On the cognitive argument for cost-benefit analysis

TY - JOUR

T1 - On the cognitive argument for cost-benefit analysis

AU - Christiansen, Andreas

PY - 2018/4/1

Y1 - 2018/4/1

N2 - In a number of writings, Cass Sunstein has argued that we should use cost-benefit analysis as our primary approach to risk management, because cost-benefit analysis corrects for the cognitive biases that mar our thinking about risk. The paper critically evaluates this ‘cognitive argument for cost-benefit analysis’ and finds it wanting. Once we make distinctions between different cognitive errors and between different aspects of cost-benefit analysis, it becomes apparent that there are really two cognitive arguments, neither of which is successful as arguments for cost-benefit analysis as a whole. One argument shows that the analysis aspect of cost-benefit analysis is warranted because it corrects for false beliefs about the magnitudes of risk and for the neglect of some costs. While this is a sound argument, it does not provide an argument for other aspects of cost-benefit analysis. The second argument purports to show that commensurating and monetizing the values of the effects of regulation is warranted because it corrects for the use of widely diverging values of a statistical life. This argument fails because the use of widely diverging values of a statistical life is not a cognitive error: It is neither precluded by considerations of instrumental rationality, nor by the requirement of treating like cases alike.

AB - In a number of writings, Cass Sunstein has argued that we should use cost-benefit analysis as our primary approach to risk management, because cost-benefit analysis corrects for the cognitive biases that mar our thinking about risk. The paper critically evaluates this ‘cognitive argument for cost-benefit analysis’ and finds it wanting. Once we make distinctions between different cognitive errors and between different aspects of cost-benefit analysis, it becomes apparent that there are really two cognitive arguments, neither of which is successful as arguments for cost-benefit analysis as a whole. One argument shows that the analysis aspect of cost-benefit analysis is warranted because it corrects for false beliefs about the magnitudes of risk and for the neglect of some costs. While this is a sound argument, it does not provide an argument for other aspects of cost-benefit analysis. The second argument purports to show that commensurating and monetizing the values of the effects of regulation is warranted because it corrects for the use of widely diverging values of a statistical life. This argument fails because the use of widely diverging values of a statistical life is not a cognitive error: It is neither precluded by considerations of instrumental rationality, nor by the requirement of treating like cases alike.

KW - Faculty of Humanities

KW - Cost-benefit analysis

KW - Cognitive bias

KW - Risk

KW - Cass Sunstein

KW - Ethics

U2 - 10.1007/s10677-018-9883-9

DO - 10.1007/s10677-018-9883-9

M3 - Journal article

SN - 1386-2820

VL - 21

SP - 217

EP - 230

JO - Ethical Theory and Moral Practice

JF - Ethical Theory and Moral Practice

IS - 2

ER -