When benefit-cost analysis produces a result that is objectionable does this mean that the technique is objectionable? It means only that the technique cannot rise above the individual and community values on which it rests.
That is, values in benefit-cost analysis rest in large measure on law. An understanding of what values count and whose values count and why they count cannot then be separated from law. This understanding of value obviates most criticisms of benefit-cost analysis as a technique. Benefit-cost analysis also contributes to the law so that, for example, when there is a discrepancy between legal and psychological ownership, efficiency suggests that the law change to reflect psychological ownership. The values considered in benefit-cost analysis are very broad and include those associated with income distribution-the most radical proposition in this article-as well as the value of harm even when it is specifically unknown. An appreciation of the broad range of what is meant by value further dislodges criticisms of benefit-cost analysis.
The Book Thief
Derek sues Amartya for stealing his book, and asks for the return of the book and costs. Derek is poor and Amartya is rich. Derek loves the book but Amartya cares only a little for it. Derek would have been willing to pay $10 for the book, or would have sold the book to Amartya for $15. Amartya would pay $20 for it, but would sell it for $22.50. A benefit-cost analyst hired by Amartya testifies at the trial that the value of the book is greater for Amartya than for Derek, in the sense that Amartya's willingness to pay exceeds Derek's willingness to pay. So the benefit-cost analyst suggests that wealth is maximized if the book goes to Amartya. The court finds, however, that because Amartya stole the book, it belongs to Derek, the benefit-cost analysis notwithstanding. 1