A critical comment on environmental benefit-cost analysis: principles, defenses, and multidisciplinary limitations

Abstract

Economists have fostered benefi t-cost analysis (BCA) as a preferred technique to evaluate and compare the impacts of alternative public policies. Particularly, its application for analyzing environmental policies and regulations, what we call “environmental BCA”, relies on a set of idiosyncratic techniques for monetizing compliance costs and environmental and health benefi ts. Although economists have heralded environmental BCA as a practical and useful tool to promote “rational” public interventions, it actually faces inherent limitations when used to analyze the desirability of environmental policies. This essay critically reviews both the arguments defending environmental BCA’s application as a technique for ex ante policy evaluation and then explore its inherent multidisciplinary limitations. We found that although environmental BCA’s proponents have used arguments associated with promoting effi ciency, consistent, and evidence- based public policies, environmental BCA is subject to a plethora of multidisciplinary limitations associated not only with its technical soundness, but also with environmental science, ethical concerns and its political infl uence