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Is cost-benefit analysis legal? Three rules


  • Richard O. Zerbe

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


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

    1. Burton A. Weisbrod, 1981. "Benefit-Cost Analysis of a Controlled Experiment: Treating the Mentally Ill," Journal of Human Resources, University of Wisconsin Press, vol. 16(4), pages 523-548.
    2. Dale Whittington & Duncan Macrae, 1990. "Comment: Judgments about who has standing in cost-benefit analysis," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(4), pages 536-547.
    3. Richard O. Zerbe, 1991. "Comment: Does benefit cost analysis stand alone? rights and standing," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 10(1), pages 96-105.
    4. 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.
    5. 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, July.
    6. 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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    Cited by:

    1. Kubiak, Sheryl & Roddy, Juliette & Comartin, Erin & Tillander, Elizabeth, 2015. "Cost analysis of long-term outcomes of an urban mental health court," Evaluation and Program Planning, Elsevier, vol. 52(C), pages 96-106.
    2. 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 Applied Economics.
    3. Easter, K. William & Archibald, Sandra O., 1998. "Benefit-Cost Analysis In U.S. Environmental Regulatory Decisions," Conference Papers 14475, University of Minnesota, Center for International Food and Agricultural Policy.
    4. David L. Weimer & Aidan R. Vining & Randall K. Thomas, 2009. "Cost-benefit analysis involving addictive goods: contingent valuation to estimate willingness-to-pay for smoking cessation," Health Economics, John Wiley & Sons, Ltd., vol. 18(2), pages 181-202.
    5. repec:eee:touman:v:59:y:2017:i:c:p:621-629 is not listed on IDEAS

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