The value test: An exercise in futility
This exercise has not been to demonstrate that Patricia Herman`s value test is flawed. Indeed, it appears to be a very diligent attempt to get it right. Even a perfect cost/benefit analysis will be fundamentally flawed because all such analysis is an attempt to do something that conceptually cannot be done. Cost/benefit analysis is a non-operational approach for making determinations about social efficiency. Making assumptions to the contrary and then proceeding does not change this fact; it does not change things to argue that this is the best we can do. If we do proceed with the analysis, any conclusion regarding social efficiency is pure speculation. The point is that the problems with the analysis precludes demonstrating that its the best we can do because there is no way to assess the analysis ex post. In order to determine whether the results of a cost/benefit analysis, ex post, moves us in the direction of enhanced social welfare one would have to understand the direction. To know this, the analyst would have to be able to overcome the problems that we have discussed, and this is a catch 22. This analysis also has broader implications for DSM. Support for DSM is based on the assumption that electricity is being overconsumed, but all of the problems that must be overcome to perform cost/benefit analysis must also be overcome to demonstrate that there is an overconsumption problem. It must be shown that existing restrictions on oil drilling/explorations, energy taxes/regulations, and monopoly/cartel influences are not already compensating for the overconsumption. To understand the extent of any overconsumption problem one must overcome the subjective value problem since interpersonal comparisons of costs and benefits have to be made. Combine these problems with the fact that the passage of time changes results and that the science behind some social cost problems is controversial, and it becomes doubtful that DSM as public policy has any economic justification.
- OSTI ID:
- 93822
- Report Number(s):
- CONF-950398-; TRN: 95:005120-0003
- Resource Relation:
- Conference: New horizons in electric power deregulations, Washington, DC (United States), 2 Mar 1995; Other Information: PBD: 1995; Related Information: Is Part Of New horizons in electric power deregulation; PB: 139 p.
- Country of Publication:
- United States
- Language:
- English
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