Updates to "Cost-Benefit Analysis at the Crossroads" symposium (LPE Project)
October 11, 2021
The Law and Political Economy (LPE) Project's "Cost-Benefit Analysis at the Crossroads" symposium, which I blogged about earlier, continues, adding two new contributions.
First, in "Equity in Regulatory Cost-Benefit Analysis," Zachary Liscow (Yale Law School) considers three ways to include distributional effects into CBA—incorporate mesaures of distributional impact in CBA estimates, "cleanse" cost and benefitm measures to account for distributional impacts, and use differential weights in CBA—and acknowledges that, at the end of the day, this is a political decision:
Which of these distributional strategies to adopt ultimately boils down to a political choice. Imposing distributional weights might be controversial politically, not to mention legally. It might be that the public finds explicit weighting quite problematic. We have no direct evidence on this, but the US tends to have strong legal and social norms of formal equality. And explicitly weighting the benefits conferred to some individuals more than others could violate those norms. On the other hand, it could be that the public would pay almost no attention to such procedures of government bureaucrats—or that they would like it if they did pay attention. Ultimately, this choice brings up deep questions of democratic theory: How, if at all, does it matter normatively what the public thinks? Or, alternatively, is this just a question of political feasibility, which depends on the difficult-to-predict reception of a new policy?
Continuing on this theme is "Let's Politicize Cost-Benefit Analysis" by Elizabeth Popp Berman (University of Michigan), author of the forthcoming book Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy (a book I'm certain will be a topic of discussion on this blog upon its release in March 2022). Berman reviews the different ways the two major American political parties have used (and abused) CBA for their own ends, but instead of arguing for CBA as an idealized and "objective" evaluative standard, she sees it for what it is,
a convenient fiction that exists to coordinate action and facilitate decision-making. Our methods for estimating, say, the Value of a Statistical Life are arbitrary. They put a patina of rationality on what is essentially a moral choice. We accept them because they give us a consistent way to produce a number that roughly accords with our sense of what is reasonable—but a dozen other numbers could be similarly justified. Our actual estimates of costs and benefits are often lucky to be correct within an order of magnitude. And minor changes in assumptions—for example, about the appropriate discount rate—can lead to dramatically different assessments of the benefits of a project or decision. [Emphasis added.]
She concludes that, in practice, CBA should (continue to) serve the goals of those using it, and technical improvements to it should be made for the same reasons:
The primary goal of CBA reform should not be to produce the best, most morally defensible analysis. It should be to introduce technical changes that tilt the playing field toward outcomes we think are good. And in areas where CBA seems likely to be irredeemably biased against action, our aim should be to push for alternative forms of evaluation.
Of course, this would negate any independent evidentiary value that CBA may have, but that is Berman's point—it shouldn't be regarded in that way at all. (Again, I eagerly await the publication of her book for more thinking along these lines.)
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