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Project evaluation with democratic decision-making: What does cost–benefit analysis really measure?

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  • Nyborg, Karine

Abstract

It is often argued that projects involving public good changes should be chosen on the basis of monetary valuation and cost–benefit analysis (CBA). However, CBA is not value-free. When used to measure welfare, it is based on highly controversial value judgements. When used to measure efficiency, it is based on assumptions of limited relevance to democratic decision-making processes. CBA measures total net willingness to pay, neither more nor less. While interesting in its own right, the normative significance of this indicator is not obvious.

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  • Nyborg, Karine, 2014. "Project evaluation with democratic decision-making: What does cost–benefit analysis really measure?," Ecological Economics, Elsevier, vol. 106(C), pages 124-131.
    • Handle: RePEc:eee:ecolec:v:106:y:2014:i:c:p:124-131
    DOI: 10.1016/j.ecolecon.2014.07.009
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    More about this item

    Keywords

    Cost–benefit analysis; Ethics; Environmental quality; Democratic decision-making;
    All these keywords.

    JEL classification:

    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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