This book has been written because both authors have taught courses in cost-benefit analysis which form part of Masters' degrees in Development Economics. Both felt that there was a need for a book which expounded the basic principles of cost-benefit analysis and then related those principles to current issues in development economics.

Students taking Masters' degrees in development economics have very varied backgrounds; they come from many countries and their first degrees differ considerably in terms of both subject matter and analytic content. We have not assumed a strong theoretical background on the part of our readers and part of the book covers material that will be familiar to many students. Part I introduces the basic concepts of welfare economics and includes in chapter 2 a review of the microeconomic theory underlying the remainder of the text. A distinctive feature of the presentation, and one that lays the foundations for subsequent analysis, is the use of simple general equilibrium models to derive cost-benefit rules. The partial equilibrium approach, based on measures of consumer and producer surplus and typical of most introductory textbooks on this subject, is discussed in chapter 1 and the analysis is extended to the general equilibrium framework in chapter 3. A general equilibrium approach is not only useful for formal theory; recent advances in the use of computable general equilibrium (CGE) models for policy analysis have made this approach one with practical application.