Valuing Foreign Lives and Settlements

David A. Dana

Journal of Benefit-Cost Analysis, 2010, vol. 1, issue 1, 1-26

Abstract: Cost-benefit analysis in the United States for policy and legal purposes traditionally has been highly parochial, excluding not just losses or gains of welfare to non-U.S. residents from a given policy but also excluding any losses or gains in welfare U.S. residents would experience as a result of impacts to foreigners and foreign settlements. In the climate change context, this approach has meant that cost-benefit analyses for the costs of unmitigated climate change to the United States value at zero the losses that U.S. residents will bear as a result of the direct, adverse impacts of climate change to foreign lives and settlements. This article argues that there are sound theoretical reasons to include such welfare losses in a cost-benefit analysis, and that doing so requires going beyond revealed preference data to consider stated preference surveys. The article presents the findings of internet-based surveys that strongly suggest that the implicit assumption of the current approach to cost-benefit analysis in the United States—that U.S. residents value foreign lives and settlements that may be destroyed by climate change at zero—is untenable.

Date: 2010
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