Cost-benefit analysis: A normative perspective

Policy makers rely on cost-benefit analysis (CBA) to help them select the best policies and projects to alleviate poverty. But CBA, as practiced in the United States, not only fails to inform policy makers about the best use of scarce resources but helps make poverty worse for many people. International donor organizations-the United Nations, Organization for Economic Cooperation and Development, and World Bank-have sophisticated CBA methods that could better serve policy makers in deciding how to help poor people. The authors look at the results of CBA in four economic development venues-enterprise zones, military base redevelopment, sports stadiums, and business incentives-for developing a critique of cost-benefit practices. A brief program is offered to correct cost-benefit practice, but it is concluded that reform must come not from policy makers and policy analysts who now use CBA but from outsiders who want to influence political systems on behalf of poor people.