Voluntariness and the bounds of cost-benefit analysis

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Abstract

Behavioural economists often claim that their policy recommendations are justified by cost-benefit analysis (CBA), but without adequate explanation of the methodology they have in mind. I sketch the outlines of a CBA methodology that is compatible with the findings of behavioural economics and is in accord with my account in Sugden (2018) of a well-functioning market as a network of opportunities for mutually beneficial transactions. The key idea is that the CBA of a project is concerned only with effects that are not transmitted through voluntary interactions. I illustrate this proposal by considering the appraisal of fuel economy mandates.
Original languageEnglish
Pages (from-to)954-962
Number of pages9
JournalBehavioural Public Policy
Volume7
Issue number4
Early online date27 Feb 2023
DOIs
Publication statusPublished - Oct 2023

Keywords

  • cost-benefit analysis
  • behavioural economics
  • voluntary interaction
  • regularisation
  • fuel economy mandate
  • voluntariness
  • fuel economy mandates

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