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29 J. Legal Stud. 913 (2000)
Why Is Cost-Benefit Analysis So Controversial

handle is hein.journals/legstud29 and id is 925 raw text is: WHY IS COST-BENEFIT ANALYSIS
The cost-benefit principle says we should take those actions, and only those ac-
tions, whose benefits exceed their costs. For many, this principle's commonsensical
ring makes it hard to imagine how anyone could disagree. Yet critics of cost-benefit
analysis are both numerous and outspoken. Many of them argue that cost-benefit
analysis is unacceptable as a matter of principle. I begin by noting why many find
this argument largely unpersuasive. I then examine several conventions adopted by
cost-benefit analysts that do appear to yield misleading prescriptions. Finally, I con-
sider the possibility that the cost-benefit principle may itself suggest why we might
not always want to employ cost-benefit analysis as the explicit rationale for our
THE cost-benefit principle says we should install a guardrail on a danger-
ous stretch of mountain road if the dollar cost of doing so is less than the
implicit dollar value of the injuries, deaths, and property damage thus pre-
vented. Many critics respond that placing a dollar value on human life and
suffering is morally illegitimate.'
The apparent implication is that we should install the guardrail no matter
how much it costs or no matter how little it affects the risk of death and
Given that we live in a world of scarcity, however, this position is diffi-
cult to defend. After all, money spent on a guardrail could be used to pur-
chase other things we value, including things that enhance health and safety
in other domains. Since we have only so much to spend, why should we
install a guardrail if the same money spent on, say, better weather forecast-
ing would prevent even more deaths and injuries?
* Goldwin Smith Professor of Economics, Cornell University. This paper was prepared
for presentation at the University of Chicago Law School conference Cost-Benefit Analysis,
September 17-18, 1999. I thank William Schulze for helpful discussions.
For an overview, see Robert Kuttner, Everything for Sale (1997).
[Journal of Legal Studies, vol. XXIX (June 2000)]
© 2000 by The University of Chicago. All rights reserved. 0047-2530/2000/2902-0014$01.50

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