methodological approach. The first step to conducting a CBA is identifying the project scope, which means the purpose of a specific project (Choy, 2018). For instance, the planning committee must determine the resources needed, constraints, and workers needed to facilitate the project (Choy, 2018). Another step is the cost-benefit analysis which focuses on all the costs of focusing on a particular project. The costs can be indirect, direct, or opportunity expenses which can show the project’s direction.

Another integral focus in CBA analysis is the projection of expected outcomes, which influences decision-making. Most projects have a primary focus which may include higher revenue, improved job satisfaction, or competitive advantage (Choy, 2018). This stage involves tallying the benefits, which is a measure of success or an indicator showing the impact of a specific project. This stage is crucial since it helps determine the benchmarks supporting informed choice.

Efficiency is integral for most businesses since it results in more significant economies of scale. Cost-benefit analysis is ethical in most cases since it promotes efficiency to maximize benefits. The reason is that the CBA evaluates processes implemented to ensure that they yield maximum social benefits. This factor indicates that managers who ignore CBA would engage in low-return investments by overlooking various things (Choy, 2018). This strategy is also ethical since it results in Pareto optimality which makes situations standardized for the benefit of the people (Choy, 2018). For instance, reducing the prices of products is integral since it ensures products are accessible, maximizing profits for a company due to high sales.

Implementation analysis is done at the conception stage of project implementation. It is relevant in CBA since it serves as a benchmark to understand whether a specific project had a positive impact (Choy, 2018). Therefore, process implementation is conducted where a project’s outcomes are uncertain and when the process is infinite. Process implementation includes various stages, such as exploration, installation, and expansion (Choy, 2018). Exploration enables managers to realize the impact of a specific project by accessing its potential. In the installation process, the project is evaluated by focusing on how specific proposed regulations affect the project. Additionally, the expansion period is whereby the project can be debuted or terminated depending on the previous findings.

CBA is an ethical procedure that determines the efficacy of a specific project before its implementation. There are processes involved in CBA, including the establishment of a practical framework, consequential analysis, and tallying the benefits. Within this time, implementation analysis is conducted to determine the viability of the procedures proposed. The validity of these strategies is justified since they promote positivity or achievement of societal good.


Choy, Y. K. (2018). Cost-benefit analysis, values, wellbeing, and ethics: an indigenous worldview analysis. Ecological Economics, 145, 1-9. Web.

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