Risk in Benefit-Cost Analysis



In recent years, benefit-cost analysis has been increasingly applied to large societal decision problems (such as developing a fast breeder energy economy) which involve both risks to society and analysis of very long-term consequences possibly extending over many human generations. This paper examines the philosophical underpinnings of the technique which is a special case of utilitarianism, and compares implications of the technique to those arising from alternative ethical systems in analyzing questions of public safety. Ethical systems which emphasize the good of the whole, such as utilitarianism, are shown to differ sharply in decision outcomes from those which emphasize the rights of the individual, such as libertarianism. It is suggested that benefit-cost analysis should be broadened to include alternative weightings of benefits and costs consistent with a variety of ethical views.