Evaluators spend a lot of time thinking about impact. We also think about value - but mostly the value that policies and programs create rather than the value they consume. Because resources are limited, costs matter as much as consequences; good decisions depend on understanding both.
As a profession, I suspect we under-use economic methods of evaluation. These methods, which include cost-benefit analysis (CBA), cost-effectiveness analysis (CEA), and cost-utility analysis (CUA) among others, may give off an air of exclusivity, like some kind of economists-only club lounge, but I contend they belong to evaluators as much as economists.
And much like airline lounges the world over, once you step through the door you rapidly see they’re not as rarified as they look. Economic methods aren’t a world apart. They’re quite learnable and (believe it or not) an enjoyable journey of discovery.
Here, I will introduce three textbooks that I recommend for evaluators looking to get up to speed on economic evaluation. These books cover some common ground, but each also has unique strengths and comparative advantages, for different sectors and levels of technical depth. I’ll also discuss what these books don’t cover, and how the Value for Investment approach helps us mix economic insights with complementary methods and tools that we already have.
Persaud & Yates: Cost-Inclusive Evaluation: Planning It, Doing It, Using It
The newest book of these three (published in 2024), Nadini Persaud and Brian T. Yates’ text is an accessible and practical resource for those new to cost analysis. It introduces financial and economic thinking relevant to program evaluation in a friendly and comprehensive way.
I like the authors’ human-centred, holistic evaluation approach, moving beyond financial accounting (which they cover with depth and nuance) to include broader social and environmental value, ethical dimensions, and stakeholder participation. Persaud and Yates frame cost-inclusive evaluation as integrating cost thinking into any evaluation, not only formal CBA/CEA/CUA. Evaluators need not be economists to get started.
I also like the practical focus, making key concepts actionable through clear guidance. For example, you’ll learn about participatory approaches for identifying costs, frameworks for estimating direct and indirect costs, and more. The learning is made concrete with sample worksheets, templates, helpful graphics, procedure steps, real-world examples, and end-of-chapter discussion questions.
This is the book to pick up if you want to start with a broad, easy-to-grasp introduction to cost-inclusive thinking, or if you need practical methods for integrating costs in diverse evaluations where stakeholder involvement and context matter. It’s an excellent entry point for non-economists or anyone seeking to balance technical rigour with a human perspective across public, community, and social sectors.
Levin, McEwan, et al.: Economic Evaluation in Education
I have the second edition of Henry M. Levin and Patrick J. McEwan’s book, Cost-Effectiveness Analysis: Methods and Applications (2011). It offers succinct methodological clarity and frameworks for CEA, CUA, and CBA, tailored in particular to education sector challenges like quantifying educational outcomes for economic evaluation. More broadly, it also has a useful emphasis on applying economic analysis to policy questions and communicating results in accessible ways for decision-makers.
There’s a 3rd Edition, Economic Evaluation in Education: Cost-Effectiveness and Benefit-Cost Analysis (Levin, McEwan, Belfield, Bowden, & Shand, 2018). Although I haven’t read it, I’m told the new edition reflects significant methodological developments that have come into wider use. It introduces updated material on CUA, expanded coverage of CEA and CBA, and updates guidance on measuring diverse outcomes and costs. It also includes extra resources for handling complex outcomes and multi-criteria decision-making, and new examples addressing policy relevance.
Check out these books if you want a quick overview of economic evaluation basics, or if you need step-by-step, actionable techniques to support evidence-based decision-making, especially in education and broader human services contexts.
Drummond, Sculpher, et al.: Methods for the Economic Evaluation of Health Care Programmes
In 1998, I was lucky enough to attend training in economic evaluation of healthcare programmes at McMaster University, led by Michael F. Drummond, Greg L. Stoddart, George W. Torrance, and the late Bernie O’Brien. The Second Edition of their “little blue book”, published in 1997, was the first evaluation textbook I ever owned and read - a well-thumbed copy still sits on my shelf, alongside the Third Edition from 2005, which saw Mark J. Sculpher join the author team. They have since released a Fourth Edition (2015), with Karl Claxton added to the list of authors.
Drummond et al. remains one of the most influential and comprehensive texts for its coverage of foundational concepts in economic methods of evaluation, and advanced topics like decision-analytic modelling, uncertainty analysis, and systematic evidence synthesis. The book provides nuanced methods for transferring results across contexts while maintaining scientific and methodological integrity.
The Fourth Edition incorporates new chapters on principles of economic evaluation, maximising health and welfare, and systematic decision-making in healthcare, including resource constraints and opportunity cost. It integrates the choice of analytic approach with real-world decision problems, making the text internationally relevant and practically useful, especially in the health sector. It sets systematic standards for health sector economic evaluation, spanning clinical, regulatory, and policy spheres, and is a key reference for academics and analysts needing comprehensive frameworks.
CEA and CUA, as used today, were extensively refined in the health sector. These approaches give health decision-makers a disciplined way to compare interventions and choose where limited resources go. Subsequently, their use has spread to fields like education, social policy, and other areas. Although this book specialises in healthcare applications, its principles, frameworks, and analytic techniques are broadly transferable and adaptable to evidence-based decision-making across a variety of sectors.
If your work is in health or clinical program evaluation, or you need the most technically sophisticated, analytically robust guidance of these three, reach for this book first. It’s a seminal reference for health policy analysis and high-stakes decision-making, especially when you need frameworks for critical appraisal, global transferability, and navigating the latest methodological innovations.
So, who are these books for, and how do they sit alongside Value for Investment in practice…?
Who should read these texts?
Evaluators and commissioners looking to upskill in economic evaluation methods should read these texts because they provide systematic frameworks for assessing the costs, consequences and efficiency of interventions across diverse contexts. CEA, CUA, and CBA are rigorous methods for quantifying resources and outcomes, enabling consistent comparisons, supporting transparent budgeting decisions, and ensuring analysis is robust enough to withstand scrutiny. As policy and funding environments increasingly demand defensible assessments of impact and value for money, these methods equip evaluators to undertake cost-inclusive evaluations, strengthening the credibility and utility of their findings.
These texts are particularly grounded in sectors like health, education, and social services in higher-income countries, but the underlying reasoning about costs, consequences, and trade-offs can support evaluators working in low and middle-income countries and Indigenous settings, provided methods are adapted with local priorities and constraints in mind.
Social Return on Investment (SROI) practitioners can enhance the depth of their analyses by engaging with the economic evaluation techniques presented in these textbooks. SROI guidance helpfully emphasises stakeholder engagement and social value but (as far as I have seen) is generally lighter on formal treatment of causal inference, monetary valuation, uncertainty, discounting and opportunity costs than these economic texts. These books dive deeper into complex issues around quantifying, valuing, attributing, and comparing the costs and consequences of interventions in systematic and replicable ways, and the theoretical underpinnings. They offer practical tools and frameworks that go beyond SROI fundamentals, helping practitioners navigate real-world challenges such as data gaps, stakeholder tensions, and sector-specific constraints.1 It may be more than coincidental that the best examples of SROIs I have encountered were done by economists, while the worst ignored basic principles of sound economic evaluation.
Why read all three?
Persaud & Yates make economic thinking accessible to non-specialists, enabling evaluators of social and community programs to include robust cost analysis in their work. Levin & McEwan apply economic methods to education, human services and policy evaluation, translating evidence into actionable recommendations that bridge analytic rigour and practical decision-making. Drummond et al. deliver an advanced toolkit for rigorous health economic evaluation with methods to address complexity, uncertainty, and diverse evidence.
Each text contributes practical, real-world tools, robust methodological frameworks, and attention to stakeholder and contextual factors, making their combined insights greater than the sum of their parts. Read together, they equip evaluators with both breadth and depth, ensuring the ability to tailor approaches to any sector.
Levin, McEwan et al. (2018) and the prior edition (2011) have been required reading for our course on Evaluation and Value for Money, part of the online Master of Evaluation degree at the University of Melbourne. Persaud and Yates (2024) is required reading from 2026, with supplementary readings from Drummond, Sculpher, et al. (2015). Together, they support the development of both generalist and specialist skills for evidence-based decision-making, each complementing the others by covering distinct needs and contexts, and offering sector-related exemplars.
But there’s a practical gap…
Each of these books teaches the “what” and the “why”, and some useful practical pointers, but they don’t walk a novice through the full “how”. While they provide an excellent foundation, I still think there’s a critical gap for beginners who need to move from theory to boots-on-the-ground practice. None of these books provide the full handholding of setting up your first spreadsheet model, dealing with the infinite challenges of real-world data, and designing conceptual workarounds when the data available isn’t quite what you were looking for. While Persaud and Yates do include sample worksheets and templates, these are best seen as starting points rather than full guides for independent application. As I reflect back on how I learned to apply economic methods, it took more than just textbooks: real learning happened through practical training and ongoing (forever) collegial support, getting stuck and unstuck over and over again.
In practice, many beginners benefit from pairing these books with a practical course in spreadsheet-based economic analysis, where learners can get their hands dirty, engaging directly with data, testing assumptions, and starting to develop the important problem-solving skills essential for applying economic evaluation in real-world contexts. That’s why our Evaluation and Value for Money course at the University of Melbourne is designed to wrap around these texts with practical spreadsheet work and evaluative judgements supported by Value for Investment fundamentals.
How do these books fit with the Value for Investment approach?
Our Master’s-level Evaluation and VfM course doesn’t just teach economic methods. We also situate these methods inside a broader evaluative frame, the Value for Investment (VfI) approach, because economic methods of evaluation don’t capture all considerations. In particular, CBA, CEA and CUA are strongest on costs and measurable outcomes, and weaker on addressing equity and social justice questions,2 hard-to-quantify values, and contestable value judgements that surround real-world decisions.3
In case VfI is new to some readers, a quick orienting note is in order before getting into the details of how the books and VfI intersect. VfI is an interdisciplinary approach that combines economic and evaluative thinking. It treats economic methods of evaluation as powerful tools that can (but don’t have to) sit within a broader, mixed‑methods, evaluative reasoning approach to deciding what counts as “good enough” value, for whom, and on what terms. Readers who want a fuller introduction can explore my “VfI in an hour” overview and practical guidance; in this post, the focus is on how the three economic texts align with, and are complemented by, that wider VfI frame.
The three texts are strongly aligned with VfI principles in many ways - and there are some ways in which VfI goes beyond the constraints of economic evaluation.
How the three books align with VfI
Value of economic methods: All three books advocate for rigorous attention to costs in evaluation. They present CBA, CEA, and CUA as central tools, and demystify these methods so that a range of professionals - not just economists - can use them effectively. VfI, too, recognises that economic methods are often important components of evaluations of resource use.
Recognising the limits of economic approaches: All three texts acknowledge that economic analyses have limitations, especially when applied to intangibles, distributional concerns, or nuanced social outcomes. They caution against relying solely on CBA or cost-effectiveness metrics when value extends into domains that resist measurement and monetisation. VfI echoes and extends this caution, offering a framework that explicitly mixes methods and synthesises multiple lines of evidence.
Fitness-for-purpose: no “gold standards”: None of these authors treat CBA as a universal “gold standard.” Instead, they emphasise matching methods to purpose, resources, stakeholders, and evidence quality. Similarly, VfI argues that no single method reigns supreme; evaluations should respond to context and requirements.
Mixed methods: A shared principle across these works and VfI is the belief that quantitative cost data and outcomes should be combined with qualitative evidence. All three texts, and VfI, concur that qualitative insights deepen the evaluation and help address dimensions not easily captured with numbers alone. VfI supports this by providing a systematic framework for selecting methods and making credible judgements from all the evidence collectively.
Stakeholder engagement and participation: Each book highlights, in its own way, the importance of working with stakeholders to define value and interpret findings. Persaud & Yates advocate for involving program participants and clients; Levin et al. focus on policy translation for decision-makers; Drummond et al. stress integrating perspectives in analytic modelling. The VfI approach makes participatory co-design and sense-making central pillars of the evaluation process.
Where VfI goes beyond the three books
Evaluative reasoning - thinking beyond methods: VfI positions evaluation at the forefront by placing explicit, collaboratively developed criteria and standards at the heart of judgement. While the three books discuss measures and matrices for costs and outcomes, they do not prioritise evaluative reasoning as the core of arriving at evaluative conclusions. The VfI process operationalises evaluative reasoning, combining explicit value propositions, criteria and standards with deliberation to synthesise insights from diverse evidence.
Incorporating intangible value and multiple criteria: VfI sets out not to force every value into a monetary framework or other quantitative indicators. It doesn’t marginalise hard-to-quantify impacts in footnotes. Instead, it uses explicit criteria and standards to value intangibles. Moreover, where mainstream economic evaluation is concerned primarily with determining how efficiently outcomes are achieved, VfI uses multiple criteria to define good resource use, such as equity, stewardship, sustainability, acceptability, etc. This doesn’t diminish the importance of efficiency and economic evaluation - it wraps a bigger picture around them.
A viable and credible alternative: It isn’t always feasible, proportionate or desirable to include economic methods of evaluation - but we still need good answers to VfM questions. Sometimes the kinds of outcomes that are amenable to economic analysis need more time to emerge. Sometimes it’s too hard to monetise and attribute the most important costs and outcomes to the intervention. Some communities may resist economic metrics, especially where they have previously been used in ways that sidelined lived experience or Indigenous knowledge. In any of these cases, VfI offers a rigorous alternative.
Bottom line
The three textbooks introduced here each bring distinctive sectoral and methodological strengths. Together, their frameworks provide critical guidance for integrating economic insights into evaluation practice. I recommend all three.
CBA, CEA, CUA, and other economic methods offer powerful ways to assess how efficiently interventions use resources to generate value compared with alternatives. They belong to the field of evaluation as much as economics and I would like to see them used more. At the same time, each provides a partial view of what defines good resource use.
VfI builds on these economic insights, extending their lenses to encompass diverse forms of value, participatory reasoning, and fit-for-purpose judgement. It challenges evaluators to not sideline intangible or plural values. Through explicit criteria, collective judgements, and a commitment to inclusive rigour and methodological pluralism, VfI invites a democratic and comprehensive approach to understanding resource use and value creation.
Thanks for reading!
And big thanks to Dr Kelsey Deane for helpful peer review. Any errors, omissions and GHG emissions associated with this post are my responsibility alone. My opinions do not represent the University of Melbourne or any other organisations or individuals I work with.
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References
Persaud, N., & Yates, B. (2024). Cost-Inclusive Evaluation: Planning It, Doing It, Using It. Guilford Press.
Levin, H. M, McEwan, P. J., Belfield, C., Bowden, A., & Shand, R. (2018). Economic evaluation in education. Cost-effectiveness and Benefit-cost analysis. Sage.
Drummond, M. F., Sculpher, M. J., Claxton, K., Stoddart, G. L., & Torrance, G. W. (2015). Methods for the Economic Evaluation of Health Care Programmes (4th ed.). Oxford University Press.
The University of Melbourne’s Online Master of Evaluation course.
Value for Investment portal: practical guidance, theory, academic publications, real-world examples, training opportunities, and more: www.julianking.co.nz
For context, I have unpacked differences between SROI and CBA previously - see here, here, and here. While these methods are not identical, I argue, “I don’t care what you call it, just do it well”. This often means drawing on complementary strengths of both traditions, such as quantitative approaches from CBA guidance, stakeholder engagement and qualitative performance story from SROI. In either case, the indicators and narrative aren’t the judgement - that is a human process beyond the formula, balancing central estimates with uncertainty, distributional issues, non-monetised outcomes, ethical and political constraints, and more. That is precisely why VfI adds rubrics, mixed methods and stakeholder participation.
Economists have developed strategies for addressing distributional impacts within CBA frameworks - for example, running subgroup analyses to see how costs and benefits fall on different populations, applying wealth-adjustment weights to reflect the diminishing marginal value of income, or using explicit normative weights to prioritise benefits accruing to particular groups. These can generate useful insights about who gains and who loses, and can be powerful inputs to decision-making. However, they operate within a frame where the principal criterion is total net benefit, and where equity is explicitly treated (in Kaldor-Hicks efficiency) as external to CBA. Some leading theorists of CBA have defended this division, arguing that CBA should focus on estimating aggregate welfare while leaving questions of justice, power, privilege, self-determination, decolonisation, and social or distributive justice to other tools and processes. As I see it, CBA is not “anti-equity” but reflects one specific position on distributional impacts and is structurally weaker at addressing social justice and equity issues than approaches that place those concerns at the centre of evaluative judgement rather than at the margins.
Economic methods do have ways of engaging with plural and contestable values. Different stakeholder perspectives and ethical positions can be reflected through multiple accounts, alternative scenarios, distributional analyses, and sensitivity testing that explore how conclusions change under different conditions and assumptions. But measuring and aggregating values into a single indicator is only one way of working with value disagreement. Many important real world questions about what ought to count as value, how trade-offs between different groups and outcomes should be handled, and which principles should guide decisions are better surfaced through multiple and mixed approaches to explicit evaluative reasoning than through metrics alone.