Behavioral economics and benefit cost analysis

V. Kerry Smith, Eric M. Moore

Research output: Contribution to journalArticle

19 Citations (Scopus)

Abstract

This paper provides a brief review of the theory of benefit cost analysis and then discusses proposals by economists calling for developing a new foundation for applied welfare economics. These proposals assume individual choices cannot be reconciled with coherent preferences. As a result, applied welfare economics must consider a different basis for defining the public tradeoffs to be used in project evaluation. This analysis concludes none of the available proposals meets the needs for policy evaluation with benefit cost analysis. The paper also offers a different explanation for the seemingly incoherent preferences implied by some choices. The last part of the paper reports the results of laboratory experiments intended to evaluate whether market outcomes would allow analysts to discriminate among alternative hypothesis for seemingly irrational choices.

Original languageEnglish (US)
Pages (from-to)217-234
Number of pages18
JournalEnvironmental and Resource Economics
Volume46
Issue number2
DOIs
StatePublished - Jun 2010

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welfare economics
Cost benefit analysis
cost-benefit analysis
Economics
economics
market
Experiments
evaluation
Benefit-cost analysis
Economic cost
Welfare economics
need
laboratory experiment
analysis
policy
project
public
Trade-offs
Economists
Laboratory experiments

Keywords

  • Behavioral economics
  • Benefit cost analysis

ASJC Scopus subject areas

  • Management, Monitoring, Policy and Law
  • Aerospace Engineering

Cite this

Behavioral economics and benefit cost analysis. / Smith, V. Kerry; Moore, Eric M.

In: Environmental and Resource Economics, Vol. 46, No. 2, 06.2010, p. 217-234.

Research output: Contribution to journalArticle

Smith, V. Kerry ; Moore, Eric M. / Behavioral economics and benefit cost analysis. In: Environmental and Resource Economics. 2010 ; Vol. 46, No. 2. pp. 217-234.
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