This video explains how cost benefit analysis (CBA) can be used to support bad decision-making. CBA if used as intended, it can be a very valuable investment tool. CBA can inform the investor if an initiative produces more benefits than costs and if investment in the initiative is worth proceeding with.
This video takes a look at CBA as a potential tool for manipulation. CBA is portrayed to be used by Government agencies as a technique to inform decision making. In reality, CBA is rarely used to inform investment decisions but instead used to promote Government investments as good use of public money.
This video outlines many of the tricks used by analysts to increase the value of benefits and lower the value of costs in attempt to make Government investments look more favourable. The areas this video covers are as follows:
- Base Case
- Assumptions
- Exaggerate Future Growth
- Insufficient Sources Cited
- Long Evaluation Periods
- More effort to find benefits than costs
- Qualitative discussion around benefits and not costs
- Lack detailed options analysis
- Select modelling or models that produces best results
- Exclude Negative effects on the network
- Don’t discuss negative externalities
- Use Generic Sensitivity tests
- Exclude profits from construction from analysis
I hope you enjoy this video. I will be putting out two more posts regarding the use of CBA as a tool of manipulation in the coming days.
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