Overlapping paradigms in the cost benefit analysis of pollution regulation Online publication date: Mon, 13-May-2013
by Christopher Dylan McGee
Interdisciplinary Environmental Review (IER), Vol. 7, No. 1, 2005
Abstract: The paper explores some inconsistencies between different frameworks for cost benefit analysis of regulations for pollution externalities. There are three different guiding paradigms for such analysis: one measuring costs and benefits in monetary units, one that considers utilitarian measures of costs and benefits, and one based on the just allocation of individual rights. The first two paradigms (monetary and utilitarian) are shown to be incompatible when there is asymmetric dispersion of costs and benefits. This raises the question of which standard is appropriate. The final section of the paper explores how standard analysis incorporates an assumption that the victims of pollution have a right to be protected. This assumption undermines the validity of both the utilitarian and monetary paradigms for applications where victims are not compensated for pollution damages. There is an inherent tension, or inconsistency, in the way standard analysis synthesizes normative and positive considerations into a framework for public policy design.
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