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    This blog highlights effective ideas in the fight against poverty and exclusion, and analyzes the impact of development projects in Latin America and the Caribbean.
  • Cognition and cost-benefit analysis



    Cost Benefit analysis can be used to fight our cognitive biases

    More than ten years ago, Cass Sunstein wrote an article on how Cost Benefit analysis can be used to fight our cognitive biases and help unravel our misunderstanding of the facts.

    Just as the Senate was designed to have a “cooling effect” on the passions of the House of Representatives, so cost-benefit analysis might ensure that policy is driven not by hysteria or alarm, but by a full appreciation of the effects of relevant risks and their control.

    If the hysteria survives an investigation of consequences, then the hysteria is fully rational, and an immediate and intensive regulatory response is entirely appropriate.

    Let me suggest you (re)read it

    One Response to “Cognition and cost-benefit analysis”

    • joshef :

      Cost-benefit analysis is often justified on conventional economic grounds, as a way of preventing inefficiency. But it is most plausibly justified on cognitive grounds — as a way of counteracting predictable problems in individual and social cognition.

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