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Are there inherent biases in applying cost–benefit analysis?
Schar School of Policy and Government, George Mason University, Arlington VA, USA.
Jönköping University, Jönköping International Business School, JIBS, Economics. Jönköping University, Jönköping International Business School, JIBS, Center for Family Enterprise and Ownership (CeFEO). Department of Industrial Economics, Blekinge Institute of Technology, Sweden.
2018 (English)In: Applied Economics Letters, ISSN 1350-4851, E-ISSN 1466-4291, Vol. 25, no 7, p. 461-464Article in journal (Refereed) Published
Abstract [en]

This article extends discussions of potential biases that can exist in applying cost–benefit analysis. While there is extensive evidence that capture can result in stakeholder manipulation of inputs, there are also claims that the analysis is inherently theoretically bias in favour of over acceptance. The article shows that, contrary to these latter claims, treating projects in isolation is unlikely to produce such bias; indeed, it is as likely as not to lead to suboptimally low acceptance rates. The reason for excessive acceptance of projects therefore is largely due to institutional capture of the analysis for either self-interest or natural human over-optimism.

Place, publisher, year, edition, pages
Taylor & Francis, 2018. Vol. 25, no 7, p. 461-464
Keywords [en]
Cost–benefit analysis, appraisal bias, welfare economics, investment appraisal
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-37865DOI: 10.1080/13504851.2017.1332743ISI: XYZLocal ID: IHHCeFEOISOAI: oai:DiVA.org:hj-37865DiVA, id: diva2:1156339
Available from: 2017-11-12 Created: 2017-11-12 Last updated: 2018-01-19Bibliographically approved

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