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"Cost Benefit Analysis" and the Economic Calculation Problem

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Groucho Posted: Sun, Oct 14 2012 8:25 PM

So I've been giving this a bit of thought lately, the increasingly popular meme that has been rippling its way through libertarian circles this past year - the use of so-called "cost-benefit analysis" in determining which government actions (or which forms of aggression) ought to be undertaken.

The problem I have is this: I cannot for the life of me figure out how any such large-scale cost-benefit analysis is not subject to the same failings as socialism in terms of the economic calculation problem.


An idealist is one who, on noticing that roses smell better than a cabbage, concludes that it will also make better soup. -H.L. Mencken
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Same problem to a lesser degree. There's a price system, just a inefficient price system because the government is involved.

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Neodoxy replied on Sun, Oct 14 2012 10:24 PM

Well it's a little complicated, but basically if the government somehow knew the exact effects of its actions upon future events, then so long as it was a one time event that was unexpected by entrepreneurs and was relatively instantaneous, then it would not suffer from the calculation problem, and could yield positive results. This is because it is strictly working within the framework of the market economy and the corresponding market calculations. Good luck meeting the above criteria though.

At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black...
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