The Key Difference Between Cost-Benefit vs Cost-Effectiveness

Cost-Benefit vs Cost-Effectiveness
Feature	Cost-Benefit	Cost-Effectiveness
Definition	Compares total expected costs vs total expected benefits in monetary terms.	Compares costs of different methods to achieve the same outcome, usually non-monetary.
Focus	Focuses on profitability or net gain.	Focuses on efficiency in achieving a goal.
Measurement Unit	Both costs and benefits are measured in money.	Costs are monetary, but outcomes are often non-monetary (e.g., lives saved, test scores).
Outcome Type	Financial or economic benefits.	Physical, social, or health outcomes.
Used In	Business, infrastructure, investment analysis.	Public health, education, social programs.
Decision Basis	If benefits exceed costs, proceed with the project.	Choose the most cost-efficient option to achieve the objective.
Goal	Maximize net financial gain.	Minimize cost to achieve a specific result.
Result Format	Net benefit or benefit-cost ratio.	Cost per unit of outcome (e.g., ₹ per student educated).
Comparing Alternatives	Compares multiple projects with different benefits and costs.	Compares methods for the same goal to find the most efficient.
Monetization Requirement	Requires all benefits and costs to be converted to money.	No need to monetize the outcome, just compare relative efficiency.
Complexity	More complex due to monetization of intangible benefits.	Simpler when benefits are hard to quantify in money.
Example	Building a highway and comparing construction cost vs reduced travel time (in ₹).	Comparing two vaccination programs for cost per life saved.
Key Question	Is it worth the money spent?	Which option gives the best value for money?
Financial Return	Yes, expected financial return is analyzed.	No financial return is calculated, only outcome efficiency.