How To Design Cost Benefit Analysis? Why Is Piracy So Prevalent?

A cost-benefit analysis compares the costs and benefits of a particular course of action (and, perhaps, alternative courses of action). In business school, you are quite often taught that the only costs that matter (or the only ones that are legally allowed to be considered) are economic costs.

In real life, there are non-economic costs as well, usually related to the physical, spiritual, psychological, and social well-being of affected persons and Mother Earth, and time factors, too.

So, the design of a cost benefit analysis would begin by enumerating the costs you will consider, and deciding on scales by which they will be measured. Methods of gathering cost- and benefit-related information will be determined (or designed, if survey or experiment are involved). Methods of comparing benefits in one category with costs in another need to be considered.

Example: Piracy is expected to have a large economic benefit for some individuals, a moderate economic cost for other individuals, and a high social and moral cost for the pirates, and some non-zero psychological and/or social cost for the rest of us. An analysis would be expected to attempt to identify these costs, assign some value on a scale, and make some judgment regarding whether the costs exceed the benefits (or vice versa) and, if so, for whom.