Reading Notes by Christopher Lay

Los Angeles Pierce College

Department of History, Philosophy, and Sociology

Steven Kelman, "Cost-Benefit Analysis: An Ethical Critique"

Decision Making	Many argue that cost-benefit analyses are necessary for making decisions. They argue:
	1) We ought not do something if the costs outweigh the benefits. 2) To determine if we ought to do something we should "express all benefits and costs in a common scale or denominator, so that they can be compared with each other." 3) Policy-makers need to know the costs and benefits and this justifies the costs needed to gather the relevant data.	"(1) There exists a strong presumption that an act should not be undertaken unless its benefits outweigh its costs." "(2) In order to determine whether benefits outweigh costs, it is desirable to attempt to express all benefits and costs in a common scale or denominator, so that they can be compared with each other, even when some benefits and costs are not traded on markets and hence have no established dollar values." "(3) Getting decision-makers to make more use of cost-benefit techniques is important enough to warrant both the expense required to gather the data for improved cost-benefit estimation and the political efforts needed to give the activity higher priority compared to other activities, also valuable in and of themselves."
Kelman	Kelman's conclusion:
	1) There may be situations where something is right despite the costs. 2) Not everything can be quantified in the cost-benefit calculus. 3) The expense of collecting data for cost-benefits analyses is not always justified.	"(1) In areas of environmental, safety, and health regulation, there may be many instances where a certain decision might be right even though its benefits do not outweigh its costs." "(2) There are good reasons to oppose efforts to put dollar values on non-marketed benefits and costs." "(3) Given the relative frequency of occasions in the areas of environmental, safety, and health regulation where one would not wish to use a benefits-outweigh-costs test as a decision rule, and given the reasons to oppose the monetizing of non-marketed benefits or costs that is a prerequisite for cost-benefit analysis, it is not justifiable to devote major resources to the generation of data for cost-benefit calculations or to undertake efforts to 'spread the gospel' of cost-benefit analysis further."
Starting Question	"How do we decide whether a given action is morally right or wrong and hence, assuming the desire to act morally, why it should be undertaken or refrained from?"
CBA Answer	"[T]he answer given by cost-benefit analysis, that actions should be undertaken so as to maximize net benefits, represents one of the classic answers given by moral philosophers—that given by utilitarians."
Utilitarianism	"The act that maximizes attainment of satisfaction under the circumstances is the right act."
	"The positive and negative consequences of an act for satisfaction may go beyond the act's immediate consequences."
Impetuous Utilitarianism	"A facile version of utilitarianism would give moral sanction to a lie, for instance, if the satisfaction of an individual attained by telling the lie was greater than the suffering imposed on the lie's victim." "Few utilitarians would agree."
Long-Term Consequences Matter	Most non-facile utilitarians would point to the many long-term, negative consequences from permitting lies.	"Most of them would add to the list of negative consequences the effect of the one lie on the tendency of the person who lies to tell other lies, even in instances when the lying produced less satisfaction for him than dissatisfaction for others. They would also add the negative effects of the lie on the general level of social regard for truth-telling, which has many consequences for future utility."
Moral Pains and Pleasures	Important: The pains and pleasures associated with doing what is morally good or morally bad cannot figure into the calculation. Calculations that use such pains and pleasures to determine the morality of an action beg the question.
Kelman's Move / Utilitarian Roots	"Utilitarianism is an important and powerful moral doctrine." "But it is probably a minority position among contemporary moral philosophers." "It is amazing that economists can proceed in unanimous endorsement of cost-benefit analysis as if unaware that their conceptual framework is highly controversial in the discipline from which it arose–moral philosophy."
Nazi Example	"Imagine the case of an old man in Nazi Germany who is hostile to the regime." "He is wondering whether he should speak out against Hitler." "If he speaks out, he will lose his pension." "And his action will have done nothing to increase the chances that the Nazi regime will be overthrown: he is regarded as somewhat eccentric by those around him, and nobody has ever consulted his views on political questions." "Recall that one cannot add to the benefits of speaking out any satisfaction from doing 'the right thing,' because the purpose of the exercise is to determine whether speaking out is the right thing." " How would the utilitarian calculation go?" "The benefits of the old man's speaking out would, as the example is presented, be nil, while the costs would be his loss of his pension." "So the costs of the action would out-weigh the benefits." "By the utilitarians' cost-benefit calculation, it would be morally wrong for the man to speak out."
Evaluative Pause	Does this mean that the pensioner ought do nothing according to utilitarianism?
Candle	"Another example: two very close friends are on an Arctic expedition together." "One of them falls very sick in the snow and bitter cold, and sinks quickly before anything can be done to help him." "As he is dying, he asks his friend one thing, 'Please, make me a solemn promise that ten years from today you will come back to this spot and place a lighted candle here to remember me.'" "The friend solemnly promises to do so, but does not tell a soul." "Now, ten years later, the friend must decide whether to keep his promise." "It would be inconvenient for him to make the long trip." "Since he told nobody, his failure to go will not affect the general social faith in promise-keeping." "And the incident was unique enough so that it is safe to assume that his failure to go will not encourage him to break other promises." "Again, the costs of the act outweigh the benefits." "A utilitarian would need to believe that it would be morally wrong to travel to the Arctic to light the candle."
Evaluative Pause	What would Singer, the utilitarian, say that the living person should do?
Justice/Innocence	"A third example: a wave of thefts has hit a city and the police are having trouble finding any of the thieves." "But they believe, correctly, that punishing someone for theft will have some deterrent effect and will decrease the number of crimes." "Unable to arrest any actual perpetrator, the police chief and the prosecutor arrest a person whom they know to be innocent and, in cahoots with each other, fabricate a convincing case against him." "The police chief and the prosecutor are about to retire, so the act has no effect on any future actions of theirs." "The fabrication is perfectly executed, so nobody finds out about it." "Is the only question involved in judging the act of framing the innocent man that of whether his suffering from conviction and imprisonment will be greater than the suffering avoided among potential crime victims when some crimes are deterred?" "A utilitarian would need to believe that it is morally right to punish the innocent man as long as it can be demonstrated that the suffering prevented outweighs his suffering."
Evaluative Pause	Would Utilitarian legislators say that such actions should be enshrined into law?
Possible Worlds	"And a final example: imagine two worlds, each containing the same sum total of happiness." "In the first world, this total of happiness came about from a series of acts that included a number of lies and injustices (that is, the total consisted of the immediate gross sum of happiness created by certain acts, minus any long-term unhappiness occasioned by the lies and injustices)." "In the second world the same amount of happiness was produced by a different series of acts, none of which involved lies or injustices." "Do we have any reason to prefer the one world to the other?" "A utilitarian would need to believe that the choice between the two worlds is a matter of indifference."
Evaluative Pause	What can a Utilitarian say in response?
Kelman's Conviction	"We believe that some acts whose costs are greater than their benefits may be morally right and, contrariwise, some acts whose benefits are greater than their costs may be morally wrong."
CBA Included	Kelman doesn't argue that there is no place for cost-benefit analyses.	"This does not mean that the question whether benefits are greater than costs is morally irrelevant. Few would claim such. Indeed, for a broad range of individual and social decisions, whether an act's benefits outweigh its costs is a sufficient question to ask. But not for all such decisions."
CBA Excluded	But it does not belong in a number of areas, such as the "freedom of speech or trial by jury."	"We do not do cost-benefit analyses of freedom of speech or trial by jury."
Human Rights	"The notion of human rights involves the idea that people may make certain claims to be allowed to act in certain ways or to be treated in certain ways, even if the sum of benefits achieved thereby does not outweigh the sum of costs."
Not CBA, But ... / In the Face of Conflicts	"In the most convincing versions of nonutilitarian ethics, various duties or rights are not absolute." "But each has a prima facie moral validity so that, if duties or rights do not conflict, the morally right act is the act that reflects a duty or respects a right." "If duties or rights do conflict, a moral judgment, based on conscious deliberation, must be made." "Since one of the duties non-utilitarian philosophers enumerate is the duty of beneficence (the duty to maximize happiness), which in effect incorporates all of utilitarianism by reference, a nonutilitarian who is faced with conflicts between the results of cost-benefit analysis and nonutility-based considerations will need to undertake such deliberation." "But in that deliberation, additional elements, which cannot be reduced to a question of whether benefits outweigh costs, have been introduced." "Indeed, depending on the moral importance we attach to the right or duty involved, cost-benefit questions may, within wide ranges, become irrelevant to the outcome of the moral judgment."
Conflict Example	"When officials are deciding what level of pollution will harm certain vulnerable people–such as asthmatics or the elderly–while not harming others, one issue involved may be the right of those people not to be sacrificed on the altar of somewhat higher living standards for the rest of us."
In General	"But more broadly than this, many environmentalists fear that subjecting decisions about clean air or water to the cost-benefit tests that determine the general run of decisions removes those matters from the realm of specially valued things."
Assigning Costs and Benefits	Common measures are needed if one is to compare costs to benefits. $ But we usually squirm when assigning monetary value to things like "human life itself," and "peace and quiet, fresh-smelling air, swimmable rivers, spectacular vistas [etc.] ... ."	"In order for cost-benefit calculations to be performed the way they are supposed to be, all costs and benefits must be expressed in a common measure, typically dollars, including things not normally bought and sold on markets, and to which dollar prices are therefore not attached. The most dramatic example of such things is human life itself; but many of the other benefits achieved or preserved by environmental policy—such as peace and quiet, fresh-smelling air, swimmable rivers, spectacular vistas—are not traded on markets either."
	But people do seem willing to put prices on many of those things, economists point out. When you buy a house, something that can have a monetary value, it comes bundled with things that don't have direct market value, like views etc. "[F]resh air is not marketed, but houses in different parts of Los Angeles that are similar except for the degree of smog are."	"They have tried to develop methods for imputing a person's 'willingness to pay' for such things, their approach generally involving a search for bundled goods that are traded on markets and that vary as to whether they include a feature that is, by itself, not marketed."
Problem 1 / We're Not All Alike	Some value quiet more than others. "[T]o use the property value discount of homes near airports as a measure of people's willingness to pay for quiet means to accept as a proxy for the rest of us the behavior of": 1] "those least sensitive to noise," 2] "airport employees (who value the convenience of a near-airport location)" or 3] "others who are susceptible to an agent's assurances that 'it's not so bad.'"
Problem 2 / Giving Up & Gaining	"[T]he attempts of economists to measure people's willingness to pay for non-marketed things assume that there is no difference between the price a person would require for giving up something to which he has a preexisting right and the price he would pay to gain something to which he enjoys no right."
But Giving Up ≠ Gaining	"[M]ost people would insist on being paid far more to assent to a worsening of their situation than they would be willing to pay to improve their situation."
Problem 3 / Private & Public	"Those who use figures garnered from ["private"] analysis to provide guidance for public decisions assume no difference between how people value certain things in private individual transactions and how they would wish those same things to be valued in public collective decisions."
Behavioral Cues	"[W]e show [it is argued] by our daily risk-taking behavior that we do not value life infinitely, and therefore our public decisions should not reflect the high value of life that proponents of strict regulation propose."
But Private ≠ Public	"[P]ublic, social decisions provide an opportunity to give certain things a higher valuation than we choose, for one reason or another, to given them in our private activities."
	"Precisely because we fail, for whatever reasons, to give life-saving the value in everyday personal decisions that we in some general terms believe we should give it, we may wish our social decisions to provide us the occasion to display the reverence for life that we espouse but do not always show."
Problem 4 / Cheapening	"[T]he very act of [assigning a cost to something] will reduce the thing's perceived value." "To place a price on the benefit may, in other words, reduce the value of that benefit." "Cost-benefit analysis thus may be like the thermometer that, when placed in a liquid to be measured, itself changes the liquid's temperature."
Cheapened E.G.	"Praise that is bought is worth little, even to the person buying it."
Cheapening Reason A	"The first reason that pricing something decreases its perceived value is that, in many circumstances, non-market exchange is associated with the production of certain values not associated with market exchange."
Cheapening Reason A / Sex E.G.	"The willingness to pay for sex bought from a prostitute is less than the perceived value of the sex consummating love." "(Imagine the reaction if a practitioner of cost-benefit analysis computed the benefits of sex based on the price of prostitute services.)"
Cheapening Reason A / Environmental E.G.	"[F]or many people who value ["pristine streams or undisturbed forests"], part of their value comes from their position as repositories of values the non-market sector represents."
Cheapening Reason B / "Not For Sale"	"The second way in which placing a market price on a thing decreases its perceived value is by removing the possibility of proclaiming that the thing is 'not for sale,' since things on the market by definition are for sale."
NFS	"[T]he statement is a way of showing that a thing is valued for its own sake, whereas selling a thing for money demonstrates that it was valued only instrumentally."
	"Such an announcement does more, however, than just reflect a preexisting high valuation." "It signals a thing's distinctive value to others and helps us persuade them to value the thing more highly than they otherwise might." "It also expresses our resolution to safeguard that distinctive value." "To state that something is not for sale is thus also a source of value for that thing, since if a thing's value is easy to affirm or protect, it will be worth more than an otherwise similar thing without such attributes." "If we proclaim that something is not for sale, we make a once-and-for-all judgment of its special value."
Without NFS	"When something is priced, the issue of its perceived value is constantly coming up, as a standing invitation to reconsider that original judgment." "Were people constantly faced with questions such as 'how much money could get you to give up your freedom of speech?' or 'how much would you sell your vote for if you could?', the perceived value of the freedom to speak or the right to vote would soon become devastated as, in moments of weakness, people started saying 'maybe it's not worth so much after all.'"
Cheapening Reason C / Priceless	Some things NFS are extra-special: they are "priceless," or have "infinite value." "Such expressions are reserved for a subset of things not for sale, such as life or health."
Priceless and Economists	"Economists tend to scoff at talk of pricelessness." "For them, saying that something is priceless is to state a willingness to trade off an infinite quantity of all other goods for one unit of the priceless good, a situation that empirically appears highly unlikely."
Priceless	"Its value-affirming and value-protecting functions cannot be bestowed on expressions that merely denote a determinate, albeit high, valuation."
Priceless / Kennedy E.G.	"John Kennedy in his inaugural address proclaimed that the nation was ready to 'pay any price [and] bear any burden ... to assure the survival and the success of liberty.'" "Had he said instead that we were willing to 'pay a high price' or 'bear a large burden' for liberty, the statement would have rung hollow."
Possible, "In Effect" Objection to Kelman Considered	Recall Kelman from earlier: 1) "in cases where various non-utility-based duties or rights conflict with the maximization of utility, it is necessary to make a deliberative judgment about what act is finally right." 2) "the search for commensurability might not always be a desirable one, that the attempt to go beyond expressing benefits in terms of (say) lives saved and costs in terms of dollars is not something devoutly to be wished."
"In Effect" Valuation	The objection goes like this: we value human life "in effect," so we might as well be straightforward and explicit about it. "If government regulators promulgate a regulation that saves 100 lives at a cost of $1 billion, they are 'in effect' valuing a life at (a minimum of) $10 million, whether or not they say that they are willing to place a dollar value on a human life."	"In situations involving things that are not expressed in a common measure, advocates of cost-benefit analysis argue that people making judgments 'in effect' perform cost-benefit calculations anyway. If government regulators promulgate a regulation that saves 100 lives at a cost of $1 billion, they are 'in effect' valuing a life at (a minimum of) $10 million, whether or not they say that they are willing to place a dollar value on a human life. Since, in this view, cost-benefit analysis 'in effect' is inevitable, it might as well be made specific."
Kelman's Reply "In Effect" Objection	"This argument misconstrues the real difference in the reasoning processes involved."
CBA	"In cost-benefit analysis, equivalencies are established in advance as one of the raw materials for the calculation." "One determines costs and benefits, one determines equivalencies (to be able to put various costs and benefits into a common measure), and then one sets to toting things up—waiting, as it were, with bated breath for the results of the calculation to come out." "The outcome is determined by the arithmetic; if the outcome is a close call or if one is not good at long division, one does not know how it will turn out until the calculation is finished."
Non-CBA	"In the kind of deliberative judgment that is performed without a common measure, no establishment of equivalencies occurs in advance." "Equivalencies are not aids to the decision process." "In fact, the decision-maker might not even be aware of what the 'in effect' equivalencies were, at least before they are revealed to him afterwards by someone pointing out what he had 'in effect' done." "The decision-maker would see himself as simply having made a deliberate judgment; the 'in effect' equivalency number did not play a causal role in the decision but at most merely reflects it."
	"Given this, the argument against making the process explicit is the one discussed earlier in the discussion of problems with putting specific quantified values on things that are not normally quantified–that the very act of doing so may serve to reduce the value of those things."