Original Post Date: Monday, November 30, 2009

It seems that business and government today is mired in cost-benefit analysis. The cost side is fairly easy to understand: how much money will the business (or government) have to expend to deliver a given service? Benefits are a little harder to quantify.

First, there is the difference between monetary versus non-monetary or social benefits. Some things like the office Christmas Party do not make any money but they keep morale high. Second, there is the difference between short-term and long-term costs and benefits. The company using Blackberries may bring the immediate satisfaction feeling mobile and linked into work but there may be some long-term costs.

Does our decision-making process really take these factors into consideration? Do people who live beyond their means really weigh the long-term financial cost of living on credit versus the immediate (non-monetary) benefit of feeling important? Do we consider the long-term productivity gains by investing in work-force/employee training immediately?

Unfortunately, I think the heart wants what the heart wants. Businesses and individuals do not weigh benefits in a methodical manner. So until the day when benefit analysis ceases to be in the eye of the beholder, we should focus on accurate cost estimation.