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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