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Cost-benefit Analysis, Legal, Economic and Philosophical Perspectives
M.D. Adler and E.A. Posner
University of Chicago
Chicago, IL
2001
351 + v pp. - includes index
The chapters in this book were first published in a special issue of The Journal of Legal Studies (Vol. XXIX No 2. Part 2, June 2000) and were originally given at a conference held in the University of Chicago Law School in September 1999. The authors include economists, lawyers and public administration/ government specialists.
Two of the chapters can be especially recommended to readers interested in cost-benefit analysis (CBA): the "Overview" by Richard Posner, and a "post-- conference" comment by Gary Becker. These are, respectively, the final and penultimate chapters of the book. Becker makes an absolutely central methodological point. He distinguishes between.
* the social planner model; and
* the interest group competition model.
Essentially, CBA is usually seen as an input into a "rational choice" approach to decision making. The textbooks tell us that the sequence of activities in policy decision-making is to identify the objectives, to enumerate the alternative means of achieving the objectives, to undertake CBA analysis, before selecting a course of action based on the most efficient means of achieving the objectives. This is the "social planner model". However, Becker suggests that the "interest group competition" model might be more realistic:
In this approach, the political power of different groups determines which regulations, taxes, and subsidies are adopted. Since redistributions of income induced by powerful interest groups are not likely to be socially 'optimal' in the sense used in the social planner model, cost-benefit analysis may seem to be irrelevant. But an analysis that weights equally benefits and costs to all individuals is still useful in explaining actual political programs (p. 315).
This type of disaggregated approach, recognising conflicts of interest, and perhaps treating CBA as an ex postanalytical activity, rather than as an ex ante decision-making...