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Are there inherent biases in applying cost–benefit analysis?

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  • Kenneth J. Button
  • Johan E. Eklund

Abstract

This article extends discussions of potential biases that can exist in applying cost–benefit analysis. While there is extensive evidence that capture can result in stakeholder manipulation of inputs, there are also claims that the analysis is inherently theoretically bias in favour of over acceptance. The article shows that, contrary to these latter claims, treating projects in isolation is unlikely to produce such bias; indeed, it is as likely as not to lead to suboptimally low acceptance rates. The reason for excessive acceptance of projects therefore is largely due to institutional capture of the analysis for either self-interest or natural human over-optimism.

Suggested Citation

  • Kenneth J. Button & Johan E. Eklund, 2018. "Are there inherent biases in applying cost–benefit analysis?," Applied Economics Letters, Taylor & Francis Journals, vol. 25(7), pages 461-464, April.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:7:p:461-464
    DOI: 10.1080/13504851.2017.1332743
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    Cited by:

    1. Jurgita Baranauskiene & Vilija Alekneviciene, 2019. "Comprehensive Measurement of Social Benefits Generated by Public Investment Projects," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 15(4), pages 195-210.
    2. Gunnar Eliasson, 2018. "Why Complex, Data Demanding and Difficult to Estimate Agent Based Models? Lessons from a Decades Long Research Program," International Journal of Microsimulation, International Microsimulation Association, vol. 11(1), pages 4-60.

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