Leading Entrepreneurship

In my fifth post of this series, Cost Benefit Analysis Arguments Against, we looked at reasons why one might not use to justify a decision using this analysis. After having reviewed both sides, this post will review the net effect.

“What is the purpose of cost-benefit analysis? I assume it is to make a valuation… To assess how good the event is, taken as a whole, we have to put together its costs and benefits. This is a process of aggregation or weighting, and it is the purpose of cost-benefit analysis. Cost-benefit analysts have been reluctant to acknowledge that a theory of value must underlie their work, and they have tried to keep theory out of their practice as much as they can. Economists are traditionally reticent people, and they do not like to impose their own theories of value on their work; instead, they prefer to leave valuations as much as possible to the individual preferences of the public. In particular, economists have tried not to commit themselves to any substantive theory about the value of a person’s life. So when they value people’s lives, they like to base their valuation on the people’s own preferences about preserving their lives.”

John Bromme (2000)
Cost-Benefit Analysis and Population,
Journal of Legal Studies. XXIX,
Number 2, Part 2, 953-970.

“What is the value of human life? About $1.54 million… At least, that is what it appears to be in the context of setting public policy about highway safety.”

http://www.princeton.edu/main/news/archive/S01/11/87I80/index.xml

“In travel, the economic value of life, for safety purposes, varies between around $1,000,000 for trains, and around $20,000 for automobiles.”

http://en.wikipedia.org/wiki/Value_of_life

“At a discount rate of 3 percent, males and females aged 20-24 have the highest present value of lifetime earnings — $1,517,045 and $1,085,188 respectively.”

http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1049&context=ctcre

“Overall, the median [US life-saving] intervention [strategy] costs $42,000 per life-year saved.”

http://www.ncbi.nlm.nih.gov/entrez/query.fcgi?cmd=Retrieve&db=PubMed&list_uids=7604170&dopt=Citation

“In mainstream cost-benefit analysis, the primary work of valuation is done by the use of willingness to pay. This approach is, of course, based on the rationale of the discipline of market valuation.”

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

“Textbook CBA reduces moral commitments to valuations.”

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.

“In retrospect I know that in the context of the times my actions were legal (they were all well within the framework of the law); they probably also were ethical according to most prevailing definitions (they were in accord with accepted professional standards and codes of conduct); the major concern for me is whether they were moral (in the sense of adhering to some higher standards of inner conscience and conviction about the “right” actions to take).”

Dennis A. Gioia, (1992)
Pinto Fires and Personal Ethics: A Script Analysis of Missed Opportunities,
Journal of Business Ethics,
11, 5, 6, 379-389.