scholarly journals [Ir]rationality, Happiness, and Benefit-Cost Analysis: Introduction to the Special Issue

2016 ◽  
Vol 7 (1) ◽  
pp. 1-11 ◽  
Author(s):  
Lisa A. Robinson
Keyword(s):  
Cost Analysis ◽  
Behavioral Economics ◽  
Policy Design ◽  
Well Being ◽  
Special Issue ◽  
Benefit Cost Analysis ◽  
Design And Implementation ◽  
Societal Welfare ◽  
Benefit Cost ◽  
The Relationship

Behavioral economics and happiness research have many important implications for the conduct of benefit-cost analysis as well as for policy design and implementation. By identifying ways in which we may act irrationally and providing new perspectives on the relationship between our circumstances and our sense of well-being, this research raises numerous questions regarding the evaluation of individual and societal welfare and the desirability of alternative policies. In this special issue, we present a series of articles that explore these concerns and provide significant new insights.

scholarly journals Behavioral Economics and the Conduct of Benefit-Cost Analysis: Towards Principles and Standards

2011 ◽  
Vol 2 (2) ◽  
pp. 1-51 ◽  
Author(s):  
Lisa A. Robinson ◽  
James K. Hammitt
Keyword(s):  
Cost Analysis ◽  
Behavioral Economics ◽  
Economic Valuation ◽  
Well Being ◽  
Relevant Information ◽  
Behavioral Research ◽  
Benefit Cost Analysis ◽  
The Status ◽  
Principles And Standards ◽  
Benefit Cost

As traditionally conducted, benefit-cost analysis is rooted in neoclassical welfare economics, which, in its most simplified form, assumes that individuals act rationally and are primarily motivated by self-interest, making decisions that maximize their welfare. Its conduct is evolving to reflect recent work in behavioral economics, which explores the psychological aspects of decisionmaking. We consider several implications for analyses of social programs, focusing largely on economic valuation. First, benefit-cost analysis often involves valuing nonmarket outcomes such as reductions in health and environmental risks. Behavioral research emphasizes the need to recognize that these values are affected by psychological as well as physical attributes. Second, benefit-cost analysis traditionally uses exponential discounting to reflect time preferences, while behavioral research suggests that individuals’ discounting may be hyperbolic. While the appropriate rates and functional form are uncertain, market rates best represent the opportunity costs associated with diverting funds to support a particular social policy or program. Such rates reflect the intersection between technological progress and individual preferences, regardless of whether these preferences fit the standard economic model or a behavioral alternative. Third, behavioral research emphasizes the need to consider the influence of other-regarding preferences on valuation. In addition to acting altruistically, individuals may act reciprocally to reward or punish others, or use the status of others as the baseline against which to assess their own well-being. Fourth, behavioral economics identifies factors that can help researchers develop valuation studies that provide well-informed, thoughtful preferences. Finally, while behavioral research has led some to argue for a more paternalistic approach to policy analysis, an alternative is to continue to focus on describing the preferences of those affected by the policy options while working to ensure that these preferences are based on knowledge and careful reflection. Benefit-cost analysis can be best viewed as a pragmatic framework for collecting, organizing, and evaluating relevant information.

scholarly journals Introduction to a special issue entitled Perspectives on Implementing Benefit-Cost Analysis in Climate Assessment

2014 ◽  
Vol 5 (03) ◽  
pp. 333-346 ◽  
Author(s):  
Fran Sussman ◽  
Anne Grambsch ◽  
Jia Li ◽  
Christopher P. Weaver
Keyword(s):  
Climate Change ◽  
Decision Making ◽  
Cost Analysis ◽  
Climate Change Impacts ◽  
Theory And Practice ◽  
Future Research ◽  
Special Issue ◽  
Change Analysis ◽  
Benefit Cost Analysis ◽  
Benefit Cost

Abstract:Over the past half-century or more, economists have developed a robust literature on the theory and practice of benefit-cost analysis (BCA) as applied to diverse projects and policies. Recent years have seen a growing demand for practical applications of BCA to climate change policy questions. As economists seek to meet this demand, they face challenges that arise from the nature of climate change impacts, such as the long time frame and the potential for non-marginal changes, the importance of intangible effects, and the need to grapple with Knightian uncertainty. As a result of these and other characteristics of climate change, many of the fundamental tenets of BCA are coming under scrutiny and the limits of BCA’s methodological and practical boundaries are being tested. This special issue assembles a set of papers that review the growing body of literature on the economics of climate change. The papers describe the state of the literature valuing climate change impacts, both globally and at more disaggregated levels. The papers also discuss the challenges economists face in applying BCA to support climate change decision making and adaptation planning. This introduction provides background and context on the current use of BCA in climate change analysis, and sets each paper firmly in that context, identifying also areas for future research. While the challenges in conducting BCA and interpreting its results are significant, across the papers it becomes clear that economic analysis in general, and the tools and methods of BCA in particular, have a central role to play in supporting decision-making about how to respond to climate change.

scholarly journals Conducting Benefit-Cost Analysis in Low- and Middle-Income Countries: Introduction to the Special Issue

2019 ◽  
Vol 10 (S1) ◽  
pp. 1-14 ◽  
Author(s):  
Lisa A. Robinson ◽  
James K. Hammitt ◽  
Dean T. Jamison ◽  
Damian G. Walker
Keyword(s):  
Cost Analysis ◽  
Special Issue ◽  
Reference Case ◽  
Middle Income ◽  
Benefit Cost Analysis ◽  
Middle Income Countries ◽  
Introductory Article ◽  
Health And Development ◽  
Benefit Cost ◽  
Global Health And Development

Investing in global health and development requires making difficult choices about what policies to pursue and what level of resources to devote to different initiatives. Methods of economic evaluation are well established and widely used to quantify and compare the impacts of alternative investments. However, if not well conducted and clearly reported, these evaluations can lead to erroneous conclusions. Differences in analytic methods and assumptions can obscure important differences in impacts. To increase the comparability of these evaluations, improve their quality, and expand their use, this special issue includes a series of papers developed to support reference case guidance for benefit-cost analysis. In this introductory article, we discuss the background and context for this work, summarize the process we are following, describe the overall framework, and introduce the articles that follow.

scholarly journals Behavioral economics and policy evaluation

2014 ◽  
Vol 5 (1) ◽  
pp. 89-109 ◽  
Author(s):  
Timothy J. Brennan
Keyword(s):  
Cost Analysis ◽  
Willingness To Pay ◽  
Behavioral Economics ◽  
Policy Evaluation ◽  
Direct Democracy ◽  
Cognitive Biases ◽  
Policy Issues ◽  
Benefit Cost Analysis ◽  
Benefit Cost ◽  
Benefits And Costs

Abstract:Behavioral economics posits a number of cognitive biases and limitations, which raises questions as to whether revealed willingness to pay equals true willingness to pay. If so, benefit-cost analysis, with a number of methodological advantages, would need to be replaced. Prior analyses of the issue by Sunstein, Sugden, and Bernheim and Rangel fail to offer guidance that would avoid substituting centralized judgments for decentralized information on benefits and costs. Alternatives including using post-implementation valuations, libertarian paternalism, and direct democracy on policy issues also have conceptual or practical limitations. A tentative suggestion is democratic delegation, somewhat appealing because it is already applied to cope with bounded rationality and non-efficiency values. Viewing benefit-cost analysis as a market analogue, and restricting the domain of behavioral economics to uninformed consumers, may be useful guides. The most important guidance may be to require very strong evidence of substantial choice failure before abandoning benefit-cost analysis.

scholarly journals Benefit-Cost in a Benevolent Society

2006 ◽  
Vol 96 (1) ◽  
pp. 339-351 ◽  
Author(s):  
Theodore C Bergstrom
Keyword(s):  
Decision Making ◽  
Cost Analysis ◽  
Public Goods ◽  
Contingent Valuation ◽  
Well Being ◽  
Welfare Economics ◽  
Benefit Cost Analysis ◽  
Family Decision ◽  
Family Decision Making ◽  
Benefit Cost

How should benefit-cost analysis account for the value that benevolent individuals place on others' enjoyment of public goods? When adding up the benefits to be compared with costs, should we sum the private valuations, the altruistic valuations, or something else? This paper argues that private valuations are appropriate if concern for the well-being of others respects their private preferences. The discussion has implications for family decision-making, welfare economics, and the design of applied contingent valuation studies.

scholarly journals Benefit-Cost Analysis of Prevention and Intervention Programs for Youth and Young Adults: Introduction to the Special Issue

2015 ◽  
Vol 6 (3) ◽  
pp. 455-470 ◽  
Author(s):  
Margaret R. Kuklinski
Keyword(s):  
Young Adults ◽  
Cost Analysis ◽  
Intervention Programs ◽  
Evidence Based ◽  
Special Issue ◽  
Prevention And Intervention ◽  
Benefit Cost Analysis ◽  
Youth And Young Adults ◽  
Program Costs ◽  
Benefit Cost

Benefit-cost analysis (BCA) and related economic evaluation methods (cost analysis and cost-effectiveness analysis) have increasingly been applied to prevention and intervention programs for youth and young adults to assess their costs as well as the gains that may be anticipated from investing in these programs. This work reflects in part the growing prominence of evidence-based programs, policies, and practices as well as evidence-informed decision making. The papers included in this special issue represent a range of topics and issues, including the need for accurate and comprehensive assessment of program costs, high-quality BCAs of prevention and intervention programs, increasing recognition of the importance of monetizing noncognitive outcomes, and the role of BCA in pay for success financing arrangements. This introduction (a) describes the evidence-based context in which this work plays a role, (b) summarizes the practical and theoretical contributions of the papers, and (c) identifies the common themes.

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