Sharpe, Simon;
Mercure, Jean-Francois;
Vinuales, Jorge;
Ives, Matthew;
Pollitt, Hector;
Knobloch, Florian;
Nijsse, Femke JMM;
(2021)
Deciding how to decide: Risk-opportunity analysis as a generalisation of cost-benefit analysis.
(Working Paper Series: IIPP WP
2021/03).
UCL Institute for Innovation and Public Purpose: London, UK.
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Abstract
Policymaking in the UK, the US and many other parts of the world relies heavily on cost-benefit analysis, applied within a market failure framework that rests on the theoretical foundation of welfare economics. These techniques have their roots in the so-called ‘Marginal Revolution’ of the 1870s. As the UK government’s guide to policy appraisal (the ‘Green Book’) acknowledges (section 5.5) these techniques are appropriate for informing policy in contexts of marginal change, but work less well outside those conditions. So, what should be done when the aim is to change big things quickly, or where opportunities for transformative change are available? Concerns have been raised that applying marginal analysis techniques outside their appropriate realm may create a bias towards inaction. But finance ministries may be equally concerned that if policymakers are given free rein to label their policies as ‘transformational’ in intent, and therefore exempt from cost-benefit analysis, a bias for action may be hard to contain. The challenge, then, is to define an approach to informing policy in a broad set of conditions that has analytical rigour, demands a proportionate amount of effort, and avoids undue bias in either direction.
| Type: | Working / discussion paper |
|---|---|
| Title: | Deciding how to decide: Risk-opportunity analysis as a generalisation of cost-benefit analysis |
| Open access status: | An open access version is available from UCL Discovery |
| Publisher version: | https://www.ucl.ac.uk/bartlett/public-purpose/publ... |
| Language: | English |
| Additional information: | This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Policy appraisal, disequilibrium, uncertainty |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > Inst for Innovation and Public Purpose |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/10195979 |
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