This article examines how distributional weights can be introduced into benefit-cost analysis (BCA) by using insights from recent developments in welfare economics, in particular the theory of fair social allocation and happiness studies. We argue that it is easier than commonly believed to design weights that embody the Paretian and equity properties of a well-crafted social welfare function. However, the informational requirements for such weights suggest that it may be helpful to examine the potential for simpler weights (e.g., based on simple objective indexes of well-being) to provide reasonable approximations of ideal weights for use in BCA.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- Management, Monitoring, Policy and Law