Cost-benefit analysis is reducible to several major principles that co
llectively describe the assumption base, objectives, analytical tasks,
and merits of this important project assessment methodology. Here, th
ese principles are identified and described using basic economic terms
and concepts. The deficiencies of cost-benefit analysis also emerge f
rom these principles, and these issues are also observed in this artic
le. Further discussion investigates high-profile issues in the economi
c assessment of environmental affects and the economic effects on sect
ors linked to water-project-impacted sectors.