On Balance

The opinions expressed in "On Balance" posts are those of the individual authors and do not represent the views of the Society for Benefit-Cost Analysis or other organization. The Society is open to proposals for posts on opposing views.

 June 8, 2018 

By Kerry Krutilla 

It is challenging to explain benefit-cost analysis (BCA) to the general public or to members of other professions lacking sufficient knowledge of—and appreciation for—applied microeconomics. This post discusses the nature of this challenge, and raises the question: should the SBCA develop a more concerted communications strategy to better explain the fundamental concepts of the discipline and their practical application?

May 25, 2018

Review by James K. Hammitt

Pricing Lives: Guideposts for a Safer Society  (Princeton University Press, 2018) is a tour de force. It provides an entertaining, accessible account of the modern approach to valuing mortality risk. In non-technical prose, it covers the major aspects of the approach and how it should be applied to social decisions.  It shows how US regulatory agencies’ adoption of the ‘value per statistical life’ (VSL) to replace the ‘cost of death’ (i.e., human capital) approach has led to more-protective regulation and argues the VSL approach should be extended beyond regulation, to private-sector decisions about product design and to government sanctions for regulatory violations. It also finds that the values used outside the US are typically far too small; revising these upward would lead to more-protective and more-appropriate regulation in other countries.

 

Friday, May 11, 2018

By Dan Hudson

I am a Reliability Engineer and Risk Analyst for the U.S. Nuclear Regulatory Commission  (USNRC). The USNRC is the Federal agency responsible for licensing and regulating civilian uses of nuclear materials to ensure public health and safety are adequately protected. In addition to performing risk analyses of commercial nuclear power plants, I contribute to an ongoing effort to enhance the USNRC’s guidelines for performing benefit-cost analysis (BCA) to evaluate proposed regulatory actions.

Report from the SBCA President on the 2018 Annual Conference and The Plenary Presentation by Tomas Philipson

By Don Kenkel

It was my honor to preside over the 2018 Society for Benefit-Cost Analysis (SBCA) Conference  held March 14 – 16 at the George Washington University in Washington, DC. I am happy to report that by all indications it was another successful conference. We had 319 total registrants from 19 countries across 5 continents. U.S. participants represented 31 states and D.C. Half of all participants were affiliated with the U.S. federal government. The next largest group were academics (almost one-third); other attendees were from the private sector or from state and international government agencies. The three pre-conference professional development workshops were well attended and also drew a mix of participants from federal, state, and international agencies, as well as academics.

 April 26, 2018

By Henrik Andersson 

Despite the obvious attraction of Benefit-Cost Analysis (BCA) for policy evaluation, its implementation rate varies across countries and sectors.  Although the concept of BCA can be traced back to European thinkers, it was first applied in the United States. The evaluation by the U.S. Army Corps of Engineers’ of the U.S. Flood Control Act of 1936 is often regarded as the first use of BCA, but President Ronald Reagan’s Executive Order 12291 issued in 1981 provided considerable impetus to its use in the United States. Although perceptions of BCA as anti-regulatory caused some adversaries of BCA to argue for its elimination in policy making, BCA is now viewed also as a tool to promote regulation.

                                      

April 11, 2018

By W. Kip Viscusi

Proper application of the value of a statistical life (VSL) is essential to preventing the systematic undervaluation of life throughout the world. The values used by U.S. federal agencies to monetize prospective risk reductions formerly were too low but have increased over time and are now in a range consistent with the economic literature. However, the values agencies assign to fatalities in setting regulatory sanctions are extremely low—often a fraction of the current estimates for VSL estimates used in regulatory contexts. Further, other countries still monetize risk reductions using techniques that undervalue life relative to VSL estimates. 

March 7, 2018 

By Elisabeth Gilmore

As a teacher of benefit-cost analysis (BCA), the review by the current administration of the Clean Power Plan (CPP), a cornerstone of the Obama era climate change regulations, presents what we often call “teachable moments.” Specifically, how could the CPP produce benefits that exceed costs in the Obama administration and then costs that exceed benefits in the Trump administration? 

February 12, 2017

By Barry Friedman 

The Journal of Benefit Cost Analysis and the Policing Project at New York University School of Law teamed up to host a symposium on the use of benefit-cost analysis in a domain in which it is all too absent: policing. (Policing tends to have many definitions, but generally we mean it here to refer to any use of force or surveillance of the populace for reasons of achieving public safety.) The goal of this Symposium on Benefit-Cost Analysis of Policing Practices, and the conference that preceded it, is to interest more scholars in working in this vital field, and to identify and begin to tackle some of the methodological challenges the field faces.

 

December 8, 2017

By Stuart Guterman

The Congressional Budget Office (CBO) plays an important role in the federal legislative process. CBO’s score on a given bill—that is, its estimate of how it would affect the federal budget deficit—can determine whether Congress decides to go forward with the bill, modify it to get a more favorable estimate, or simply drop it. Given their importance, debates over CBO’s scores and the methods they use to produce them can be as controversial as the bills that are being considered. While this controversy can be politically motivated (with advocates on either side of an issue arguing for a score that is more favorable to their position), it also stems from limited understanding of CBO’s intended role in the process—and reflects the difficulty of conducting analyses of benefits and costs in the context of policy decisions.

October 26, 2017

By David L. Weimer

Rational action lies at the heart of neoclassical economics. Sovereign consumers make choices that maximize their utilities. By observing the tradeoffs implicit in actual choices, or eliciting tradeoffs for hypothetical choices, benefit-cost analysts impute willingness to pay for desirable policy impacts and willingness to accept undesirable ones. Yet, it appears that sometimes consumers seem to make mistakes. The field of behavioral economics seeks to provide a more realistic psychological model of consumers and other economic actors that helps us understand apparent deviations from neoclassical rationality. The 2017 Nobel Memorial Prize in Economic Sciences recognizes Richard H. Thaler’s pioneering contributions to behavioral economics.

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