Cost-Benefit Analysis and Incentives In Evaluation: Some Comments

This book of essays “Cost- Benefit Analysis and Incentives in Evaluation” edited by Massimo Florio has a twofold objective. While it explicitly focuses on the reduction of moral hazard on the part of the European Union member states in using cost-benefit analysis (CBA), and in doing so proposes application of the incentive policy (à la Laffont and Tirole), it also investigates the reasons why CBA is declining as an evaluation tool. The decline is due to the entry onto the economic policy scene of monetarism as expounded by Friedman and, later, Barro, Lucas, Kydland and Prescott, with their critique of any type of public intervention. The authors rediscover the reasons for economic CBA evaluation, particularly for infrastructure projects (but it can readily be extended to environmental, education, cultural, research and innovation projects). Under scrutiny are concepts such as the discount rate, income distribution and the social welfare function.Cost-Benefit Analysis, Environmental Economics: Government Policy, Project Evaluation, Social Discount Rate