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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.
  • How (not) to lie with Cost Benefit Analysis



    “Lies, damned lies, and statistics” is what Benjamin Disraeli reportedly once said, according to Mark Twain and if one is to believe Wikipedia.

    A few months ago I wrote on some of the dirty little secrets in Cost Benefit Analysis: mixing nominal and real flows, counting employment as a benefit, ignoring externalities etc.

    CB Lies eng


    So it’s refreshing (or is it?) that a recent article provided some rules on how (not) to lie with Benefit-Cost Analysis (previous ungated version here)

    Benefit-cost analysis is the applied side of welfare economics. Its broad use in support of public decisions draws both detractors and defenders. This tongue-in-cheek piece demonstrates that knowing how to lie provides insights into how not to lie; we assume the former is always accidental among economists and we hope it is so for others.

    That’s kind of wishful thinking, but here is a sneak preview to these lies

    Lie #1: Be selective in your impacts and values

    Lie #2: Confuse the baseline

    Lie #3: Count jobs entirely as a benefit

    Lie #4: Act as if a number is certain (This one I love)

    If you lie about a lie, are you telling the truth?

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