The Compensation Principle and Cost Benefit Analysis: Consistency, Application and Decision Rule Error

Neil Bruce and Richard Harris

Working Papers from Queen's University, Department of Economics

Abstract: Evaluating projects on the basis of aggregate (unweighted) costs and benefits is a wide spread practice in cost-benefit analysis. This practice continues despite serious flaws in the "compensation principle", which is the usual welfare theoretic basis to justify the procedure. For this reason we examine precise conditions under which projects can be evaluated in terms of aggregate costs and benefits. We also examine the direction of the bias or decision rule error that will be encountered when the required conditions are not satisfied.

Date: 1982

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:qed:wpaper:520

Access Statistics for this paper

More papers in Working Papers from Queen's University, Department of Economics
Contact information at EDIRC.
Series data maintained by Mark Babcock ().