Social Welfare and Benefit-Cost Analysis

1979 ◽  
pp. 159-171
Author(s):  
F. L. C. H. Helmers
Keyword(s):  
Cost Analysis ◽  
Social Welfare ◽  
Benefit Cost Analysis ◽  
Benefit Cost

scholarly journals Is Mandatory Project Evaluation Always Appropriate? Dynamic Inconsistencies of Irreversible and Reversible Projects

2012 ◽  
Vol 3 (1) ◽  
pp. 1-31 ◽  
Author(s):  
Tatsuhito Kono ◽  
Hiromichi Notoya
Keyword(s):  
Cost Analysis ◽  
Social Welfare ◽  
General Equilibrium ◽  
Service Level ◽  
Transportation Services ◽  
Dynamic Inconsistency ◽  
Benefit Cost Analysis ◽  
Public Projects ◽  
Optimal Service ◽  
Benefit Cost

Benefit-cost analysis (BCA) is used to optimize investment in public projects. Indeed, in many countries, BCA is mandatory for provision of most public services. However, once BCA is mandated, residents can strategically alter their behaviors based on a dynamic inconsistency that the BCA-based optimal service level depends on residents’ behaviors. This paper discusses this dynamic inconsistency problem, taking transportation services as an example. We show that the problem may decrease both social welfare and the utility of residents as compared with the first-best case, and that the occurrence of second-best outcomes depends on the reversibility of the project and the general-equilibrium interdependency with another project.

scholarly journals Accounting for systematic risk in benefit-cost analysis: a practical approach

2013 ◽  
Vol 4 (3) ◽  
pp. 361-373 ◽  
Author(s):  
Jason Hansen ◽  
Jonathan Lipow
Keyword(s):  
Cost Analysis ◽  
Social Welfare ◽  
Systematic Risk ◽  
Welfare Loss ◽  
Practical Approach ◽  
Costs And Benefits ◽  
Simple Modification ◽  
Benefit Cost Analysis ◽  
Numerical Example ◽  
Benefit Cost

Circular A-94 specifies how analysts should discount costs and benefits of government projects, and thus how to account for risk. In this paper, we argue that the methods mandated by A-94 properly account for non-systematic and term risk, but not for systematic risk. A numerical example illustrates how improper accounting for systematic risk produces misleading results and social welfare loss. We conclude by proposing a simple modification of A-94’s procedures that would allow analysts to at least partially account for systematic risk.

Benefit-Cost Analysis in Global Health

2017 ◽  
Author(s):  
Lisa A. Robinson ◽  
James K. Hammitt
Keyword(s):  
Global Health ◽  
Cost Analysis ◽  
Benefit Cost Analysis ◽  
Benefit Cost

What’s in, what’s out? Towards a rigorous definition of the boundaries of benefit-cost analysis

2021 ◽  
pp. 1-17
Author(s):  
Daniel Acland
Keyword(s):  
Cost Analysis ◽  
Willingness To Pay ◽  
Low Cost ◽  
Consumer Sovereignty ◽  
Benefit Cost Analysis ◽  
Rigorous Definition ◽  
Pareto Criterion ◽  
Definition Of ◽  
Benefit Cost

Abstract Benefit-cost analysis (BCA) is typically defined as an implementation of the potential Pareto criterion, which requires inclusion of any impact for which individuals have willingness to pay (WTP). This definition is incompatible with the exclusion of impacts such as rights and distributional concerns, for which individuals do have WTP. I propose a new definition: BCA should include only impacts for which consumer sovereignty should govern. This is because WTP implicitly preserves consumer sovereignty, and is thus only appropriate for ‘sovereignty-warranting’ impacts. I compare the high cost of including non-sovereignty-warranting impacts to the relatively low cost of excluding sovereignty-warranting impacts.

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