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Cost-Benefit Analysis and the Democratic Ideal

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Abstract

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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  • Karine Nyborg & Inger Spangen, 1997. "Cost-Benefit Analysis and the Democratic Ideal," Discussion Papers 205, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:205
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    References listed on IDEAS

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    1. Karine Nyborg, 1996. "The Political Man and Contingent Valuation: Motives Do Count," Discussion Papers 180, Statistics Norway, Research Department.
    2. Brekke, Kjell Arne, 1997. "The numeraire matters in cost-benefit analysis," Journal of Public Economics, Elsevier, vol. 64(1), pages 117-123, April.
    3. 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.
    4. Nyborg, Karine, 1998. "Some Norwegian Politicians' Use of Cost-Benefit Analysis," Public Choice, Springer, vol. 95(3-4), pages 381-401, June.
    5. 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.
    6. Peter J. Hammond, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 263-282.
    7. Fridstrom, Lasse & Elvik, Rune, 1997. "The Barely Revealed Preference behind Road Investment Priorities," Public Choice, Springer, vol. 92(1-2), pages 145-168, July.
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    Cited by:

    1. Nyborg, Karine, 2014. "Project evaluation with democratic decision-making: What does cost–benefit analysis really measure?," Ecological Economics, Elsevier, vol. 106(C), pages 124-131.
    2. Susanne Menzel & Tom L. Green, 2013. "Sovereign Citizens and Constrained Consumers: Why Sustainability Requires Limits on Choice," Environmental Values, White Horse Press, vol. 22(1), pages 59-79, February.
    3. Nyborg, Karine, 2000. "Project analysis as input to public debate: Environmental valuation versus physical unit indicators," Ecological Economics, Elsevier, vol. 34(3), pages 393-408, September.

    More about this item

    Keywords

    Democracy; cost-benefit analysis;

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate

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