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5 Regulation 33 (1981)
Cost-Benefit Analysis: An Ethical Critique

handle is hein.journals/rcatorbg5 and id is 35 raw text is: Cost-Benefit Analysis An Ethical Critique Steven Kelman A T THE BROADEST and vaguest level, cost- benefit analysis may be regarded simply as systematic thinking about decision- making. Who can oppose, economists some- times ask, efforts to think in a systematic way about the consequences of different courses of action? The alternative, it would appear, is un- examined decision-making. But defining cost- benefit analysis so simply leaves it with few implications for actual regulatory decision- making. Presumably, therefore, those who urge regulators to make greater use of the technique have a more extensive prescription in mind. I assume here that their prescription includes the following views: (1) There exists a strong presumption that an act should not be undertaken unless its bene- fits outweigh its costs. (2) In order to determine whether benefits outweigh costs, it is desirable to attempt to ex- press all benefits and costs in a common scale or denominator, so that they can be compared with each other, even when some benefits and costs are not traded on markets and hence have no established dollar values. (3) Getting decision-makers to make more use of cost-benefit techniques is important enough to warrant both the expense required to gather the data for improved cost-benefit esti- Steven Kelman, on leave from the Kennedy School of Government at Harvard, is associate director for management planning, Federal Trade Commis- sion. A version of this article was delivered at a Conservation Foundation - Illinois Institute of Natural Resources Conference. The views are the author's. mation and the political efforts needed to give the activity higher priority compared to other activities, also valuable in and of themselves. My focus is on cost-benefit analysis as ap- plied to environmental, safety, and health regu- lation. In that context, I examine each of the above propositions from the perspective of for- mal ethical theory, that is, the study of what actions it is morally right to undertake. My con- clusions are: (1) In areas of environmental, safety, and health regulation, there may be many instances where a certain decision might be right even though its benefits do not outweigh its costs. (2) There are good reasons to oppose ef- forts to put dollar values on non-marketed benefits and costs. (3) Given the relative frequency of occa- sions in the areas of environmental, safety, and health regulation where one would not wish to use a benefits-outweigh-costs test as a decision rule, and given the reasons to oppose the mone- tizing of non-marketed benefits or costs that is a prerequisite for cost-benefit analysis, it is not justifiable to devote major resources to the gen- eration of data for cost-benefit calculations or to undertake efforts to spread the gospel of cost-benefit analysis further. I How do we decide whether a given action is morally right or wrong and hence, assuming the desire to act morally, why it should be under- taken or refrained from? Like the Moliere char- REGULATION, JANUARY/FEBRUARY 1981 33

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