On Balance and Working Papers October 2017

On Balance: Perspectives from the Field

The SBCA recently introduced a new feature, "On Balance: Perspectives from the Field." Short informative, practical, and timely articles relevant to BCA, written by prominent experts in the field, will be distributed regularly via email and on our website.

Nobel Laureate Richard Thaler, Behavioral Economics, and Benefit-Cost Analysis

by David L. Weimer

Rational action lies at the heart of neoclassical economics. Sovereign consumers make choices that maximize their utilities. By observing the tradeoffs implicit in actual choices, or eliciting tradeoffs for hypothetical choices, benefit-cost analysts impute willingness to pay for desirable policy impacts and willingness to accept undesirable ones. Yet, it appears that sometimes consumers seem to make mistakes. The field of behavioral economics seeks to provide a more realistic psychological model of consumers and other economic actors that helps us understand apparent deviations from neoclassical rationality. The 2017 Nobel Memorial Prize in Economic Sciences recognizes Richard H. Thaler’s pioneering contributions to behavioral economics.

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David Weimer is the Edwin E. Witte Professor of Political Economy, University of Wisconsin–Madison and was president of the Society for Benefit-Cost Analysis in 2013. He is the author of Behavioral Economics for Cost-Benefit Analysis (Cambridge University Press 2017).

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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 sbcainfo@uw.edu

Cost-benefit analysis for flood risk management and water governance in the Netherlands; an overview of one century
 

Abstract: The Netherlands is a global reference for flood risk management. This reputation is based on a mix of world-class civil engineering projects and innovative concepts of water governance. For more than a century, cost-benefit analysis has been important for flood risk management and water governance in the Netherlands. It has helped to select the most effective and efficient flood risk projects and to coordinate and reconcile the interests of various policy areas, levels of government and private stakeholders. This paper provides for the first time an overview of this well-developed practice. This includes the cost-benefit analysis in the 1901 act for enclosure of the Zuiderzee, van Dantzig’s famous formula for the economically optimal strength of dikes and a whole set of cost-benefit analyses for More room for rivers and the Delta Program for the next century. Dutch practice illustrates how cost-benefit analysis can support and improve flood risk management and water governance; other countries may learn from this. Rough calculations indicate that investing in cost-benefit analysis has been a highly profitable investment for Dutch society.

Authors: Frits Bos and Peter Zwaneveld (CPB Netherlands Bureau for Economic Policy Analysis)

Link: http://www.cpb.nl/en/publication/cost-benefit-analysis-for-flood-risk-management-and-water-governance-in-the-netherlands-overview

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SBCA Featured Content - On Balance and Working Papers October 2017