Hi Fred,
Yes, that is a good question. I think the answer is that it does
take a fairly sophisticated economist to write a cost-benefit analysis,
but it doesn't take much savvy to know when one is badly biased. Anyone
knowledgeable about the topic - - even if they have only a minimal
understanding of CB technique - - can tell when analysis is being skewed
by biased assumptions.
Of course you are also right that it is often very difficult to
apply CBA given available information. In those cases CBA can be a guide
to what sorts of information is lacking to make a good decision. Let me
also back off just a tad from my original pronouncement. There are
situations where a cost benefit analysis is irrelevant. A harm is
alleged and the proposed remedy for it so cheap that costs and benefits
are obvious. The issue in cases such as this is not the CBA but making
the case that the harm is real (or isn't) and that the remedy will work
(won't work). For lots of issues these are the questions rather than
CBA
BTW, my "academic" perspective was honed by working as a senior
economist with Clinton's CEA. One of the things I did during my time
with the CEA was fight a losing battle with OSHA over the introduction
of CBA considerations into some parts of rules-making. For what its
worth, it is the pro-regulation, pro-environment, pro-safety crowd that
are the most ardent critics of CBA. If you are a libertarian I think
that CBA is more often that not your friend. But that is another
story... - - Bill Dickens
>>> [EMAIL PROTECTED] 02/13/03 11:23PM >>>
From: "William Dickens"
> Fred,
> You completely misunderstand my point. If a cost benefit
analysis
> is presented it makes very clear what the assumptions are that lead
to
> the policy conclusions.
Bill,
I don't think I completely misunderstood. I do apologize, however, as
I
allow myself to gravitate from your purely academic response back into
the
real world. Your point is well taken, but my mind was on the earlier
question.
> > Is there a practical way for policy makers to assess the
reliability
> > and objectivity of CBA?
I thought this was an excellent question. How many policy makers do
you
know that are actually able to understand the necessary variables to
arrive
at a meaningful assumption in order to evaluate the analysis? I work
in
government. CBA is seldom used. I would like to see it used more
often,
but data are relatively sparse due to the disjointed accounting systems
and
other road blocks (E.g. - collective bargaining agreements). Seldom
does a
cost center actually represent the work being performed.
-Fred Childress
----- Original Message -----
From: "William Dickens" <[EMAIL PROTECTED]>
To: <[EMAIL PROTECTED]>
Sent: Thursday, February 13, 2003 9:33 PM
Subject: RE: Cost benefit analysis
> Fred,
> You completely misunderstand my point. If a cost benefit
analysis
> is presented it makes very clear what the assumptions are that lead
to
> the policy conclusions. Thus any debate of the question is going to
be
> much better informed and much more closely focused on the issues
that
> matter. Its going to be more logical. I am not saying that a bad
CBA
> trumps a good verbal argument in deciding an issue. I'm saying that
as a
> starting point for a debate a bad CBA is still a good point of
departure
> because it spells out the assumptions and logic that the person
> presenting it is making.
> - - Bill Dickens
>
> >>> [EMAIL PROTECTED] 02/13/03 05:37PM >>>
> On Thu, 13 Feb 2003 15:52:43 -0500, "William Dickens"
> <[EMAIL PROTECTED]> said:
> > Any CBA is better than no CBA - - even a badly skewed one. Its the
> same
> > argument for formalizing theory in economics. It makes clear what
> your
> > assumptions and logic are and makes it easy to identify areas of
> > agreement and disagreements between opponents on an issue. - -
Bill
> > Dickens
>
> Did I just read what I think I read?
> So here is the scenario - a *badly skewed* CBA is used by misguided
> (do-gooder) policy makers to influence legislation by defeating a
more
> reasonable (logical) argument. This CBA had more traction (the bad
> science environmentalists had a well funded propaganda campaign) and
> the
> resultant legislation ended up killing millions of people
> (refrigerators
> in third world countries no longer able to keep food cold or
> pesticides
> no longer available to kill mosquitos which carried disease). I
find
> it
> hard to agree that "any CBA is better than no CBA."
>
> -Fred Childress
>
>
> > >>> [EMAIL PROTECTED] 02/13/03 01:57PM >>>
> > One problem with applying CBA to policy formulation is ensuring
> > reliability
> > and objectivity. Too often, CBA is manipulated for predetermined
> > policy
> > positions. EPA once produced a Regulatory Impact Analysis that
> > contended
> > that benefits from the phaseout of CFCs are $8 trillion to $32
> > trillion. In
> > such cases, CBA does more to confound, rather than illuminate,
> > rational
> > policy formulation.
> >
> > Is there a practical way for policy makers to assess the
reliability
> > and
> > objectivity of CBA?
> >
> > Walt Warnick
> >
> > -----Original Message-----
> > From: Driessnack, John [mailto:[EMAIL PROTECTED]]
> > Sent: Thursday, February 13, 2003 9:56 AM
> > To: [EMAIL PROTECTED]
> > Cc: [EMAIL PROTECTED]
> > Subject: RE: Cost benefit analysis
> >
> >
> >
> > In defense you can say that almost all of the weapons related
> > spending
> > (Procurement and RDT&E budget - almost half of the budget when you
> > consider
> > the spare purchases) is accomplished having gone through some CBA
in
> > the
> > process of deciding the approach to develop, procure, and then
> maintain
> > the
> > equipment. An Analysis of Alternative is required along with
> > estimates
> > (actually by several layers of organizations).
> >
> >
> >
> > The other source to look at would be the Federal Acquisition
> > Regulations
> > (FAR). This policy drives use of CBA for certain purchases. So
you
> > could
> > estimate off of this policy!
> >
> >
> >
> > jdd
> >
> >
> >
> > John D Driessnack, PMP, CCE/A
> >
> > Professor, Defense Acquisition University
> >
> > PMT-250/352, DAU Risk/Tools Subject Matter Expert
> >
> > DAWIA PM, Acq Logi, FM Level III
> >
> > NE-Capital Campus, Faculty Department
> >
> > Program Management and Leadership
> >
> > 9820 Belvoir Rd, Building 205, Room 115B
> >
> > Ft Belvoir, VA 22060-5565
> >
> > 703-805-4655 (DSN-655)
> >
> > [EMAIL PROTECTED]
> >
> > FAX 703-805-3728
> >
> >
> >
> > -----Original Message-----
> > From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]
> > Sent: Tuesday, February 11, 2003 11:16 PM
> > To: [EMAIL PROTECTED]
> > Subject: Cost benefit analysis
> >
> >
> >
> > Does anyone know how often CBA is actually used in making policy?
> > What
> > percent of the federal budget (or state or local) has been
> determined
> > by
> > CBA?
> >
> > Cyril Morong
> >
> >
> >
> Yours in Liberty,
> Fred Childress
>
> LNC Region 5 Alt Representative - http://www.LP.org
>
> "Even if you're on the right track, you'll get run over if you just
> sit
> there."
> -Will Rogers
>
>
>
>
