Cost-Benefit Analysis

Background

Cost-benefit analysis has been widely promoted as a way of rationalizing environmental policymaking.. The theory is that an accurate and objective summation of all the relevant costs and beenfits of a proposed government action, reduced to a common metric – dollars, will help policy makers make better decisions and make more judicious use of limited resources., However, serious concerns have been raised about the ability of strict cost-benefit analysis to deliver on its promise. Some of the concerns include the difficulty of reducing the relevant factors (most particularly the value of human life) to a simple dollar value, the difficulty of defining an appropriate "discount rate," the fact that cost-benefit analysis ignores the distributional implications of policy options, and the concern that the complexity of cost-benefit analysis reduces the objectivity and trasnparency of government decsion-making.


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