Using Environmental Benefit-Cost Analysis to Improve Government Performance

Abstract

In this paper we first describe the legal and administrative basis of mandates that variously require and eschew economic measures for environmental management. We then summarize the steps involved in benefit-cost analysis and what can and cannot be accomplished with such information. Our basic conclusion is that while the approach is not perfect, benefit-cost analysis has a solid methodological footing and provides a valuable performance measure for an important governmental function, improving the well-being of society. However, benefit-cost analysis requires analytical judgements which, if done poorly, can obfuscate an issue or worse, provide a refuge for scoundrels in the policy debate. We conclude the article with specific suggestions for both the everyday performance of benefit-cost analysis and its use in policy decision-making.