The role of social cost–benefit analysis in societal decision-making under large uncertainties with application to robbery at a cash depot

M. Jones-Lee and T. Aven

Reliability Engineering and System Safety, 2009, vol. 94, issue 12, 1954-1961

Abstract: Social cost–benefit analysis is a well-established method for guiding decisions about safety investments, particularly in situations in which it is possible to make accurate predictions of future performance. However, its direct applicability to situations involving large degrees of uncertainty is less obvious and this raises the question of the extent to which social cost–benefit analysis can provide a useful input to the decision framework that has been explicitly developed to deal with safety decisions in which uncertainty is a major factor, namely risk analysis. This is the main focus of the arguments developed in this paper. In particular, we provide new insights by examining the fundamentals of both approaches and our principal conclusion is that social cost–benefit analysis and risk analysis represent complementary input bases to the decision-making process, and even in the case of large uncertainties social cost–benefit analysis may provide very useful decision support. What is required is the establishment of a proper contextual framework which structures and gives adequate weight to the uncertainties. An application to the possibility of a robbery at a cash depot is examined as a practical example.

Keywords: Social cost–benefit analysis; Risk assessment; Uncertainties (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reensy:v:94:y:2009:i:12:p:1954-1961

DOI: 10.1016/j.ress.2009.06.011

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