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A Critique of the Productivity Commission's Cost-Benefit Analysis in the 'Disability Care and Support' Report

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  • Mark Harrison

Abstract

In its 2011 NDIS report, the Productivity Commission rationalises its policy recommendation by means of a cost-benefit analysis, claiming that 'the benefits of the [National Disability Insurance] scheme would significantly outweigh the costs'. But methodology the PC adopts departs from conventional cost-benefit analysis in ways that understates costs, presumes the benefits, muddies policy comparisons, and jumbles equity and efficiency issues. These problems are traceable to the Commission's use of a 'distributional weights approach' to equity benefits. The 'basic needs approach' is an alternative way of dealing with equity considerations that better captures the underlying preferences of citizens and the rationale for disability care and support policies.

Suggested Citation

  • Mark Harrison, 2013. "A Critique of the Productivity Commission's Cost-Benefit Analysis in the 'Disability Care and Support' Report," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 20(2), pages 77-88.
    • Handle: RePEc:acb:agenda:v:20:y:2013:i:2:p:77-88
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    1. Glenn Jenkins & Chun-Yan Kuo & Arnold C. Harberger, 2011. "Cost-Benefit Analysis for Investment Decisions: Chapter 14 (The Shadow Price of Government Funds, Distributional Weights, and Basic Needs Externalitiess)," Development Discussion Papers 2011-14, JDI Executive Programs.
    2. Arnold C. Harberger, 1978. "On the Use of Distributional Weights in Social Cost-Benefit Analysis," NBER Chapters, in: Research in Taxation, pages 87-120, National Bureau of Economic Research, Inc.
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