2.10 A reliable impact evaluation might be able to demonstrate and quantify the outcomes generated by a policy, but will not on its own be able to show whether those outcomes justified that policy. Economic evaluation is able to consider such issues, including whether the costs of the policy have been outweighed by the benefits. There are different types of economic evaluation, including:
• cost-effectiveness analysis (CEA), which values the costs of implementing and delivering the policy, and relates this amount to the total quantity of outcome generated, to produce a "cost per unit of outcome" estimate (e.g. cost per additional individual placed in employment); and
• cost-benefit analysis (CBA), which goes further than CEA in placing a monetary value on the changes in outcomes as well (e.g. the value of placing an additional individual in employment). This means that CBA can examine the overall justification for a policy ("Do the benefits outweigh the costs?"), as well as compare policies which are associated with quite different types of outcome. CBAs quantify as many of the costs and benefits of a policy as possible, including wider social and environmental impacts (such as crime, air pollution, traffic accidents and so on) where feasible. The Magenta Book uses the very general term "value for money" to refer to the general class of CBA-based approaches, but it is important to recognise the more general scope of CBA which include those impacts which are not routinely measured in money terms. The Green Book provides more detailed guidance on CBA and the valuation of economic impacts.
2.11 Economic approaches value inputs and outcomes in quite particular ways, and it is crucial that the needs of any economic evaluation are considered at the design stage. Otherwise, it is very likely that the evaluations will generate information which, although maybe highly interesting and valid in itself, is not compatible with a cost-benefit framework, making it very difficult to undertake an economic evaluation.