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ABSTRACT
The cost-benefit principle says we should take those actions, and only those actions, whose benefits exceed their costs. For many, this principle's commonsensical ring makes it hard to imagine how anyone could disagree. Yet critics of cost-benefit analysis are both numerous and outspoken. Many of them argue that cost-benefit analysis is unacceptable as a matter of principle. I begin by noting why many find this argument largely unpersuasive. I then examine several conventions adopted by cost-benefit analysts that do appear to yield misleading prescriptions. Finally, I consider the possibility that the cost-benefit principle may itself suggest why we might not always want to employ cost-benefit analysis as the explicit rationale for our actions.
THE INCOMMENSURABILITY PROBLEM
THE cost-benefit principle says we should install a guardrail on a dangerous stretch of mountain road if the dollar cost of doing so is less than the implicit dollar value of the injuries, deaths, and property damage thus pre vented. Many critics respond that placing a dollar value on human life and suffering is morally illegitimate.1
The apparent implication is that we should install the guardrail no matter how much it costs or no matter how little it affects the risk of death and injury.
Given that we live in a world of scarcity, however, this position is difficult to defend. After all, money spent on a guardrail could be used to purchase other things we value, including things that enhance health and safety in other domains. Since we have only so much to spend, why should we install a guardrail if the same money spent on, say, better weather forecasting would prevent even more deaths and injuries?
More generally, critics object to the cost-benefit framework's use of a monetary metric to place the pros and cons of an action on a common footing. They complain, for example, that when a power plant pollutes the air, our gains from the cheap power thus obtained simply cannot be compared with the pristine view of the Grand Canyon we sacrifice.
Even the most ardent proponents of cost-benefit analysis concede that comparing disparate categories is extremely difficult in practice. But many critics insist that such comparisons cannot be made even in principle. In their view, the problem is not...