Benefit-Cost in a Benevolent Society

American Economic Review (Impact Factor: 2.69). 03/2006; 96(1):339-351. DOI: 10.1257/000282806776157623
Source: RePEc


How should benefit-cost analysis account for the value that benevolent individuals place on others' enjoyment of public goods? When adding up the benefits to be compared with costs, should we sum the private valuations, the altruistic valuations, or something else? This paper argues that private valuations are appropriate if concern for the well-being of others respects their private preferences. The discussion has implications for family decision-making, welfare economics, and the design of applied contingent valuation studies.

Download full-text


Available from: Ted Bergstrom, Jan 07, 2015
  • Source
    • "That is, it is possible to fail to accept a good proposal (from a BCA point of view) using only selfish values. Bergstrom (2006) agrees with this conclusion. "
    [Show abstract] [Hide abstract]
    ABSTRACT: Hausman (2012) “selectively” reviews the CVM literature and fails to find progress over the 18 years since Diamond and Hausman (1994) argued that unquantified benefits and costs are preferred to benefits and costs quantified by CVM for policy analysis. In these comments, we provide counter-arguments to the claims made by Hausman. We provide these counterarguments not with the intent to convince the reader that the debate over contingent valuation is settled but rather to urge the community of economists to recognize that the intellectual debate over contingent valuation is still ongoing and that plenty of work remains to be done. We review the literature and argue that (1) hypothetical bias raises important research questions about the incentives guiding survey responses and preference revelation in both real and hypothetical settings that contingent valuation can help answer, (2) the WTP-WTA gap debate is far from settled and the debate raises important research questions about the future design and use of benefit cost analyses of which contingent valuation will undoubtedly be a part, and (3) CVM studies do, in fact, tend to pass a scope test and there is little support for the assertion that an adding up test is the definitive test of CVM validity.
    Applied Economic Perspectives and Policy 04/2013; 35(4). DOI:10.1093/aepp/ppt029 · 1.20 Impact Factor
  • Source
    • "" A number of empirical economic studies have investigated the role of social preferences in voting (e.g., Deacon and Shapiro, 1975; Holmes, 1990; Shabman and Stephenson, 1992, 1994; Kotchen and Powers, 2006). Given the overwhelming evidence of pro-social behavior in bargaining, trust, reciprocity, public goods, and other games, it is not surprising that these studies have demonstrated deviations from pure self-interest in actual referenda: following terminology recently used by Bergstrom (2006), voters appear to be partly motivated by " sympathetic gains " obtained from others' enjoyment of public goods as well as " sympathetic losses " that each bears for the share of costs paid by others. However, the aggregated and anonymous data used in these studies preclude measuring the extent of the deviation from self-interest (Mueller, 1989), identifying the precise form that such social preferences take, or assessing the impact of those preferences on the desirability of using referenda as a public goods allocation mechanism. "
    [Show abstract] [Hide abstract]
    ABSTRACT: Public referenda are frequently used to determine the provision of public goods. As public programs have distributional consequences, a compelling question is what impact, if any, do social preferences have on voting behavior. This paper explores this issue using laboratory experiments wherein voting outcomes lead to a known distribution of net benefits across participants. Preferences are elicited using a novel Random Price Voting Mechanism (RPVM), which is more efficient in eliciting preferences than a dichotomous choice referendum but gives consistent results. Results suggest that social preferences, in particular a social efficiency motive, lead to economically meaningful deviations from selfish voting choices and increase the likelihood that welfare-enhancing programs are implemented.
    Journal of Public Economics 04/2010; 94(3-4):308-317. DOI:10.1016/j.jpubeco.2009.12.004 · 1.46 Impact Factor
  • Source
    • "Jones-Lee (1992) provides several extensions and generalizations. The case of fertility poses different problems because, in a marriage, as studied for example in Bergstrom (2006), the utility functions of husband and wife are well-defined and the formation of a marriage is voluntary. Not only are children self-produced by parents, but children do not have preferences relevant for valuation of mortality risk. "
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper accounts for the value of children and future generations in the evaluation of health policies. This is achieved through the incorporation of altruism and fertility in a "value of life" type of framework. We are able to express adults' willingness to pay for changes in child mortality and also to incorporate the welfare of future generations in the evaluation of current policies. Our model clarifies a series of puzzles from the literature on the "value of life" and on intergenerational welfare comparisons. We show that, by incorporating altruism and fertility into the analysis of the recent U.S. experience, the estimated welfare gain of a young adult from reductions in mortality easily doubles.
    Journal of Public Economics 02/2009; 93(1-2):280-295. DOI:10.1016/j.jpubeco.2008.06.005 · 1.46 Impact Factor
Show more