Policy Forum The costs and benefits of benefit-cost analysis
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@MISC{_policyforum,
author = {},
title = {Policy Forum The costs and benefits of benefit-cost analysis},
year = {}
}
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Abstract
Among the tools of the economic trade, cost-benefit analysis is the most widely used in policy circles. Asking whether there is a role for cost-ben-efit analysis is like asking whether there is a role for the weatherman. Of course there is. The analogy is not idle. We need to know the weather, for it causes some of the worst uncertainties known to humans. But it is at least as important to know that the weather service makes errors. We need to know its limi-tations to take precautions. Errors can be costly. Think of cyclones, droughts and floods. Few of us would fly an airplane in possibly danger-ous weather conditions if we did not know the margin of error. Like weather prediction, cost-benefit analysis can be useful but it can also go wrong. Erroneous cost-benefit analysis can be as damaging as erroneous weather prediction. Both fail when concerned with larger issues. Weather predictions for large areas and for large timescales are unreliable and could be dangerous if taken too seriously. The same holds
