From the book Theory and Practice in Policy Analysis, Chapter 3: Around the worl
ID: 425942 • Letter: F
Question
From the book Theory and Practice in Policy Analysis, Chapter 3:
Around the world (and especially in any locations that have ties to the US), benefit-cost analysis is the primary decision-making criteria of governments and corporations. Doing a benefit-cost analysis is pretty conceptually simple (you may already have experience with BCA). But there are a lot of important assumptions that go into BCA, most of which are never even considered by those who actually carry it out. This chapter (and the next reading) basically dig into the ethics of BCA, including ways that it might be unfair. We already use this tool all the time to make important decisions, and these readings dig into what BCA can and can't tell us.
Answer the Questions below:
What is the issue with using prices to estimate benefits and what is the correct way of framing them?
Should the value of (all) things be based on the number of people that use them?
What are some issues with “willingness-to-pay” as a stand-in for economic value?
What is the Pareto criterion and why is it almost impossible to meet?
What is the Kaldor-Hicks criterion and what are some ethical issues with it?
What are some of the practical/political issues with the way that BCA is applied?
What do you think about the Precautionary Principle as an alternative to BCA? In the end, is BCA a useful tool?
Explanation / Answer
Iissue with using prices ti estimate benefits might result in compromising with the quality of product or service, which in turn might result in permanent loss of trust and reputation in the eyes of customers in the quest of making easy profit.
Framing a BCA with the cost effective production and more of profit making only comes with having an end to end market analysis of the best suited price to attract the consumers and also have means of productions with less of price without compromising on the quality.
Value of the things are have a direct relation with the acceptability and range of consumption. Thus it has a direct variable value of the floating use.
Price of goods vary with passing days as a result of increased costs. However consumers do not be able to adjust so easily to the price hikes. While purchase, the preconcieved notion of the last less price is what plays a role in making a hindrance in the willingness to pay.Thus Economic value affects with the price fluctuation and substitute products' quality.
Pareto criterion or optimality is a state of making any party better of without making any party worse off. Thus this is much beyond achievement because aiming at high profit, there happens to be much loss somewhere in the other aspects.
Kaldor Hicks criterion is based out of the intution of a Pareto Criterion, however less stringent. It emphasizes on compensating the wprse offs by the ones whose made to be better off. However teh issue remains that without having that compensated, there is always someone who is made to be worse off.
Precautionary principle emphasizes on actioning the uncertainities and assessing the risks.It implies a social responsibility of public protection of from harmful exposure. Thus this principle hands inhands with BCA could prove super beneficial for the target audience having lessened chances of incuring loss in a Pareto basis.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.