Web Debate on Benefit-Cost Analysis

"Smith says that we have limited resources and that we may have to trade one environmental or educational program against another. But why is it only good things that have to be traded against each other? What if we want both education and environmental protection, what if we want both protection of coastal wetlands and spending on climate change mitigation? Personally, we’d like to have it all, and finance it by giving up some useless missiles or tax cuts for millionaires. Scarcity is artificially contrived, in the midst of American affluence, by declaring such choices off-limits. Why should we throw up our hands and say that the richest country in the world can’t afford to protect the environment and educate our kids? Cost-benefit analysis doesn’t reflect preferences like ours because it does not -- and cannot -- take a large look at what our society spends money on and help us get the things we want most. For that, we have democracy, not made-up markets."

I would be very interested to have people make comments on this on-line debate. Which side do you think gets the best of the discussion?

I know that most economists view the role and purpose of government as correcting market failure. Based upon the discussion by Ackerman & Heinzerling, I have no idea what they think the role of government should be. James Madison describes the role of government:

"Government is instituted to protect property of every sort; as well that which lies in the various rights of individuals, as that which the term particularly expresses. This being the end of government, that alone is a just government, which impartially secures to every man, whatever is his own."

Madison's "end of government" is pretty much the normative framework of individual liberty. I agree with Madison. While the normative framework of efficiency, which defines the economic role of government as correcting market failure, is not identical to the role of government defined with respect to individual liberty, it seems to me most economists are not hostile to liberty. I suspect that Ackerman and Heinzerling can be pretty hostile to individual liberty because of their assertion that we have democracy to help us get the things we want most. Would you agree?