There are several strong textbooks on welfare economics, such as Welfare Economics by Boadway and Bruce, and Applied Welfare Economics and Public Policy by Just, Hueth, and Schmitz, just to mention two recent works. However, these are principally intended for advanced courses in welfare economics. In contrast, this book is intended for undergraduates. The reading is greatly facilitated if the student has completed an introductory course in microeconomics. As a service to the reader, I present basic parts of the economic theory of household and firm behaviour in an appendix at the end of the book. Parts of the book, notably a few sections of chapter 4 on measuring welfare changes and chapter 9 on cost-benefit analysis may seem a bit difficult, but have been included because my aim has been to cover the state of the art. The hope is that the book will turn out to be useful not only in education, but also for those working with costbenefit analysis and similar evaluation techniques at government agencies and private firms.

I am grateful to Magnus Henrekson, Bengt Kriström, Stefan Lundgren, Karl-Göran Mäler, Henry Olsson, and Jörn Stage for helpful discussions and comments upon an earlier version of the manuscript. The publisher's (anonymous) referee has done a splendid job, and contributed significantly to improving the quality of the manuscript. My special thanks must go to Eva Uddén-Jondal. The discussions we have had on the manuscript and her detailed comments and suggestions have been of invaluable importance for the completion of this work. Miriam Culjak made the manuscript readable by scrutinizing the language.