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Title:Benefit-cost analysis of environmental projects: A plethora of systematic biases PDF Logo
Authors:Graves, Philip E.
Issue Date:2010
Series/Report no.:CESifo working paper Resources and Environment 3144
Abstract:There are many reasons to suspect that benefit-cost analysis applied to environmental policies will result in policy decisions that will reject those environmental policies. The important question, of course, is whether those rejections are based on proper science. The present paper explores sources of bias in the methods used to evaluate environmental policy in the United States, although most of the arguments translate immediately to decision-making in other countries. There are some 'big picture' considerations that have gone unrecognized, and there are numerous more minor, yet cumulatively important, technical details that point to potentially large biases against acceptance on benefit-cost grounds of environmental policies that have true marginal benefits greater than true marginal costs, both in net present value terms. It is hoped that the issues raised here will improve future conduct of benefit-cost analyses of environmental policies.
Subjects:benefit-cost analysis
environmental policy
decision making
choice behavior
public goods
willingness-to-pay
willingness-to-accept
precautionary principle
hedonic methods
sum of specific damages
health effects model
environmental perceptions
JEL:C91
D12
D61
D62
D78
D81
H11
H41
H43
Q20
Q30
Q51
Q58
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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