On Balance

On Balance: Review of "Behavioral Economics for Cost-Benefit Analysis" by David L. Weimer

Review by Donald S. Kenkel

Behavioral economics finds that under predictable circumstances people sometimes fail to act rationally and in their own best self-interest. In these circumstances, public policies can nudge people towards better choices. For example, people can be nudged to save more, smoke less, lose weight, and buy more energy efficient vehicles and appliances. In addition to providing new insights about how to design public policies (see Chetty 2015), behavioral economics also has implications for how we conduct benefit-cost analysis (BCA). After all, BCA is built on the foundation of neoclassical welfare economics and rationality. This topic has been explored over the years in the Journal of Benefit-Cost Analysis, notably in a March 2016 Special Issue on [Ir]rationality, Happiness, and Benefit-Cost Analysis

In his new book, "Behavioral Economics for Cost-Benefit Analysis" (Cambridge University Press, 2017), David L. Weimer (University of Wisconsin – Madison) pulls together the insights of behavioral economics to provide “useful guidance for those actually doing BCA.” Because behavioral economics has wide-ranging implications for almost any policy, members of the Society for Benefit-Cost Analysis will very likely find Weimer’s book of interest. 

On Balance: Consumers Guide to Regulatory Impact Analysis

August 14, 2017

The SBCA is introducing a new feature, "On Balance: Perspectives from the Field." Short informative, practical, and timely articles relevant to BCA, written by prominent experts in the field, will be posted regularly here and on our website. The first of this series is below. Stay tuned for more details and articles!

New JBCA article offers practical guide for interpreting regulatory impact analysis

by Susan E. Dudley

In the United States and elsewhere, government agencies are required to conduct regulatory impact analyses (RIAs) to weigh the benefits of regulatory proposals against their costs. These RIAs are invaluable tools for informing decision makers about the effects of regulatory choices; even regulatory decisions that are ultimately made on political, legal, ethical, or other grounds will benefit from the structured evaluation of tradeoffs and alternatives that a good RIA provides.

However, dense or complex RIAs can be challenging for policy officials and interested parties to comprehend and interpret, making it difficult to evaluate the evidence presented and to understand the likely consequences of alternative policy choices.

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