23 December 2014

Policy makers yet to embrace cost-benefit analysis approach to decision-making

The use of a cost-benefit analysis (CBA) to make policy decisions is not being widely implemented, with many decision-makers believing that CBA can lead to a loss of control and influence over policy-making, a study including a series of interviews with those responsible for water policy management in Germany has revealed. The majority of interviewees perceived CBA to weaken their ability to make decisions based on their own expertise.

CBA is used to determine the cost of projects, policies or actions in terms of the environment and human welfare. It places a monetary value on aspects such as "ecosystem services", enabling such a value to be included in the decision making process. However, CBA has had only a limited impact on decision-making to date, as many refuse to implement it. Those interviewed felt the values in CBA calculations were too black and white, whereas human analysis can be more nuanced.

Established, traditional, procedures were seen by a majority as sufficient for decision making. The author of the study argues that to change the mindset towards CBA, a discussion should take place on how economic information should be integrated into the decision-making process, one that involves cooperation between those in academia who designed the approach, and the authorities implementing it.

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