Identify and explain at least two major weaknesses or critiques of cost-benefit analysis. Identify what these weaknesses or critiques mean for the ways in which cost-benefit analysis should be used in practice.

Question

What will be an ideal response?

Answer 1

Students may identify any of the following weaknesses or critiques: the difficulty of assigning monetary values to nonmonetary outcomes; the choice of time ranges and discount rates; and the reliance on total net benefit as the criterion are each evidence of the uncertainties regarding the usefulness of cost-benefit analysis. Critiques of cost-benefit analysis include the potential for abuse by politicians and analysts who let the method make decisions for them, instead of using the information derived from the analysis as one among many elements in their decision-making process. If the method is used in this way (uncritically), the policy result can be decisions that many people would deem undesirable. Another critique of cost-benefit analysis argues that it gives little attention to the distributive questions involved in all policies. Cost-benefit analysis, because it counts all benefits and costs equally, regardless of who receives or bears them, demonstrates distributional blindness. One final critique suggests that the utilitarian foundation of cost-benefit analysis may not be suitable for a functioning democracy. Because money is central to cost-benefit analysis, in practice it places economic considerations above political considerations or values.