In governmental planning and budgeting, the attempt to measure the social benefits of a proposed project in monetary terms and compare them with its costs.
The procedure was first proposed in 1844 by Arsène-Jules-Étienne-Juvénal Dupuit (180466). It was not seriously applied until the 1936 U.S. Flood Control Act, which required that the benefits of flood-control projects exceed their costs. A cost-benefit ratio is determined by dividing the projected benefits of a program by the projected costs. A wide range of variables, including nonquantitative ones such as quality of life, are often considered because the value of the benefits may be indirect or projected far into the future.