Economic impact analysis (EIA) counts up money spent, taxes paid and jobs received and proposes that they are all benefits of some activity. Benefit-cost analysis (BCA) looks more carefully at that spending and recognizes that some spending is benefit, some is cost and that taxes are simply transfers. It compares benefits to costs to determine efficient policies.
It is easy to confuse benefits (i.e., consumer surplus) and impacts (i.e., spending) unless you explicitly recognize standing (i.e., whose benefits and costs count). For example, suppose a local economy gets most of its income from the outdoors (forest, beach, etc). Losing a good chunk of the outdoorsy area might reduce tourist spending and local income significantly. That tourist spending, however, will simply go somewhere else: to other activities in the same local area (e.g., bowling), the rest of the region, the rest of the state, etc. From a local perspective, the lost spending is a cost of losing a good chunk of the outdoorsy area. But, from a broader perspective it is a wash. The broader government, which recognizes the standing of all citizens, should totally ignore the changes in spending (unless there are some equity, or other, concerns).
Here is a number example. Suppose a state is made up of two areas: A and B. Say something about the world might change fairly soon. The locals in area B conduct an EIA and determines that it might lose $100 in income. Area B suggests the state pursue an income maintenance policy that costs $10 in order to insure the spending stays in area B. From B’s perspective it is a no brainer, the policy is a good idea because area B assigns no standing to area A.
But, a BCA conducted by the state suggests that if B loses $100 in income it is simply transferred to A. If the state spends $10 to maintain B’s income, area A is down $100 plus its share of the $10 used to maintain B's income. The state, if it assigns standing to all of its citizens and pays attention to its BCA, will not pursue the income maintenance policy and should advise B that they can pursue it on their own, if they wish.
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