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Is cost-benefit analysis legal? Three rules

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  • Richard O. Zerbe

    (Graduate School of Public Affairs, University of Washington, Box 353055, Seattle, WA 98195)

Abstract

When benefit-cost analysis produces a result that is objectionable does this mean that the technique is objectionable? It means only that the technique cannot rise above the individual and community values on which it rests. That is, values in benefit-cost analysis rest in large measure on law. An understanding of what values count and whose values count and why they count cannot then be separated from law. This understanding of value obviates most criticisms of benefit-cost analysis as a technique. Benefit-cost analysis also contributes to the law so that, for example, when there is a discrepancy between legal and psychological ownership, efficiency suggests that the law change to reflect psychological ownership. The values considered in benefit-cost analysis are very broad and include those associated with income distribution-the most radical proposition in this article-as well as the value of harm even when it is specifically unknown. An appreciation of the broad range of what is meant by value further dislodges criticisms of benefit-cost analysis.

Suggested Citation

  • Richard O. Zerbe, 1998. "Is cost-benefit analysis legal? Three rules," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 17(3), pages 419-456.
    • Handle: RePEc:wly:jpamgt:v:17:y:1998:i:3:p:419-456
    DOI: 10.1002/(SICI)1520-6688(199822)17:3<419::AID-PAM3>3.0.CO;2-J
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    References listed on IDEAS

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    5. GIULIANO, Genevieve & KNATZ, Geraldine & HUDSON, Nathan & SYS, Christa & VANELSLANDER, Thierry & CARLAN, Valentin, 2016. "Decison-making for maritime innovation investments: The significance of cost benefit and cost effectiveness analysis," Working Papers 2016001, University of Antwerp, Faculty of Business and Economics.

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