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The various ways in which the term cost effective is used are considered. It is argued that any cost effectiveness study must start with an attempt to define objectives and ways in which the degree of attainment can be measured. Then various ways of establishing the relative importance of objectives and methods of allocating resources are considered and compared. It is concluded that although techniques such as cost benefit analysis, multiattribute utility theory and goal programming have desirable conceptual qualities, it is unlikely that they will find widespread use in business and industry. Relatively unsophisticated methods such as zero-base budgeting could be used more extensively to good effect.