Journal of Benefit-Cost Analysis
Journal Data
| Type | JOURNAL |
|---|---|
| Publisher | Cambridge University Press (US) |
| ISSN | 2152-2812 / 2194-5888 |
| Scopus | 21100889857 |
| Wikidata | Q56785996 |
| OpenAlex | S87209429 |
| MAG | 87209429 |
| Website | http://journals.cambridge.org/action/displayJournal?jid=BCA |
| Total publications | 350 |
| Coverage period | 2010 - 2026 |
| Country | GB |
| Language | EN |
| Indexing | Scopus indexed |
| Cited by | 455 |
| Impact factor | 0.769 |
| SJR | 0.879 (Q1) |
| SNIP | 1.117 |
| CiteScore | 3.1 |
| h-index | 7 |
| i10-index | 7 |
| Overton policy citations | 2 |
| Female authorship share | 22.9% |
This journal is dedicated to benefit-cost analysis, a quantitative method primarily used in economics and public policy. While policy studies can sometimes intersect with social issues, this journal's focus is on economic evaluation, making its connection to social anthropology very loose and occasional
Public Administration · Sociology and Political Science · Economics and Econometrics · Air Quality and Health Impacts · Climate Change Policy and Economics · Crime Patterns and Interventions · Decision-Making and Behavioral Economics · Diverse Scientific and Economic Studies · Diverse Specialized Academic Research · Early Childhood Education and Development
A Smart Investment
Malaria imposes societal costs beyond health, including substantial effects on education, yet economic evaluations often overlook these broader impacts. We conducted a cross-sectoral benefit–cost analysis (BCA) of malaria chemoprevention in school-aged children (SAC) across ten high-burden sub-Saharan African countries. Using recent trial data, we estimated impacts on malaria morbidity, mortality, school absenteeism and literacy. The intervention…
Employer Monopsony Power Does Not Reduce the Value of a Statistical Life
Although wage rates are lower when employers have monopsony power, we find that the value of a statistical life (VSL) is not reduced when labor markets are more concentrated. Because the estimated VSL is the product of the wage and the wage-risk tradeoff rate, a greater tradeoff rate in highly concentrated U.S. labor markets produces a larger VSL. The general relationship we find is robust with respect to different labor market data. Our results …
Valuing Children’s Statistical Lives
A longstanding puzzle for regulatory theory and practice has been the valuation of children’s lives, or more precisely, the valuation of mortality risks faced by children. There are data about parents’ willingness to pay (WTP) to reduce such risks, and that data might be used to estimate the value per statistical life (VSL) for children. The problem is that any such VSL comes from the parents’ valuations; it might not adequately capture the welfa…
What Oira Peer Reviewers Advised Regarding Notable Proposed Updates to Circular A-4
After Circular A-4 “Regulatory Analysis” had served various Presidential administrations for 20 years, in 2023 revisions were proposed and made to update and modernize regulatory guidance. At the behest of the Office of Information and Regulatory Affairs within the Office of Management and Budget, peer reviewers were nominated, and a peer review of proposed revisions was organized. Joseph Aldy, Cary Coglianese, Joseph Cordes, R. Scott Farrow, Ken…
Ensuring Durability and Objectivity in Regulatory Analysis
This article is based on feedback I submitted in response to the Office of Management and Budget’s (OMB’s) April 2023 request for comments on its draft revisions to Circular A-4, “Regulatory Analysis.” Much has changed since I submitted my comments in June 2023. OMB issued a final circular in November 2023 and subsequently rescinded it in February 2025. This article includes my comments as submitted, along with an introductory “prologue” and an “…
Comparing the Draft and Final Circular A-4
In April 2023, the Office of Management and Budget (OMB) published a draft of revisions to Circular A-4, the first changes proposed since its publication in 2003. Following a public comment period, OMB published the final revised Circular A-4 in November 2023. In this article, we provide a section-by-section comparison describing the similarities and differences between the April draft and the November revision of Circular A-4. Among other observ…
Advice on Guidance
Benefit–cost analysis is a protocol for assessing alternative public policies, primarily in terms of efficiency. An important complementary element can be estimating distributional impacts to show net benefits for groups of interest. The fundamental advantage is enabling decision-makers to see and weigh the importance of changes in efficiency and changes in distribution. Rigorous estimates of any distributional effects should incorporate credible…
Letter from Former SBCA Presidents and JBCA Editors to Oira Administrator
What Are the Effects of Early Childhood Exposure to Environmental Lead on Personality
In the first analysis purporting to causally link environmental pollution to personality, Schwaba and colleagues leveraged a natural experiment driven by the United States. They used the Clean Air Act to assess the impact of decreased atmospheric lead on the “big five” personality traits. Using data from an online personality test taken by more than 1.2 million U.S. residents, Schwaba et al. reported that people born after lead levels had peaked …
The Economic Benefit of Recycling
This article presents the first analysis in the literature that measures the economic benefit of drop-off recycling in terms of consumer surplus (CS). CS, a measure of the economic benefit that consumers receive from participating in economic activities, is estimated using a single-site travel cost method application based on survey data. Our findings indicate that the total CS residents of Monongalia County receive from drop-off recycling is $1,…
Regulatory Impact Analysis Guidelines
This article provides a brief Introduction to this special Journal of Benefit–Cost Analysis issue dedicated to comments filed by former presidents of the Society for Benefit Cost Analysis and editors of this journal on the Office of Management and Budget’s draft Circular A–4 on regulatory impact analysis guidelines
Specifying the Baseline in Benefit–Cost Analysis
This article includes my 4 June 2023, comments on the specification of the baseline in Regulatory Impact Analyses that were submitted in response to the Office of Management and Budget’s (OMB’s) request for comments on its draft revisions to Circular A4, “Regulatory Analysis.” This article also includes supplemental remarks on the Office of Information and Regulatory Affairs’ (OIRA’s) Revisions to Circular A4 in Response to Public Comments. In my…
The Coordination Value of Regulation
The current method used by the US Government to calculate benefits and costs does not accurately measure the monetary value of some regulations. The problem is that the method fails to recognize the possibility that individual valuations, reflecting judgments in a relatively isolated, uncoordinated situation, might be significantly different from individual valuations in a situation of coordination. For example, people might be willing to pay $X …
Lessons to Be Learned from Impact Assessments in Times of Crises
This study examines coronavirus disease 2019-related law-drafting using Finnish data. The impact assessments of 17 government bills are analyzed using content analysis. These 17 government bills have been selected based on their societal significance and are related to restrictions on fundamental rights under the Finnish constitution. The purpose of this study is to examine how ex ante impact assessments and the planning of forthcoming implementa…
Economic Efficiency-Based Benefit–Cost Analysis
This paper is based on public comments I submitted in 2023 to the Office of Management and Budget (OMB) on the draft revisions to its Circular A-4 guidance on “Regulatory Analysis.” It includes my comments as submitted and a “prologue” and “epilogue” written after OMB published the 2023 version of Circular A-4. The major issues discussed in my and the other public comments on the 2023 revisions have been long been, and will remain, central to the…
What’s Your Problem?”
This article is part of a larger series that is dedicated to the memory of Dr. Jerry Ellig, with whom I had the pleasure of working on multiple occasions. It explores the concept of regulatory subsidiarity, which involves pushing regulatory power down from centralized governments to state, local, tribal, and other governments. It explains how this approach both promotes policy tailoring and facilitates regulatory experimentation, allowing policy …
Be Brief, Be Consistent, Be Neutral
Ex ante, my primary concerns were about implementation across the wide expanse of federal applications, supporting the supplemental use of distributional weighting, trying to find a supportable middle ground on discounting using the expected value of bounds and a more consistent scope of analysis. Ex post, I felt heard if not followed, perhaps not uncommon for reviewers
Revision of Circular A-4 Is Warranted to Reflect the Advances in Scholarship Relevant to Regulatory Analysis, but Some Caveats Are in Order
This article is based on comments that I submitted to the Office of Management and Budget (OMB) as one of eight peer reviewers of OMB’s 2023 draft revisions to Circular A-4, “Regulatory Analysis.” Since that time, OMB issued a final version of Circular A-4, which was then rescinded in January 2025. This article summarizes some of my main comments on the 2023 draft version that I submitted as a peer reviewer, along with a “prologue” that summarize…
Application of an Epi-Econ-Model to Analyze Covid-19 Lockdown Policies in the Netherlands
Epidemiological and economic (Epi-econ) models account for endogenous interactions between the epidemic and the economy. We explore the applicability of an Epi-econ model to isolate the effects of lockdown policies during coronavirus disease 2019 in the Netherlands. To this aim, we recalibrate the seminal Epi-econ model of Eichenbaum and colleagues with updated parameters specific to the Dutch context. We find that the model performs poorly in re…
Don’t TREAD on Anyone? The Political Economy and Effectiveness of Tire Pressure Monitoring Systems
In response to tire failures and vehicle rollover accidents, most notably those experienced by Ford Explorers with Firestone Tires, the 106th Congress and President Clinton enacted the Transportation Recall Enhancement, Accountability, and Documentation (TREAD) Act of 2000. Section 13 of the TREAD Act requires vehicle manufacturers to install tire pressure monitoring systems (TPMS) that alert drivers when a tire is significantly under-inflated. T…
Valuing Heat-Related Mortality Risks
Heat-related mortality risks are a substantial component of the looming costs of climate change in the United States and globally. This article presents the results from a risk-risk survey to test whether U.S. respondents place a valuation premium on mortality risks from heat relative to cancer and transportation risks. The questionnaire exploits exogenous shocks to temperatures during a heat wave and randomized elements to further test whether p…
The Military VSL
Our research reviews theory and evidence in the economics literature to provide a standard value of a statistical life (VSL) applicable to the Department of Defense (DOD). We follow Viscusi (Best estimate selection bias in the value of a statistical life, Journal of Benefit-Cost Analysis , 9(2), 205–246, 2018a) by conducting a meta-analysis of 1,025 VSL estimates from 68 different labor market studies and find a best-set average VSL estimate of $…
Ex-Ante Analysis of the Costs and Benefits of Legalizing Cannabis Markets in the Czech Republic
Cannabis is the most commonly used illicit drug worldwide. In countries with repressive drug policies, the costs of its prohibition plausibly outweigh the benefits. We conduct a cost–benefit analysis of cannabis legalization and regulation in the Czech Republic, taking into consideration alternative scenarios designed using parameters from the known effects of cannabis legalization in selected U.S. states, Canada, and Uruguay. Our analysis focuse…
Cost–Benefit Analysis of Bus Fare Subsidies under Financial Constraints
We develop a model to perform a cost–benefit analysis of bus fare subsidies under financial constraints that preclude the purchase of additional buses. Our model considers users’ costs in the provision of bus services and the lack of road pricing to internalize urban transport externalities in a context where financial constraints severely limit the institutional ability to plan and design the bus system. Because of financial constraints, the bus…
Reorganization of Economists at the FCC
The Federal Communications Commission (FCC) established a separate Office of Economics and Analytics (OEA) in December 2018 to promote more consistent quality and use of economic analysis in its decisions. The agency’s reorganization concentrated economists who previously were dispersed across different offices and bureaus. This paper describes key organizational choices that were made in the period preceding and soon after the establishment of O…
Income Elasticities and Global Values of a Statistical Life
Countries throughout the world use estimates of the value of a statistical life (VSL) to monetize fatality risks in benefit-cost analyses. However, the vast majority of countries lack reliable revealed preference or stated preference estimates of the VSL. This article proposes that the best way to calculate a population-average VSL for countries with insufficient or unreliable data is to transfer a base VSL from the United States calculated using…
The Income Elasticity of the Value per Statistical Life
The income elasticity of the value per statistical life (VSL) is an important parameter for policy analysis. Mortality risk reductions often dominate the quantified benefits of environmental and other policies, and estimates of their value are frequently transferred across countries with significantly different income levels. U.S. regulatory agencies typically assume that a 1.0 percent change in real income over time will lead to a 0.4 to 0.6 per…
Behavioral Economics and the Conduct of Benefit-Cost Analysis
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…
Valuing Mortality Risk Reductions in Global Benefit-Cost Analysis
The estimates used to value mortality risk reductions are a major determinant of the benefits of many public health and environmental policies. These estimates (typically expressed as the value per statistical life, VSL) describe the willingness of those affected by a policy to exchange their own income for the risk reductions they experience. While these values are relatively well studied in high-income countries, less is known about the values …
The Good, the Bad, and the Ugly
This paper discusses the ways in which behavioral economics challenges the premises of conventional welfare economics. It proposes revised premises that survive those challenges and sets forth a welfare framework derived from that foundation. It argues that the proposed framework is practical, in the sense that it lends itself to applications, as well as unifying, in the sense that it subsumes other approaches and illuminates the relationships be…
The Economic Value of Social and Emotional Learning
There is a growing body of research emphasizing the advantages of teaching students social and emotional (SE) skills in school. Here we examine the economic value of these skills within a benefit-cost analysis (BCA) framework. Our examination has three parts. First, we describe how the current method of BCA must be expanded to adequately evaluate SE skills, and we identify important decisions analysts must make. Second, we review the evidence on …
The Benefits and Costs of Using Social Distancing to Flatten the Curve for Covid-19
We examine the net benefits of social distancing to slow the spread of COVID-19 in USA. Social distancing saves lives but imposes large costs on society due to reduced economic activity. We use epidemiological and economic forecasting to perform a rapid benefit–cost analysis of controlling the COVID-19 outbreak. Assuming that social distancing measures can substantially reduce contacts among individuals, we find net benefits of about $5.2 trillio…
Valuing Children’s Fatality Risk Reductions
In benefit-cost analysis, fatality risk reductions are usually valued based on estimates of adults’ willingness to pay for changes in their own risks, regardless of whether the risk reduction accrues to adults or children. This approach reflects the relatively large number of valuation studies that address adults; however, the literature on children is growing. We review these studies, focusing on those that estimate values for both adults and ch…
Public Policy Induced Changes in Employment
We explore the economic welfare effects of direct and indirect government-induced changes in employment under varying market conditions. We begin with a discussion of those policy-induced employment changes that seamlessly reshuffle workers among jobs in an efficient (i.e., full-employment, full-information) economy; generally such changes create few, if any, net changes in economic welfare not captured in changes in wage bills. We then turn to t…
Accounting for Timing when Assessing Health-Related Policies
The primary focus of this paper is to offer guidance on the analysis of time streams of effects that a project may have so that they can be discounted appropriately. This requires a framework that identifies the common parameters that need to be assessed, whether conducting cost-effectiveness or benefit-cost analysis. The quantification and conversion of the time streams of different effects into their equivalent health, health care cost or consu…
Retrospective and Prospective Benefit-Cost Analyses of U.S. Anti-Smoking Policies
Regulatory policies designed to improve societal welfare by “nudging” consumers to make better choices are increasingly popular. The application of benefit-cost analysis (BCA) to this sort of regulation confronts difficult theoretical and applied issues. In this analysis we contribute a worked example of behavioral BCA of U.S. anti-smoking policies. Our conceptual framework extends the standard market-based approach to BCA to allow for individual…
Promoting Equity through Equitable Risk Tradeoffs
The impact and economic merits of President Biden’s Executive Order 13985 on equity depend on how the executive order is implemented. While policy discussion to date has focused on equitable outcomes, we propose framing risk equity policies in terms of equitable risk tradeoff rates based on six policy guidelines. The starting point for ex ante evaluation of equity for mortality risk policies should be the symmetric application of the value of a s…
The Value of Statistical Life
The value of statistical life (VSL) is arguably the most important number in benefit–cost analyses of environmental, health, and transportation policies. However, agencies have used a wide range of VSL values. One reason may be the embarrassment of riches when it comes to VSL studies. While meta-analysis is a standard way to synthesize information across studies, we now have multiple competing meta-analyses and reviews. Thus, to analysts, picking…
Behavioral Welfare Economics
A growing body of normative work explores whether and how deference to people’s choices might be reconciled with behavioral findings about human error. This work has strong implications for economic analysis of law, cost–benefit analysis, and regulatory policy. In light of behavioral findings, regulators should adopt a working presumption in favor of respect for people’s self-regarding choices, but only if those choices are adequately informed an…
Best Estimate Selection Bias in the Value of a Statistical Life
Selection of the best estimates of economic parameters frequently relies on the “best estimates” or a meta-analysis of the “best set” of parameter estimates from the literature. Using an all-set dataset consisting of all reported estimates of the value of a statistical life (VSL) as well as a best-set sample of the best estimates from these studies, this article estimates statistically significant publication selection biases in each case. Biases…
Bad Air Days
Air pollution makes us feel bad when we think about it – but do bad air days really affect our subjective well-being (SWB) when we are not thinking about them? And if so, do they affect the range of possible measures of SWB in similar ways? Using data from over 165,000 individuals in the UK, we model evaluative, experiential and eudemonic SWB as a function of demographic and local area characteristics including the background concentration of par…
Valuing Regulations Affecting Addictive or Habitual Goods
The analysis of regulations affecting addictive or habitual goods has drawn considerable controversy. Some studies have suggested that such regulations have only small welfare benefits, as consumers value these goods despite health benefits from quitting, while other studies suggest that information or behavioral problems make existing consumption decisions a poor guide to welfare evaluation. We examine potential utility offsets to health benefit…
Integrated assessment of climate change
This paper reviews applications of benefit-cost analysis (BCA) in climate policy assessment at the US national and global scales. Two different but related major application types are addressed. First there are global-scale analyses that focus on calculating optimal global carbon emissions trajectories and carbon prices that maximize global welfare. The second application is the use of the same tools to compute the social cost of carbon (SCC) for…
Challenges in applying the paradigm of welfare economics to climate change
This paper discusses the challenges inherent in developing benefit-cost analysis (BCAs) of climate change. Challenges are explored from three perspectives: meeting the foundational premises for conducting BCA within the framework of welfare economics, methodological considerations that affect the application of the tools and techniques of BCA, and practical limitations that arise out of resource constraints and the nature of the question, project…
Toward Standardization of Benefit-Cost Analysis of Early Childhood Interventions
A growing body of benefit-cost analyses (BCAs) of early childhood programs has been prompted by the increased demand for results-based accountability when allocating public and private sector resources. While the BCAs of early childhood programs serve to make such investments more compelling, there are limitations in the current state of the art, including a lack of standardization in the BCA methods used, from discount rates to shadow prices. Th…
Incidence and Costs of Personal and Property Crimes in the USA, 2017
Total cost estimates for crime in the USA are both out-of-date and incomplete. We estimated incidence and costs of personal crimes (both violent and non-violent) and property crimes in 2017. Incidence came from national arrest data, multi-state estimates of police-reported crimes per arrest, national victimization and road crash surveys, and police underreporting studies. We updated and expanded upon published unit costs. Estimated crime costs to…
Accounting for the Distribution of Benefits and Costs in Benefit–Cost Analysis
Benefit–cost analysis (BCA) is often viewed as measuring the efficiency of a policy independent of the distribution of its consequences. The role of distributional effects on policy choice is disputed; either: ( a ) the policy that maximizes net benefits should be selected and distributional concerns should be addressed through other measures, such as tax and transfer programs or ( b ) BCA should be supplemented with distributional analysis and d…
Publication Selection Biases in Stated Preference Estimates of the Value of a Statistical Life
This article presents the first meta-analysis documenting the extent of publication selection biases in stated preference estimates of the value of a statistical life (VSL). Stated preference studies fail to overcome the publication biases that affect much of the VSL literature. Such biases account for approximately 90% of the mean value of published VSL estimates in this subset of the literature. The bias is greatest for the largest estimates, p…
Conducting Benefit-Cost Analysis in Low- and Middle-Income Countries
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 assum…
Applying Benefit-Cost Analysis to Air Pollution Control in the Indian Power Sector
Air pollution is a persistent and well-established public health problem in India: emissions from coal-fired power plants have been associated with over 80,000 premature deaths in 2015. Premature deaths could rise by four to five times this number by 2050 without additional pollution controls. We site a model 500 MW coal-fired electricity generating unit at eight locations in India and examine the benefits and costs of retrofitting the plant with…
An Assessment of Important Issues Concerning the Application of Benefit-Cost Analysis to Social Policy
Benefit-cost analysis (BCA) provides a framework for systematically assessing the efficiency of public policies. Increasingly, BCA is being applied to social policies, ranging from preschool interventions to prison reentry programs. These applications offer great potential for helping to identify policies that offer the best returns on public investments aimed at helping the disadvantaged or otherwise improving social life. However, applying BCA …
Valuing Foreign Lives and Settlements
Cost-benefit analysis in the United States for policy and legal purposes traditionally has been highly parochial, excluding not just losses or gains of welfare to non-U.S. residents from a given policy but also excluding any losses or gains in welfare U.S. residents would experience as a result of impacts to foreigners and foreign settlements. In the climate change context, this approach has meant that cost-benefit analyses for the costs of unmit…
Getting Real
It is often useful to convert nominal values to real values for applied welfare analysis. This article discusses the use of price deflators, and several published economic indices that may be useful for this process
A Synthesis of Random Assignment Benefit-Cost Studies of Welfare-to-Work Programs
Over the past two decades, federal and state policymakers have dramatically reshaped the nation’s system of cash welfare assistance for low-income families. During this period, there has been considerable variation from state to state in approaches to welfare reform, which are often collectively referred to as “welfare-to-work programs.” This article synthesizes an extraordinary body of evidence: results from 28 benefit-cost studies of welfare-to…
Introduction to Inaugural Issue
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Designing Smarter Regulation with Improved Benefit-Cost Analysis
Benefit-cost analysis is required for many regulatory decisions in the United States and in other countries. In this paper, I examine a standard textbook model that is used in benefit-cost analysis as it is actually applied to environmental policy and other areas of regulation. My primary objective is to suggest how including some key factors in the analysis could promote the development of smarter regulation.I begin by presenting a standard econ…
Benefit-Cost Analysis
Benefit-cost (B/C) analysis must take into account the distributional effects from a policy or program change. To highlight this, we focus on the theory of production quota buyouts within a B/C framework. As an empirical application, we provide evidence on the distributional effects of the U.S. government buyout of the peanut program in 2002, where production quotas were key ingredients. Two approaches to producer compensation under the buyout ar…
Incorporating Distributional Issues into Benefit Cost Analysis
This article reviews the rationale for and various approaches used by economists to incorporate distributional consequences of projects or policies into benefit-cost analyses. Approaches reviewed include distributional weights and metrics based on the Lorenz curve. Analysis of distributional issues in partial equilibrium and general equilibrium settings are briefly reviewed. We present an empirical demonstration of how the contingent valuation me…
A Benefit-Cost Analysis of Private and Semi-Private Hospital Rooms
The design of new hospital inpatient rooms is moving towards private (single occupancy) rooms. These rooms are generally preferred by patients and they may improve patient care, but they are more expensive to build and to staff than semi-private rooms. The question of their societal worth is important because hospitals are expensive, long-term investments and, once built, are prohibitively expensive to change. This paper presents a benefit-cost a…
Benefit-Cost Analysis for Drinking Water Standards
The federal Safe Drinking Water Act (SDWA), as amended in 1996, enables benefit-cost analysis (BCA) to be used in setting federal drinking water standards, known as MCLs. While BCAs are typically conceived of as a tool to inform efficiency considerations by helping to identify MCL options that maximize net social benefits, in this paper we also illustrate how important equity and affordability considerations can be brought to light by suitably ap…
The Income Elasticity of the Value per Statistical Life
The income elasticity of the value per statistical life (VSL) is an important parameter for policy analysis. Mortality risk reductions often dominate the quantified benefits of environmental and other policies, and estimates of their value are frequently transferred across countries with significantly different income levels. U.S. regulatory agencies typically assume that a 1.0 percent change in real income over time will lead to a 0.4 to 0.6 per…
The BCA of HSR
This paper deals with public investment in High-Speed Rail (HSR) infrastructure and tries to understand the economic rationale for allocating public money to the construction of new HSR lines. The examination of data on costs and demand shows that the case for investing in HSR requires several conditions to be met: an ex ante high volume of traffic in the corridor where the new lines are built, significant time savings, high average willingness o…
Cost-Benefit Analysis of the Community Patent
For more than 40 years, governments and professional associations have acted, voted or lobbied against the implementation of the Community Patent (COMPAT, officially called the EU Patent). The econometric results and simulations presented in this paper suggest that, thanks to its attractiveness in terms of market size and a sound renewal fee structure, the COMPAT would drastically reduce the relative patenting costs for applicants while generatin…
Appropriate Discounting for Benefit-Cost Analysis
In order to be sensible about what discount rate to use one must be clear about its purpose. We suggest that its purpose is to help select those projects that will contribute more net benefits than some other discount rate. This approach, which is after all the foundation for benefit-cost analysis, helps to reconcile different suggested procedures for determining the discount rate. We suggest that the social opportunity cost of capital (SOC) is s…
The Treatment of Uncertainty in EPA’s Analysis of Air Pollution Rules
An understanding of the uncertainty in benefit and cost estimates is a critical part of a benefit–cost analysis. Without a quantitative treatment of uncertainty, it is difficult to know how much confidence to place in the benefit–cost estimates associated with regulatory analysis. In 2002, an NRC report recommended that EPA move toward conducting probabilistic, multiple-source uncertainty analyses in its RIAs with the specification of probability…
Characterizing the Amount and Speed of Discounting Procedures
This paper introduces the concepts of amount and speed of a discounting procedure in order to generate well-characterized families of procedures for use in social project evaluation. Exponential discounting sequesters the concepts of amount and speed into a single parameter that needs to be disaggregated in order to characterize nonconstant rate procedures. The inverse of the present value of a unit stream of benefits provides a natural measure o…
Private Valuation of a Public Good in Three Auction Mechanisms
We evaluate the impact of three auction mechanisms—the Becker-DeGroot-Marschak (BDM) mechanism, the second-price auction (SPA), and the random nth-price auction (NPA)—in the measurement of private willingness-to-pay and willingness-to-accept for a pure public good. Our results show that the endowment effect is lower with the BDM mechanism. In this market mechanism, the effect disappears after a few repetitions. Yet, on a logarithmic scale, the ra…
Labor Expenditures and Benefit-Cost Accounting in Times of Unemployment
We summarize procedures for assessing the benefits and costs of using labor inputs in public projects. Examples are provided to illustrate how information on labor inputs can be analyzed and presented such that, should the analyst choose, labor services generate elements of both benefit and cost in times of high unemployment; however, this is not generally correct in times of full employment. Our analysis is consistent with the overall goal of id…
Behavioral Economics and the Conduct of Benefit-Cost Analysis
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…
Calculating the Social Opportunity Cost Discount Rate
Two comments in this issue of the Journal address our recent article in Volume 2, Issue 2. The fundamental issue with both comments is that they confuse the financial rate of return with the opportunity cost rate of return and therefore advocate for an inappropriate basis on which to calculate the government discount rate. That is, both comments confuse the financial cost of funds, or the borrowing rate, with the economic opportunity cost of fund…
Towards Principles and Standards for the Benefit-Cost Analysis of Safety
Benefit-cost analysis (BCA) is frequently applied to decisions involving public safety which requires analyzing risk and assessing options to manage risks. Principles and standards may assist analysts, decision-makers, and the public in developing and interpreting such BCAs. Principles and standards at best represent commonly held views among a community of practice. Such views are continually evolving with advances in the field. This paper prese…
The Combination of Lab and Field Experiments for Benefit-Cost Analysis
This article explores the combination of laboratory and field experiments in defining a welfare framework and the impact of different regulatory tools on consumer behaviors. First, an overview of strengths and weaknesses raised by the experimental literature show that, for food consumption, lab and field experiments may be complementary to each other. The lab experiment elicits willingness to pay useful for determining per-unit damages based on w…
Risk Heterogeneity and the Value of Reducing Fatal Risks
The benefits associated with mortality risk reductions are a critical input for the benefit-cost analysis of economically significant federal regulations that affect health and safety. The dominant method of estimating the benefits of reducing mortality risks relies on labor markets to estimate the tradeoffs between workers’ wages and occupational risk. The past literature considers all labor market risks to be equivalent, failing to recognize th…
Valuing the Benefit for Cancer Patients of Receiving Blood Transfusions at Home
In the field of health care management, contingent valuation surveys (CV) are used in cost benefit analyses (CBA) to elicit patients’ monetary valuation of program benefits. We considered the empirical situation of blood transfusions (BT) in cancer patients. Before planning such a CBA, we had to make sure that the CV approach could be used in a particularly critical clinical situation to estimate the marginal benefit of changing from hospital BT …
Indirect Effects in Cost-Benefit Analysis
The debate about the effectiveness of investments in public infrastructure initiated by Aschauer suggests that there may be substantial discrepancies between the results of conventional cost-benefit analysis and the ultimate effects of such investments on welfare. This paper takes a closer look at this issue by investigating the existence of secondary or indirect effects under conditions of monopolistic competition. We find that such effects will…