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Cost-Benefit Analysis and the Democratic Ideal

  • Karine Nyborg
  • Inger Spangen

In traditional cost-benefit analyses of public projects, every citizen’s willingness to pay for a project is given an equal weight. This is sometimes taken to imply that cost-benefit analysis is a democratic method for making public decisions, as opposed to, for example, political processes involving log-rolling and lobbying from interest groups. Politicians are frequently criticized for not putting enough emphasis on the cost-benefit analyses when making decisions. In this paper we discuss the extent to which using cost-benefit analysis to rank public projects is consistent with Dahl’s (1989) criteria for democratic decision-making. We find several fundamental conflicts, both when cost-benefit analysis is used to provide final answers about projects’ social desirability, and when used only as informational input to a political process. Our conclusions are illustrated using data from interviews with Norwegian politicians.

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Article provided by Nordic Journal of Political Economy in its journal Nordic Journal of Political Economy.

Volume (Year): 26 (2000)
Issue (Month): ()
Pages: 83-93

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Handle: RePEc:noj:journl:v:26:y:2000:p:83-93
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  1. Karine Nyborg, 1996. "Some Norwegian Politicians' Use of Cost-Benefit Analysis," Discussion Papers 169, Research Department of Statistics Norway.
  2. Dreze, Jean & Stern, Nicholas, 1987. "The theory of cost-benefit analysis," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 14, pages 909-989 Elsevier.
  3. Karine Nyborg, 1996. "The Political Man and Contingent Valuation: Motives Do Count," Discussion Papers 180, Research Department of Statistics Norway.
  4. Fridstrom, Lasse & Elvik, Rune, 1997. " The Barely Revealed Preference behind Road Investment Priorities," Public Choice, Springer, vol. 92(1-2), pages 145-68, July.
  5. Brekke, Kjell Arne, 1997. "The numeraire matters in cost-benefit analysis," Journal of Public Economics, Elsevier, vol. 64(1), pages 117-123, April.
  6. Kjell Brekke & Hilde Lurå & Karine Nyborg, 1996. "Allowing disagreement in evaluations of social welfare," Journal of Economics, Springer, vol. 63(3), pages 303-324, October.
  7. Hammond, Peter J, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 263-82, April.
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