American Economic Review: Vol. 96 No. 1 (March 2006)
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Benefit-Cost in a Benevolent Society
Bergstrom, TheodoreC. 2006. "Benefit-Cost in a Benevolent Society." American Economic Review, 96(1): 339-351.
How should benefit-cost analysis account for the value that benevolent individuals place on others' enjoyment of public goods? When adding up the benefits to be compared with costs, should we sum the private valuations, the altruistic valuations, or something else? This paper argues that private valuations are appropriate if concern for the well-being of others respects their private preferences. The discussion has implications for family decision-making, welfare economics, and the design of applied contingent valuation studies.
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Bergstrom, Theodore C.