Cost/Benefit Analysis; Costs; Benefits; Environmental Regulation

A new book co-written by an economist and a law professor takes issue with the conventional notion of cost/benefit analysis, arguing that it is rigged in favor of lower regulation.

Conventional cost/benefit analysis implies that difficult policy questions can be answered quantitatively and objectively by putting the costs and benefits into a common denomination-- typically money. Once all costs and benefits of additional regulation, for example, are considered and tallied, the outcome that provides the greatest benefits for the least cost must be the preferred outcome. However, this process is criticized because many environmental characteristics cannot be quantified, and are therefore given an implicit value of zero in typical cost-benefit analyses. Writers of regulatory measures tend to assign very specific costs to additional regulation, but environmental benefits are more difficult to assess in dollar terms. Thus, cost/benefit analyses as practiced in political arenas tend to overstate true costs and understate true benefits.

As the title implies, a manatee could be valued by the amount of money its skin, meat and other parts would be worth on an open market. But is the manatee as a species worth more than the sum of the market value of its parts? Critics argue that many environmental attributes are similarly impossible to value in a monetary sense, and therefore do not lend themselves to inclusion in cost/benefit analysis.

(Updated May, 2004)