Is cost-benefit analysis legal? Three rules
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.
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Volume (Year): 17 (1998)
Issue (Month): 3 ()
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- Shira B. Lewin, 1996. "Economics and Psychology: Lessons for Our Own Day from the Early Twentieth Century," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1293-1323, September.
- Jonathan A. Lesser & Richard O. Zerbe, 1995. "What Can Economic Analysis Contribute To The 'Sustainability' Debate?," Contemporary Economic Policy, Western Economic Association International, vol. 13(3), pages 88-100, 07.
- Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-154, Summer.
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