Cost-benefit analysis have been attacked by many critics because of its implicit ethical assumptions. The normative content of the method is at odds with the common attitude that economists should analyze how to reach given goals, while determination of the goals should be left to the politicians. This paper presents a descriptive model of decision makers' behavior, demonstrating that rational, benevolent politicians will only in special cases accept the evaluation of projects resulting from a cost-benefit analysis. An alternative approach to project evaluation, which allows individual decision makers to rank projects in accordance with their own ethical views, is presented. In this framework, estimates of willingness to pay are generally not required. On the other hand, information about groups that are significantly affected by the project, as well as physical unit information on changes in the supply of public goods, is crucial.
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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number
137.
Find related papers by JEL classification: A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
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