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Cost benefit analysis is an important tool for policy makers since it helps them to make fair decision of taking up large scale project which will incur capital expenditure which is less than its benefit. It usually evaluate the total expenditure can incur in carrying out the project compared to the total expected benefit in order to determine whether the project worthwhile to be carried out by the company. (Ackerman, 2008). In this essay, it will outline at least three criticism of cost benefit analysis. Making decision about public policy, it is a challenging and complicated process because of less time and resources. But in It could only be possible if one could assign monetary values directly to all cost and benefits of a proposed project or policy, then it would be simple and transparent. reality, it usually a different picture in practice since sometimes the measurement of costs and benefit become complex and require detail process and calculation which sometimes losses transparency and often objective as well. (Ackerman, 2008).
Firstly, one of the criticisms of cost benefit analysis used by policy makers is pricing the priceless. When evaluating the cost and benefit of health and environmental policies, it is usually only considering the monetary value of the final stage. For example, a company emitting carbon dioxide gases on the atmosphere, policy makers only calculate the cost and benefit of the end process but does not give monetary value to the losses of species which has been harmed by the gases and it is also hard to give monetary value to the people surrounded by the area which can affect their lives. This will incur if the preservation of human life and natural system are unprized, they will remain mere warning labels attached to an incomplete numerical calculations. The philosopher Immanuel Kant states that something have price or relative worth while other things have dignity. The failure of cost benefit analysis in terms of the philosopher Immanuel Kant, attempt to weight cost which usually have price and benefit usually have dignity. But in everything money is all that matters, priceless benefits are valued at zero by default. (Ackerman, 2008).
Secondly, another criticism of cost benefit analysis is troubling trade off’s. Anything can be exchanged for anything else which can be measured in money such as cars, computers and many more which could be fair to trade one for another. This assumption is usually misleading and disturbing since artificial prices are applied to the fundamental non-monetary values of life, health and nature. For example, If you invest a $100, after one year you received $300.00, then it would mean that you a successful investor. But if a policy kills 100 people now in order to save 400 lives later, there is no way to bring back the lives of the 100 people, it will be unethical. This implies different scenario will be recorded according to what policy makers consider which is beneficiary to the society. (Ackerman, 2008).
Thirdly, Uncertainty and precaution is another criticism of cost benefit analysis. Cost benefit analysis usually require definite monetary value for comparison of cost and benefits. Many environmental policies are uncertain because it could not actually determine the exact amount of cost and benefit. Taking into account this uncertainty, it is impossible to quantify benefits of environmental protection project. In reality, it is usually complex and uncertain to determine the actual monetary value of an environmental project. This reveals that to take up environmental project we need to consider the credible warnings and harm for complete trust. (Ackerman, 2008).
Therefore, cost benefit analysis is one of the tools used by policy makers to assess the project in regards to comparing benefits and cost. Usually this tool is used mainly for many policy makers but it should also take into account some of the criticism and they can opt for another alternative if needed be for correct valuation of cost and benefits of a project.
This journal is elaborating on the effect of forest fires in the region of Algeria and as the entire Mediterranean basin as this place consider forest fires as a chronic phenomenon that seems to be increasing. The forest fires tend to be devastated as it causes enormous ecological and socio economic damages. As for this reason, it has purpose a methodology based on the CBA which has the merit to evaluate economically the importance of such investment. The main objective of the article is to validate the inclusion of the cost benefit analysis (CBA) method in the evaluation of prevention measures of forest fires.
The implementation of CBA method its aim is to evaluate the economic utility of the reduction measures of natural risk.
In this case benefit expression is referred to as B which is the avoided damages. Its equation given in the article is referred to as B= DEI * O, where DEI is the avoided damage and O is the retained objective to reduce the forest fires.
Whereas the cost expression is denoted as VA (t0) = VF (t)/ (1+t), where VA is the current value (at time t0) and VF is the future value at time t0
If B/C > 1 we should accept the project and if B/C < 1 we should not accept the project.(Insight, 2017).
The main conclusion of the article is that it showed the relevance of the CBA based on the avoided damages to evaluate the effectiveness of preventive measures of a FFP over a horizon of time using the case study of the Aures-Algeria region, which showed how the ratio B/C is accepted and examined.(Insight, 2017).
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