T y R a t e r m a n
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"Regulation, Compensation, and the Loss of Life: What Cost-Benefit Analysis Really Requires"
Abstract
Both supporters and opponents of cost-benefit analysis (CBA) commonly maintain that it will frequently endorse what I term "lethal policies," which are roughly those policies that are expected to result in more human deaths than would another available policy. I argue that this is a mistake. While I remain generally neutral in respect to the larger questions of whether lethal policies ought ever to be endorsed and whether CBA is a defensible method for making public policy decisions, I explain why CBA, properly understood, will (typically) not be able to approve of lethal policies. Many contemporary teachers of and commentators on CBA mischaracterize it as demanding only that a policy's expected benefits outweigh its expected costs. This obscures the role that the pioneers of CBA took the notion of compensation to play in justifying policy changes. Economists who are sensitive to the demand for compensability argue that this can be satisfied even where those who lose through a policy lose so badly as to die; but their argument is unsatisfying. I trace the confusion regarding compensability in respect to lethal policies to flaws in the standard conception of costs and benefits. It is a clear implication of an inherently more compelling conception of costs and benefits that the costs imposed by death are (in many cases) non-compensable and thus that CBA will not (except in rare cases) approve of lethal policies.
Click here for a .pdf this paper (roughly 7,000 words).