The Normative Implications of Political Decision-Making for Benefit-Cost Analysis
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Kerry Krutilla
The Potential Pareto criterion, or Kaldor-Hicks standard, presumes that costs are not fully compensated. Yet, uncompensated costs can incentivize costly political activity and create uncertainty about political outcomes. These consequences are not reckoned in the standard benefit-cost analysis. This study models political costs and uncertainty as a function of project parameters and political-institutional characteristics. The economic consequences of political behavior are then incorporated into an adjusted project evaluation standard. This standard assures that the project’s conventionally measured net benefits are sufficient to cover political costs and uncertainty about the decision-making outcome.
©2012 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Articles in the same Issue
- Article
- Measuring The Social Opportunity Cost of Labor In Mexico
- The Normative Implications of Political Decision-Making for Benefit-Cost Analysis
- Scitovsky Reversals and Practical Benefit-Cost Analysis
- Accounting for Nonmarket Impacts in a Benefit-Cost Analysis of Underground Coal Mining in New South Wales, Australia
- Principles and Standards
- Developing General Equilibrium Benefit Analyses for Social Programs: An Introduction and Example
Articles in the same Issue
- Article
- Measuring The Social Opportunity Cost of Labor In Mexico
- The Normative Implications of Political Decision-Making for Benefit-Cost Analysis
- Scitovsky Reversals and Practical Benefit-Cost Analysis
- Accounting for Nonmarket Impacts in a Benefit-Cost Analysis of Underground Coal Mining in New South Wales, Australia
- Principles and Standards
- Developing General Equilibrium Benefit Analyses for Social Programs: An Introduction and Example
