Value Typology in Cost-Benefit Analysis

Abstract

Cost-benefit analysis (CBA) evaluates actions in terms of negative consequences (costs) and positive consequences (benefits). Though much has been said on CBA, little attention has been paid to the types of values held by costs and benefits. This paper introduces a simple typology of values in CBA and applies it to three forms of CBA: the common, money-based CBA, CBA based in social welfare, and CBA based in intrinsic value. The latter extends CBA beyond its usual anthropocentric domain. Adequate handling of value typology in CBA avoids analytical mistakes and connects CBA to its consequentialist roots.

Keywords

Cost-benefit analysis value typology consequentialism social welfare welfare economics

Get full access to this article

View all access options for this article.

References

Ackerman

and Heinzerling

. 2004. Priceless: On Knowing the Price of Everything and the Value of Nothing. New York: The New Press.

Adler

M. D.

and Posner

E. A.

. 2000. ‘Introduction’. Journal of Legal Studies 29(2): 837–842. http://dx.doi.org/10.1086/468096.

Adler

M.D.

and Posner

E. A.

. 2006. New Foundations of Cost-Benefit Analysis. Cambridge, MA: Harvard University Press.

Aldred

1994. ‘Existence value, welfare and altruism’. Environmental Values 3: 381–402. http://dx.doi.org/10.3197/096327194776679665.

Anderson

1993. Value in Ethics and Economics. Cambridge, MA: Harvard University Press.

Baum

S. D.

2009a. ‘Cost-benefit analysis of space exploration: Some ethical considerations’. Space Policy 25(2): 75–80. http://dx.doi.org/10.1016/j.spacepol.2009.02.008.

Baum

S. D.

2009b. Description, prescription and the choice of discountrates. Ecological Economics 69(1): 197–205. http://dx.doi.org/10.1016/j.ecolecon.2009.08.024.

Baum

S. D.

and Easterling

W. E.

. 2010. ‘Space-time discounting in climate change adaptation’. Mitigation and Adaptation Strategies for Global Change 15(6): 591–609. http://dx.doi.org/10.1007/s11027-010-9239-9.

Baumol

W. J.

1946–1947. ‘Community indifference’. Review of Economic Studies 14(1): 44–48. http://dx.doi.org/10.2307/2295757.

10.

Beinat

and Nijkamp

(eds.). 1998. Multicriteria Analysis for Land-Use Management. Dordrecht: Kluwer.

11.

Boadway

R. F.

and Bruce

. 1984. Welfare Economics. Oxford: Basil Blackwell.

12.

Bradley

1998. ‘Extrinsic value’. Philosophical Studies 91: 109–126. http://dx.doi.org/10.1023/A:1004269309760.

13.

Brekke

K. A.

1997. ‘The numeraire matters in cost-benefit analysis. Journal of Public Economics 64: 117–123. http://dx.doi.org/10.1016/S0047-2727(96)01610-6.

14.

Broome

1991. ‘Utility’. Economics and Philosophy 7: 1–12.

15.

Callicott

J. B.

2002. ‘The pragmatic power and promise of theoretical environmental ethics’. Environmental Values 11(1): 3–25. http://dx.doi.org/10.3197/096327102129340957.

16.

Cooter

and Rappoport

. 1984. Were the ordinalists wrong about welfare economics?’. Journal of Economic Literature 22(2): 507–530.

17.

Crowards

1997. ‘Nonuse values and the environment: Economic and ethical motivations’. Environmental Values 6(2):143–167. http://dx.doi.org/10.3197/096327197776679167.

18.

Drakopoulos

1989. ‘The historical perspective of the problem of interpersonal comparisons of utility’. Journal of Economic Studies 16(4): 35–51.

19.

Drèze

1998. ‘Distribution matters in cost-benefit analysis: Comment on K.A. Brekke’. Journal of Public Economics 70: 485–488.

20.

Drèze

J. P.

and Stern

N. H.

. 1987. ‘The theory of cost-benefit analysis’, in Auerbach

and Feldstein

(eds.), Handbook of Public Economics (Amsterdam: North-Holland), pp. 909–989.

21.

Drèze

J. P.

and Stern

N. H.

. 1990. ‘Policy reform, shadow prices and market prices’. Journal of Public Economics 42: 1–45.

22.

Elster

and Roemer

J. E.

(eds.). 1991. Interpersonal Comparisons of Weil-Being. Cambridge, UK: Cambridge University Press.

23.

Fuggitt

and Wilcox

S. J.

. 1999. Cost-Benefit Analysis for Public Sector Decision Makers. Westport, CT: Quorum Books.

24.

Hansson

S. O.

2007. ‘Philosophical problems in cost-benefit analysis’. Economics and Philosophy 23: 163–183. http://dx.doi.org/10.1017/S0266267107001356.

25.

Hayward

1997. ‘Anthropocentrism: A misunderstood problem’. Environmental Values 6: 49–63. http://dx.doi.org/10.3197/096327197776679185.

26.

Hicks

1939. ‘The foundations of welfare economics’. Economic Journal 49(196): 696–712. http://dx.doi.org/10.2307/2225023.

27.

Holbrook

1997. ‘The consequentialistic side of environmental ethics’. Environmental Values 6: 87–96. http://dx.doi.org/10.3197/096327197776679211.

28.

Janssen

1992. Multiobjective Decision Support for Environmental Management. Dordrecht: Kluwer. http://dx.doi.org/10.1007/978-94-011-2807-0.

29.

Johansson

P.-O.

1998. ‘Does the choice of numeraire matter in cost-benefit analysis?’. Journal of Public Economics, 70: 489–493.

30.

Kahneman

and Sugden

. 2005. ‘Experienced utility as a standard of policy evaluation’. Environmental & Resource Economics 32: 161–181. http://dx.doi.org/10.1007/s10640-005-6032-4.

31.

Kaldor

1939. ‘Welfare propositions in economics and interpersonal comparisons of utility’. Economic Journal 49(195): 549–552. http://dx.doi.org/10.2307/2224835.

32.

Layard

and Glaister

(eds). 1994. Cost-Benefit Analysis, Second Edition. Cambridge, UK: Cambridge University Press.

33.

Lenman

2000. ‘Preferences in their place’. Environmental Values 9(4): 431–451. http://dx.doi.org/10.3197/096327100129342146.

34.

McCarthy

2008. ‘Utilitarianism and prioritarianism II. Economics and Philosophy 24(1): 1–33. http://dx.doi.org/10.1017/S026626710800165X.

35.

McKay

C. P.

, Toon

O. B.

and Kasting

J. F.

. 1991. ‘Making Mars habitable’. Nature 352: 489–496. http://dx.doi.org/10.1038/352489a0.

36.

McShane

2008. ‘Convergence, noninstrumental value and the semantics of ‘love’: Comment on Norton’. Environmental Values 17(1): 15–22. http://dx.doi.org/10.3197/096327108X271923.

37.

Meade

J. E.

1955. Trade and Welfare. Oxford: Oxford University Press.

38.

Mishan

E. J.

1975. Cost Benefit Analysis: An Informal Introduction. London: Allen & Unwin.

39.

Mole

R. A.

1995. ‘Terraforming Mars with four war-surplus bombs’. Journal of The British interplanetary Society 48: 321–324.

40.

Moore

G. E.

1903. Principia Ethica. Cambridge: Cambridge University Press.

41.

Munda

1995. Multicriteria Evaluation in a Fuzzy Environment: Theory and Applications in Ecological Economics. Heidelberg: Physica-Verlag. http://dx.doi.org/10.1007/978-3-642-49997-5.

42.

Y.-K.

2003. ‘From preference to happiness: Towards a more complete welfare economies’. Social Choice and Welfare 20: 307–350. http://dx.doi.org/10.1007/s003550200184.

43.

Nordhaus

2008. A Question of Balance: Weighing the Options on Global Warming Policies. New Haven: Yale University Press.

44.

Norton

B. G.

2008. ‘Convergence, noninstrumental value and the semantics of ‘love’: Comment on McShane’. Environmental Values 17(1): 5–14. http://dx.doi.org/10.3197/096327108X271914.

45.

O'Neill

2008. ‘Happiness and the good life’. Environmental Values 17(2): 125–144. http://dx.doi.org/10.3197/096327108X303819.

46.

Pearce

1993. Economic Values and the Natural World. London: Earthscan.

47.

Pearce

, Atkinson

and Mourato

. 2006. Cost-Benefit Analysis and the Environment: Recent Developments. Paris: OECD Publishing.

48.

Porter

T. W.

1995. Trust in Numbers: The Pursuit of Objectivity in Science and Public Life. Princeton: Princeton University Press.

49.

Posner

R. A.

2000. ‘Cost-benefit analysis: Definition, justification, and comment on conference papers’. Journal of Legal Studies 29(2): 1153–1177. http://dx.doi.org/10.1086/468108.

50.

Rjannow-Rasmussen

and Zimmerman

M. J.

(eds.). 2005. Recent Work on Intrinsic Value. Dordrecht: Springer.

51.

Sagoff

2008. ‘On the economic value of ecosystem services’. Environmental Values 17(2): 239–257. http://dx.doi.org/10.3197/096327108X303873.

52.

Sen

2000. ‘The discipline of cost-benefit analysis’. Journal of Legal Studies 29(2): 931–952. http://dx.doi.org/10.1086/468100.

53.

Soma

2006. ‘Natura economica in environmental valuation’. Environmental Values 15(1): 31–50. http://dx.doi.org/10.3197/096327106776678979.

54.

Spash

C.L.

2007. ‘The economics of climate change impacts à la Stern: Novel and nuanced or rhetorically restricted?’. Ecological Economics 63(4): 706–713. http://dx.doi.org/10.1016/j.ecolecon.2007.05.017.

55.

Spash

C. L.

2008. ‘How much is that ecosystem in the window? The one with the bio-diverse trail. Environmental Values 17(2): 259–284. http://dx.doi.org/10.3197/096327108X303882.

56.

Stern

2007. The Economics of Climate Change: The Stern Review. Cambridge, UK: Cambridge University Press.

57.

Sugden

and Williams

. 1978. The Principles of Cost-Benefit Analysis. Oxford: Oxford University Press.

58.

Sunstein

C. R.

2000. ‘Cognition and cost–benefit analysis’. Journal of Legal Studies 29(2): 1059–1103. http://dx.doi.org/10.1086/468105.

59.

Watson, R. T. and the Core Team (eds.), 2001. Climate Change 2001: Synthesis Report. A Contribution of Working Groups I, II, III to the Third Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge, UK: Cambridge University Press.

60.

Whittington

and MacRae

Jr . 1986. ‘The issue of standing in cost-benefit analysis’. Journal of Policy Analysis and Management 5(4): 665–682. http://dx.doi.org/10.2307/3324877.