What is double counting in economics?

In economics, double counting is defined as including the same costs or benefits more than once in the belief that different measures are involved. Double counting inflates expenditure or income since the final figure is considerably more than what was spent or earned.

Double counting usually occurs when calculating the cost of a project. An example is when the price of materials is included as part of the total costs as well as the final price of the product to be sold. In this instance, only the final price should be counted, as the cost of the materials is included in the sale price. One way to avoid double counting is to assign finances as either benefits or costs but not both at the same time.