Discuss the difficulties of using Cost Benefit Analysis in deciding whether to build a new international airport.
A Cost-Benefit analysis involves examining whether society will benefit from building a new airport. Therefore, the government need to calculate all the social costs and social benefits. This includes calculating private costs and external costs, as well as all the private benefits and external benefits.
1. Placing a monetary value on external costs and external benefits
For example, an external cost of a new airport is increased pollution from more flights. However, the exact cost is difficult to measure because we are uncertain about the implications of global warming. The new airport may also involve building on greenbelt land. This means that local wildlife will suffer. The importance of local wildlife and the environment is very subjective. e.g. if you asked a questionnaire, people would give very different answers.