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Keywords:

  • Cost-benefit analysis;
  • Social decision making;
  • Resource valuation;
  • Ecological management;
  • Sustainability

Abstract

Decisions regarding both human and natural systems often involve either explicit or implicit consideration of relative costs and benefits. These costs and benefits, however, go well beyond those captured in conventional economic cost-benefit analysis. It is not so much the mere consideration of costs and benefits that hampers cost-benefit analysis but, rather, the narrowness and incompleteness of the subset of costs and benefits that are usually considered. To use cost-benefit analysis for social decision making, one needs to think very broadly about which categories of costs and benefits need to be addressed (including effects on built, human, social, and natural capital as well as sustainable well-being) and deal with the inherent uncertainty and imprecision attached to many of the more important categories. One needs to consider the full range of possible values and valuation methods, to shift the burden of proof to the parties that stand to gain from the decision, to deal with the distributional consequences of decisions, and to be clear about the social goals being served by the decision. Failure to think broadly enough about costs and benefits leads to decisions that serve only narrow special interests, not the sustainable well-being of society as a whole.