A new article in the Fall Issue of the Journal of Benefit-Cost Analysis (JBCA), “Some Pitfalls of Practical Benefit-Cost Analysis,” describes common pitfalls that well-meaning analysts fall into. Over the past 23 years I have worked on and supervised hundreds of benefit-cost analyses. Most of these analyses have dealt with public health regulations proposed by the Food and Drug Administration, although on occasion I have reviewed analyses from other government agencies and academia. I’ve seen these pitfalls occur many times and at one time or another I’ve been guilty of most of them.
Benefit-cost analysis can have great value in creating efficient regulations and in making the effects of regulations and policies accessible to policy makers and the public. From public investments to traffic control to educational choice, benefit-cost analysis has shown its value. Several articles in the JBCA over the years have highlighted “good practices” in specific areas where benefit-cost analysis is done, notably papers by Susan Dudley (with others), and by Scott Farrow and Kip Viscusi.