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.
|Journal||Behavioural Public Policy|
|Early online date||27 Feb 2023|
|Publication status||E-pub ahead of print - 27 Feb 2023|
- cost-benefit analysis
- behavioural economics
- voluntary interaction
- fuel economy mandate