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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

    5
    Dec
    2013

    By

    “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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