All general rules for behavior or valuation and for law itself break down under some circumstances. The law struggles with this sort of issue in the law of necessity, in assigning rights, in valuation, in considering burdens of proof with incomplete information, and in developing common law....

Earlier accounts of the creation of property rights in the California gold fields ignored culture and are incomplete. We argue that culture matters in solving collective-action problems. Such problems in the California gold fields were solved through reliance on cultural focal points. Focal...

Sagoff believes that welfare has meaning beyond its relation to preference, i.e., that there is a “substantive and independently defined conception of welfare” that is measured by KH but not by KHM. In contrast, we find that the foundation of both KH and KHM is not welfare, which is not...

The concept of market failure was originally presented by economists as a normative explanation of why the need for government expenditures might arise. Gradually, the concept has taken on the form of a full-scale diagnostic tool frequently employed by policy analysts to determine the exact...

In recent years there has been a debate over whether or not moral sentiments should be included in normative economic analysis. This paper compares the standard normative criteria for benefit cost analysis, Kaldor-Hicks, that does not include moral sentiments with a modification that does called...

Benefit-cost analysis (BCA) is commonly viewed as either a mechanical tool for making decisions or as a failed technique of decision-making that avoids moral, interactive, and ethical components. It is properly neither. Benefit-cost analysis is an art form that can produce useful information...

The Kaldor-Hicks (KH) criterion has long been the standard for benefit-cost analysis, but it has also been widely criticized for ignoring equity and, arguably, moral sentiments in general. We suggest replacing KH with an aggregate measure called KHM, where the M stands for moral sentiments. KHM...

Two comments in this issue of the Journal address our recent article in Volume 2, Issue 2. The fundamental issue with both comments is that they confuse the financial rate of return with the opportunity cost rate of return and therefore advocate for an inappropriate basis on which to calculate...

In order to be sensible about what discount rate to use one must be clear about its purpose.We suggest that its purpose is to help select those projects that will contribute more net benefits than some other discount rate. This approach, which is after all the foundation for benefit-cost...

This paper argues that the consistent application of benefit-cost analysis (BCA) is likely to enhance the well-being of all. Thus, the justification for its use in policy making lies directly in the Pareto test. The Pareto justification stems from a decision-rule perspective across a portfolio...