Introduction

A project, interpreted as any public policy affecting the economy, should not be approved unless the intervention increases social welfare compared to the next best alternative. This implies a rigorous exercise of identification, measurement, and valuation of the flow of benefits and costs so that the analyst can provide the government, and society, with an estimation of the consequences of public intervention on social welfare. This is what cost-benefit analysis (CBA) is about. This book is about CBA of policies and investment projects in transport. Its purpose is to show how the economic appraisal of transport investments and policies provides valuable information for decision-making beyond intuition or goodwill. A key point to avoid misunderstandings concerning the purpose of CBA is the distinction between impact effects and net welfare effects. We stress the importance of having an analytical framework, a model where the practical criteria of measurement are obtained. Although the methodology is common to many other areas, the characteristics of transport as an economic activity make this field particularly suitable for the application of CBA.