Leading Entrepreneurship

In my third post of this series, Cost Benefit Analysis Standardization, we looked at how the government has encouraged the use of this analysis, but not why this method has appeal. We will outline the justification for the cost benefit analysis in this post.

“The philosophical premise of cost-benefit analysis is that a person is the best judge of his or her own welfare. When someone consents to accept an increased risk in exchange for money, the theory says that this choice should be respected for the sake of both freedom and rationality.”

Frank Ackerman & Lisa Heinzerling (2004)
Priceless: On Knowing the Price
of Everything and the Value of Nothing.
New York, NY: The New Press.

“Rich and poor alike have an interest in making the economic pie as large as possible. Any policy that passes the cost-benefit test makes the economic pie larger. And when the pie is larger, everyone can have a larger slice.”

Robert H. Frank (2000)
Why is Cost-Benefit Analysis So Controversial?
Journal of Legal Studies. XXIX,
Number 2, Part 2, 913-930.

“…it avoids distributional judgments and allows agencies to focus on efficiency improvements that their expertise puts them in a position to identify.”

Matthew D. Adler and Eric A. Posner (2000)
Implementing Cost-Benefit Analysis When Preferences Are Distorted,
Journal of Legal Studies. XXIX,
Number 2, Part 2, 1105-1148.

“Benefits and costs have claims to our attention.”

Amartya Sen (2000)
The Discipline of Cost-Benefit Analysis.
Journal of Legal Studies. XXIX,
Number 2, Part 2, 931-952.