The Cost-Benefit Fallacy: Why Cost-Benefit Analysis Is Broken and How to Fix It

Abstract Most cost-benefit analyses assume that the estimates of costs and benefits are more or less accurate unbiased. But what if, in reality, highly inaccurate biased? Then assumption analysis is a rational way to improve resource allocation would be fallacy. Based on largest dataset its kind, we test cost benefit public investments We find this not case with overwhelming statistical significance. document extent overruns, shortfalls, forecasting bias investments. further assess whether such inaccuracies seriously distort effective allocation, which found case. explain our findings behavioral terms explore their policy implications. Finally, conclude stands need reform outline four steps reform.