Cost-benefit analysis--a critique

Rk Turner

Omega, 1979, vol. 7, issue 5, 411-419

Abstract: This paper surveys some of the main criticisms of cost-benefit analysis (CBA) that have emerged over the years. It is noted in passing that views on what type of technique CBA really is, or should be, have differed and continue to differ depending on the set of value judgements used. We emphasise that the more recent suggested extensions to or modifications of CBA have sought to make the technique more comprehensive (i.e. to include distributional, environmental quality and other objectives as well as economic efficiency) at the inevitable cost of a loss of precision. The underlying principles of CBA are examined and the problems of multiple objective planning highlighted. Valuation problems are analysed, in particular with regard to amenity and environmental effects. Finally, the issues of uncertainty, irreversibility and intergenerational equity are raised briefly to indicate the complexity of the decision-making task when large-scale technologically advanced projects have to be appraised. In conclusion it is argued that CBA presented in a disaggregated format, as a comprehensive method for the ordering of information and a testing procedure for a range of valuations can perform a useful role in the decision-making process. The term 'policy analysis' is probably a better one for this broader view of the use of CBA. Ultimately we seem to be searching for a synthesis of the participatory and the traditional (technocratic) style of decision-making though we have a long and difficult course to chart before we even approach such a goal.

Date: 1979
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