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Risk in Benefit‐Cost Analysis

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  • William D. Schulze
  • Allen V. Kneese

Abstract

In recent years, benefit‐cost analysis has been increasingly applied to large societal decision problems (such as developing a fast breeder energy economy) which involve both risks to society and analysis of very long‐term consequences possibly extending over many human generations. This paper examines the philosophical underpinnings of the technique which is a special case of utilitarianism, and compares implications of the technique to those arising from alternative ethical systems in analyzing questions of public safety. Ethical systems which emphasize the good of the whole, such as utilitarianism, are shown to differ sharply in decision outcomes from those which emphasize the rights of the individual, such as libertarianism. It is suggested that benefit‐cost analysis should be broadened to include alternative weightings of benefits and costs consistent with a variety of ethical views.

Suggested Citation

  • William D. Schulze & Allen V. Kneese, 1981. "Risk in Benefit‐Cost Analysis," Risk Analysis, John Wiley & Sons, vol. 1(1), pages 81-88, March.
    • Handle: RePEc:wly:riskan:v:1:y:1981:i:1:p:81-88
    DOI: 10.1111/j.1539-6924.1981.tb01362.x
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    References listed on IDEAS

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    1. Conley, Bryan C, 1976. "The Value of Human Life in the Demand for Safety," American Economic Review, American Economic Association, vol. 66(1), pages 45-55, March.
    2. Mishan, E J, 1971. "Evaluation of Life and Limb: A Theoretical Approach," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 687-705, July-Aug..
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    Cited by:

    1. Ralph L. Keeney, 1984. "Ethics, Decision Analysis, and Public Risk," Risk Analysis, John Wiley & Sons, vol. 4(2), pages 117-129, June.
    2. William W. May, 1982. "$s for Lives: Ethical Considerations in the Use of Cost/Benefit Analysis by For‐Profit Firms," Risk Analysis, John Wiley & Sons, vol. 2(1), pages 35-46, March.
    3. Armando Llop, 1991. "Economic degradation, conservation and allocation of water resources," Natural Resources Forum, Blackwell Publishing, vol. 15(4), pages 313-321, November.
    4. Willey, Zach, 1982. "ECONOMIC CRITERIA IN ENVIRONMENTAL REGULATION- PROSPECTS FOR THE 1980's," 1982 Annual Meeting, August 1-4, Logan, Utah 279166, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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