Hostname: page-component-586b7cd67f-rcrh6 Total loading time: 0 Render date: 2024-11-22T12:57:41.234Z Has data issue: false hasContentIssue false
  • English
  • Français

What’s in, what’s out? Towards a rigorous definition of the boundaries of benefit-cost analysis

Published online by Cambridge University Press:  24 February 2021

Daniel Acland Open the ORCID record for Daniel Acland [Opens in a new window]
Daniel Acland*
Affiliation:
Goldman School of Public Policy, University of California Berkeley, 2607 Hearst Ave, Berkeley, CA94720, USA Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Benefit-cost analysis (BCA) is typically defined as an implementation of the potential Pareto criterion, which requires inclusion of any impact for which individuals have willingness to pay (WTP). This definition is incompatible with the exclusion of impacts such as rights and distributional concerns, for which individuals do have WTP. I propose a new definition: BCA should include only impacts for which consumer sovereignty should govern. This is because WTP implicitly preserves consumer sovereignty, and is thus only appropriate for ‘sovereignty-warranting’ impacts. I compare the high cost of including non-sovereignty-warranting impacts to the relatively low cost of excluding sovereignty-warranting impacts.

Keywords

benefit-cost analysisconsumer sovereigntywillingness to paywelfare
Type
Article
Information
Economics & Philosophy , Volume 38 , Issue 1 , March 2022 , pp. 34 - 50
Check for updates
Copyright
© The Author(s), 2021. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Adler, M.D. and Posner, E.A. 2006. New Foundations of Cost-benefit Analysis. Cambridge, MA: Harvard University Press.10.2307/j.ctv1nzfgqtCrossRefGoogle Scholar
Bentham, J. 1825. The Rationale of Reward. John and HL Hunt.Google Scholar
Boardman, A.E., Greenberg, D.H., Vining, A.R. and Weimer, D.L. 2011. Cost-benefit Analysis: Concepts and Practice. 4th edition. Upper Saddle River, NJ: Prentice Hall.Google Scholar
Bostani, M. and Malekpoor, A. 2012. Critical analysis of Kaldor-Hicks efficiency criterion, with respect to moral values, social policy making and incoherence. Advances in Environmental Biology 6, 2032–2038.Google Scholar
Chan, J. 2000. Legitimacy, unanimity, and perfectionism. Philosophy & Public Affairs 29, 5–42.10.1111/j.1088-4963.2000.00005.xCrossRefGoogle Scholar
Cowell, F. and Gardiner, K. 2000. Welfare Weights. London: Office of Fair Trading.Google Scholar
Gibbs, B. 1986. Higher and lower pleasures. Philosophy 61, 31–59.10.1017/S0031819100019549CrossRefGoogle Scholar
Gramlich, E. 1990. A Guide to Benefit-Cost Analysis. Long Grove, IL: Waveland Press.Google Scholar
Griffin, J. 1998. Value Judgement: Improving our Ethical Beliefs. Oxford: Oxford University Press.10.1093/0198752318.001.0001CrossRefGoogle Scholar
Hayek, F.A. 1945. The use of knowledge in society. American Economic Review 35, 519–530.Google Scholar
HM Treasury 2018. The Green Book: Central Government Guidance on Appraisal and Evaluation.Google Scholar
Hicks, J.R. 1941. The rehabilitation of consumers’ surplus. Review of Economic Studies 8, 108–116.10.2307/2967467CrossRefGoogle Scholar
Hotelling, H. 1938. The general welfare in relation to problems of taxation and of railway and utility rates. Econometrica 6, 242–269.10.2307/1907054CrossRefGoogle Scholar
Hutt, W.H. 1990 [1936]. Economists and the Public: A Study of Competition and Opinion. Piscataway, NJ: Transaction Publishers.Google Scholar
Kaldor, N. 1939. Welfare propositions of economics and interpersonal comparisons of utility. Economic Journal 49, 549–552.10.2307/2224835CrossRefGoogle Scholar
Kelman, S. 1981. Cost-benefit analysis: an ethical critique. Regulation 5, 33.Google ScholarPubMed
Kymlicka, W. 1989. Liberal individualism and liberal neutrality. Ethics 99, 883–905.10.1086/293125CrossRefGoogle Scholar
Mill, J.S. 1999 [1859]. On Liberty, ed. Alexander, E.. Peterborough, ON: Broadview Press.Google Scholar
Nussbaum, M.C. 2001. Women and Human Development: The Capabilities Approach (Vol. 3). Cambridge: Cambridge University Press.Google Scholar
Office of Management and Budget. 2003. Circular A-4, Regulatory Analysis.Google Scholar
Posner, E.A. and Sunstein, C.R. 2017. Moral commitments in cost-benefit analysis. Virginia Law Review 103, 1809–1860.Google Scholar
Zerbe, R.O. 2004. Should moral sentiments be incorporated into benefit-cost analysis? An example of long-term discounting. Policy Sciences 37, 305–318.10.1007/s11077-005-5750-3CrossRefGoogle Scholar