Moral aspects of socio economic methods
1. The individual versus the well being of the majority
The aim of a social cost-benefit analysis is to select the project with the highest social cost-benefit ratio that will lead to a maximisation of wealth for society. But what if the planned expansion of a new airport will indeed increase the (economic) well being of a region, but at the same time will reduce the quality of life for people living close to the airport significantly?
2. Measuring the economic value of a human life and the environment
Another source of controversy is setting a monetary value on a human life, e.g., when assessing the cost-effectiveness of security measures to save a life. Apart from the more classic moral point of view that a human life is priceless, there are methodological issues about how (in technical terms) to determine the value of a human life (the value of a statistical life (VASL). For example, the value of a statistical life assumes that all agents have the same preferences with regards to risk and are fully informed about it. In addition, measuring the value of life assumes one is able to isolate the analysed risk factor (e.g. terrorism) from other risk factors such as health issues and other types of crime.
As an illustration of the above mentioned issues, see the case example below:
Case example: dedicated surveillance on location
A paper by Stewart and Mueller (2008) performed a cost-benefit analysis of two aviation security measures, one of them the Federal Air Marshal Service. They conclude that even if the Air Marshal surveillance prevents one 9/11 replication each decade, the $900 million annual spending on Air Marshal Service fails a cost-benefit analysis at an annual estimated cost of $180 million per life saved (compared to a societal willingness to pay to save a life of $1 - $10 million per saved life).
The same kind of issues can be raised when the environment is valued as a provider of services to humans, such as safe water supply and pollination. Also here, one can wonder if it is always possible to correctly value the environment, especially because one cannot afford to make mistakes.
3. Who deserves safety?
A third source of moral controversy comes from the question if everyone deserves protection from (terrorist) threats or only the wealthy. This is a question policy makers and urban planners have to deal with every day.
Footnotes and references
- For more information on this subject, see e.g.:Ashenfelter, O. (2006): Measuring the Value of a Statistical Life: Problems and Prospects. NBER Working Paper Series. No. 11916. Online: http://www.nber.org/papers/w11916.pdf?new_window=1.
- Stewart, M.G., J. Mueller (2008): A risk and cost-benefit assessment of United States aviation security measures. Springer Science.