Introduction to Benefit–Cost Volume

• Date: 16 October 2007
• Published date: 16 October 2007
• Pages: xv-xvii
• DOI: https://doi.org/10.1016/S0193-5895(07)23017-9
• Author: Richard O. Zerbe

INTRODUCTION TO

BENEFIT–COST VOLUME

In the earlier part of the twentieth century, cost–benefit (CBA) or benefit–

cost analysis was used as a vehicle by Congress to curtail its wasteful

spending, by using the Army Corp of Engineers to examine Congressional

projects using CBA. Theodore Porter here examines the rise of the use of

CBA in historical context and finds that the Corp was highly successful in

reducing wasteful spending. Regardless of the present day effectiveness of

the Corps, CBA currently provides valuable service. To appreciate this one

need look no further than the effect Arnold Harberger’s work and students

have had in less developed countries, and at the several hundred useful

evaluations of social programs produced over the last several years. Finally,

one can look, criticisms of Ackerman and Heinzerling notwithstanding, at

many of the analyses of environmental programs.

Nevertheless, problems remain. Robert Haveman shows how the effect of

the absence of well-accepted and enforced benefit–cost standards leads to

spurious analyses that result in public waste. Haveman examines the

benefit–cost analysis performed by the City of Chicago for the FAA. The

Chicago analysis results in positive net benefits of about 2.2 billion;

Haveman’s analysis indicates a net social loss of around 4 billion. There are

as yet no uniform standards for CBA analysis even within the Federal

Government. Daniel Cole notes the limited success of OMB and EPA in

improving methodological consistency. He suggests that an independent

group of economists, policy analysts and legal scholars, under the auspices

of the National Science Foundation, take on the job of establishing revisable

‘‘best practice’’ standards. Somewhat similarly, Victor Flatt argues that the

courts can recognize the proper standard that governs what an agency can

do. The courts can then set a standard for BCA that should be used when an

agency is engaged in its application. Such an approach is consistent with the

non-delegation doctrine, which suggests agencies should not be engaging in

political manipulation in performing such analyses; political considerations

are for Congress. Taken together, then, these two articles spell out an

approach to increasing rigor and consistency. The article by Carol Bray,

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