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Rethinking Cost-Benefit Analysis

Matthew D. Adler

Duke University School of Law

Eric A. Posner

University of Chicago - Law School

April 1999

University of Chicago Law School, John M. Olin Law & Economics Working Paper No. 72

This paper analyzes cost-benefit analysis from legal, economic, and philosophical perspectives. The traditional defense of cost-benefit analysis is that it maximizes a social welfare function that aggregates unweighted and unrestricted preferences. We follow many economists and philosophers who conclude that this defense is not persuasive. Cost-benefit analysis unavoidably depends on controversial distributive judgments; and the view that the government should maximize the satisfaction of unrestricted preferences is not plausible. However, we disagree with critics who argue that cost-benefit analysis produces morally irrelevant evaluations of projects and should be abandoned. On the contrary, cost-benefit analysis, suitably constrained, is consistent with a broad array of appealing normative commitments, and it is superior to alterative methods of project evaluation. It is a reasonable means to the end of maximizing overall welfare when preferences are undistorted or can be reconstructed. And it both exploits the benefits of agency specialization and constrains agencies that might otherwise evaluate projects improperly.

Number of Pages in PDF File: 92

JEL Classification: H43, K23

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Date posted: May 27, 1999  

Suggested Citation

Adler, Matthew D. and Posner, Eric A., Rethinking Cost-Benefit Analysis (April 1999). University of Chicago Law School, John M. Olin Law & Economics Working Paper No. 72. Available at SSRN: https://ssrn.com/abstract=164902 or http://dx.doi.org/10.2139/ssrn.164902

Contact Information

Matthew D. Adler
Duke University School of Law ( email )
210 Science Drive
Box 90362
Durham, NC 27708
United States

Eric A. Posner (Contact Author)
University of Chicago - Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
773-702-0425 (Phone)
773-702-0730 (Fax)
HOME PAGE: http://www.law.uchicago.edu/faculty/posner-e/

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