The Cost-Benefit Principle Controversy: Robert Frank
The author Robert Frank has tried to explain the controversy of the cost-benefit analysis. In his article, Robert stated the cost-benefit principle, which made it controversial. The principle states that we should only accept those benefits that exceed their initial costs. The principle further avers that we should all install a guardrail on the dangerous road if the cost incurred during the installation is lower than when there are injuries and damage to property. Despite his arguments, I disagree with him as I find his argument unpersuasive and irrelevant.
Robert is in support of installation of the guardrail, which he says that should be installed despite the cost. Having lived in a world where everything is scarce, it is the high time that we try to minimize the cost we spend on our daily activities. Therefore, risking our scarce resources to install a guardrail is not a strategic option. Also, with the aim to make people understand the controversy of cost-benefit, they have given their views on the issue. Although the conclusion is not given, we can tell from what is stated that they do not support the controversy. Robert goes ahead to explain the measurement problems and the survey methods. For one to know if the action satisfies the cost-benefit controversy, an individual needs to derive the measures of the costs and benefits. Therefore, if unable to come up with the exact measures, then the first critique confirms that the measures are just assumptions
In the future, the controversy anticipates that all the relevant costs and benefits will be put in one temporal footing. Having put them together, the discount rate will be chosen, which will be used to compute the future costs and the benefits in present value terms. The discount rate chosen will be derived from the present value calculations in the market. However, this is a mere assumption since there is no assurance that the interest rate will be fixed despite the changes in the economy’s growth. To explain the controversy, Robert states, “To secure a maximum benefit in life, all future pleasures or pains should act upon us with the same force as if they were present, allowance being made for their uncertainty.” No human is constituted perfectly; a future feeling is always more influential than the present.
From the article, we can conclude that the critics given to explain the controversy have not used any persuasive argument. Also, the methods used by the cost benefits analysts have overstated the value of the goods, and the demands are context sensitive. The controversy focuses on the present instead of the future. For example, the method used to come up with the interest rate to be made in the markets assumes that the current state of the market will remain the same in the future. However, arguing from the real-life happenings, the market situations keep changing from time-to-time. For instance, we may set an interest rate that is too high, and then the changes that occur in a market are negative. I would conclude my reviews by indicating that the critics of the cost-benefit analysis are not well displayed, and therefore we will have to continue using the analysis in our decision-making. The circumstances will force us to join the cost-benefit analysis to eliminate the biases and ensure we all benefit.
Robert H. Frank. Why is the Cost-Benefit Analysis so Controversial? The Journal of Legal Studies, vol. 29, No.S2 (June 2000), pp. 913-930.