TBL-CBA Trap #3: Double Counting

by | Apr 16, 2018 | Economics, Sustainability

Number 3 in our TBL-CBA traps series.

3. Double Counting

By avoiding the trap of being too narrow, people often fall into this trap. In particular, benefits are more likely to be double counted than costs. Take, for example an infrastructure or building project that lowers the cost of a product for consumers. There will also be a rise in the profits of producers and other middle men involved in delivering the product to consumers because it costs less to deliver. The cost savings is passed on from producer to consumer, so it is one and the same. Similarly, if, out of the net benefit of a project, tax is paid to the government, this should be counted as a transfer not as a loss.

Another frequently double-counted benefit is “property price increase” resulting from a project. Many cost-benefit analyses of property price increases from better transit access, for example, will often erroneously include both the capitalized future transportation benefits and the non-transportation use benefits of liveability.

So, be inclusive and avoid thinking narrowly about stakeholders, but not so inclusive that you double count. By side-stepping both traps, you’ll have lived up to one of the founding principles of cost-benefit analysis: be “MECE” – Mutually Exclusive and Comprehensively Exhaustive. (See trap # 1).

Click here if you would like an infographic of the Top Ten TBL-CBA Traps.

Recaps:

Trap #1 – Re-inventing the wheel

Trap #2 – Forgetting Certain Stakeholders

 

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