The Fatal Flaw in Cost-Benefit Analysis

In Part I of this commentary on the Sarkozy-Stiglitz Commission on the Measurement of Economic Performance and Social Progress, the focus was on the social engineering perspective underlying the search for such an index. But at the end of that commentary, I noted that the Commission’s discussion of different indices was rather “academic” since there is one dominant index used in governmental decision-making: the monetized gains minus the monetized losses of cost-benefit analysis. A proponent of cost-benefit (CB) analysis would roll up all the Commission’s discussion into the question of the better “costing out” of all the direct and indirect impacts of a social decision.

Social Engineering vs. Pragmatism: Part I of Commentary on the Sarkozy-Stiglitz Commission

The point of this Part I commentary on the Sarkozy-Stiglitz Commission is to juxtapose the social engineering perspective implied in the whole exercise of trying to find a better index of “economic performance and social progress” to a more pragmatic perspective.