Working Papers May 2017

Working Paper Series

We welcome papers submitted by SBCA members on topics in benefit-cost analysis for circulation as part of this working paper series. The Society shares these papers as a service to its members and the benefit-cost analysis community. The Society for Benefit-Cost Analysis does not edit the papers before sharing and inclusion of a working paper here does not constitute endorsement by the Society of any of its content.  

SBCA members interested in submitting their working papers for future issues may contact Erika Dowd at

A Distinction Between Benefit-Cost Analysis and Cost Benefit Analysis: Moral Reasoning and a Justification for Benefit Cost Analysis

Abstract: Cost benefit analysis (CBA) has been both vilified and supported in legal literature but misunderstood both in that literature and in the economic literature. The vilification is often wrong or muddled in both literatures. The fact is that a proper statement of CBA, which I call benefit-cost analysis, BCA, suggests it is quite compatible with moral decision making, provides a useful decision framework.

This article distinguishes between BCA and CBA. CBA is the traditional approach of valuation, built on the potential compensation test (“PCT”) of hypothetical compensation and the avoidance of distributional and other equity considerations. BCA is not built on such a hypothetical formulation. BCA recognizes rights and moral sentiments as values insofar as they are reflected in the willingness to pay (“WTP”) to obtain them and the willingness to accept (“WTA”) payment in return for giving them up. CBA is often limited to analyzing only the monetary, fair market value of property. BCA provides a more accurate measure of well-being, drops the CBA grounding in the PCT, and reflects moral sentiments in valuation, making it superior to CBA for many purposes and not inferior in any. The major moral criticism of the traditional CBA and the formulation here of BCA is that values are then determined by the willingness to pay for them or the willingness to accept payment to give them up, that is by wealth and income. But, wealth and income are values preserved by the legal system. Any system of valuation in a regime of law must begin with what is legal and end with what is legally possible. It is no legitimate criticism of BCA that it rests on law.

Author: Richard O. Zerbe (University of Washington)


Best Estimate Selection Bias of Estimates of the Value of a Statistical Life

Abstract: Selection of the best estimates of economic parameters frequently relies on the best estimate or a meta-analysis of the “best-set” of parameter estimates from the literature. Using an all-set dataset consisting of all reported estimates of the value of a statistical life (VSL) as well as a best-set sample of the best estimates from these studies, this article estimates statistically significant publication selection biases in each case. Biases are much greater for the best-set sample, as one might expect, given the subjective nature of the best-set selection process. While “best estimate selection bias” potentially exacerbates the problems associated with existing publication selection biases, the mean and median best-set estimates of the VSL are similar to those in the all-set sample. The bias-corrected estimate of the VSL for the all-set USA sample is $9.5 million and $11.5 million based on the CFOI data.

Author: W. Kip Viscusi (Vanderbilt University)


Shining a Light on Regulatory Costs

Abstract: President Trump’s Executive Order 13771, Reducing Regulation and Controlling Regulatory Costs, has caused some confusion among the analysts, inside and outside federal agencies, who forecast the economic effects of regulations. Which effects should count as costs and which as benefits? It sounds like it should be an easy question, but it is not. Here are some wrinkles to consider.

Author: Brian Mannix (The George Washington University)


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Working Paper Series - Working Papers May 2017