Scandinavian Working Papers in Economics

Oslo University, Department of Economics

No 08/2014: Project Evaluation with Democratic Decision-making: What Does Cost-benefit Analysis Really Measure?

Karine Nyborg ()
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Karine Nyborg: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway

Abstract: It is often argued that projects involving public good changes should be chosen on the basis of monetary valuation and cost-benefit analysis (CBA). In democratic project selection processes, however,decision-makers cannot generally interpret CBA as measuring projects’ social welfare effects.The reason is partly that decision-makers’views of the good society differ –that is, they typically do not hold the same social welfare function – and partly because separating efficiency anddistribution is even less straightforward in democratic than in dictatorial decision-making processes.

Keywords: Environmental cost-benefit analysis; ethics; democratic decision-making

JEL-codes: A11; D31; D61; D63

19 pages, July 4, 2014

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