Why Benefit-Cost Analysis Is Widely Disregarded and What to Do About It

Abstract

Three prominent shortcomings of benefit-cost analysis as currently practiced are (1) it does not identify the population segments whom the proposed measure benefits or harms, (2) it attempts to reduce all comparisons to a single dimension, generally dollars and cents, and (3) it conceals the degree of inaccuracy or uncertainty in its estimates. These defects impair the usefulness of benefit-cost studies, divert effort and attention away from the most useful information benefit-cost studies could convey, and risk misleading many readers. These faults can be corrected or avoided without much difficulty and to great benefit.