Principles and Standards for Benefit–Cost Analysis

Principles and Standards for Benefit–Cost Analysis

Edited by Scott O. Farrow and Richard Zerbe, Jr.

Benefit–cost analysis informs which policies or programs most benefit society when implemented by governments and institutions around the world. This volume brings together leading researchers and practitioners to recommend strategies and standards to improve the consistency and credibility of such analyses, assisting analysts of all types in achieving a greater uniformity of practice.

Chapter 5: Towards principles and standards for the benefit–cost analysis of safety

Scott Farrow and W. Kip Viscusi

Subjects: economics and finance, public sector economics, valuation


This chapter proposes principles and standards for benefit–cost analysis (BCA) that are of particular importance to public safety policies. Applied economists and policy analysts are often under pressure to deliver their analysis in a specified time frame subject to a particular budget (Committee to Evaluate Measures, 2006; DeMartino, 2011). In the US government and in some US states, analysts may be creating BCAs for which comparison of results across policies is desirable. Moreover, application of consistent standards for analysis facilitates public scrutiny of the economic basis for the policies. It is in such applied work where analytical principles and standards may facilitate producing analyses and encourage replicability, comparability, credibility, and usability. Our principles and standards provide a set of recommended best practices for the analysis of policies affecting public safety but do not necessarily reflect requirements that the analysis must meet. Public safety issues arise with respect to both privately marketed goods that affect the public and government policies that have a strong public good component, such as highway safety. Public safety concerns arise in a wide range of activities in general categories such as security, physical safety, natural hazards, environmental risks, public health, product safety, and employment hazards. Each of these areas of potential risk exposure has specific component risks such as those posed by crime, terrorism, food products, floods, and transportation.

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