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Accident Analysis and Prevention 33 (2001) 9–17

Cost–benefit analysis of road safety measures: applicability and controversies

Rune Elvik * Institute of Transport Economics, PO Box 6110, Etterstad, N-0602, Oslo, Norway

Received 17 June 1999; received in revised form 20 November 1999; accepted 29 November 1999

Abstract

This paper discusses the applicability of cost–benefit analysis as an aid to policy making for road safety measures. A framework for assessing the applicability of cost–benefit analysis is developed. Five main types of criticism of cost–benefit analysis are identified: 1. rejecting the basic principles of cost–benefit analysis as not applicable to road safety, 2. excluding some types of issues from the scope of calculation of costs and benefits, 3. setting policy objectives that are not amenable to cost–benefit analysis, 4. rejecting the need for maintaining a separation between policy objectives and policy programmes as required for cost–benefit

analysis, and 5. rejecting, or denying the possibility of ever obtaining, acceptably valid and reliable economic valuations of the consequences

of alternative policy programmes. It is concluded that rejecting the basic principles of cost–benefit analysis is a difficult position to defend, since these principles are simply a re-statement in economic terms of very general principles of rational choice. These principles are part of the normative basis of all formal techniques designed to aid policy making as well as the democratic system of government. Everybody, including those who advocate the use of cost–benefit analysis, agree that some issues are unsuitable for cost–benefit analysis, in particular those that involve basic human rights and fairness in distribution. There may, however, be disagreement with respect to the perception of a specific policy issue in terms of whether it is mainly about rights and fairness or mainly about the effective use of policy instruments to solve a social problem. Politicians may be tempted to set policy objectives that are ill suited for cost–benefit analysis, but this does not imply that cost–benefit analysis makes unreasonable assumptions. Perhaps the most important issue for the applicability of cost–benefit analysis is whether people in general have sufficiently well ordered preferences for economic valuations based on these preferences to make sense. © 2000 Elsevier Science Ltd. All rights reserved.

Keywords: Cost–benefit analysis; Road safety; Assessment of applicability

www.elsevier.com/locate/aap

1. Introduction

Cost–benefit analysis has been applied for many years to set priorities for road safety measures. Its application goes at least 25 years back (Trilling, 1978), but has remained controversial (Hauer, 1994). Joksch (1975), in an early appraisal of the applicability of cost–benefit analysis to road safety measures, con- cluded that there were so many problems in estimating both costs and benefits that one should not rely on cost–benefit analysis to decide whether road safety

measures ought to be introduced. His objections did not, however, question the basic principles of cost– benefit analysis. Critics like Hauer (1991, 1994) and Haukeland (1994) have been more fundamental and reject the basic principles of cost–benefit analysis as put forward in the field of welfare economics to be applica- ble in the field of road safety. They state that the very idea of putting a monetary value on human life does not make sense and is ethically unacceptable.

The implications for the applicability of cost–benefit analysis of various types of criticism against its use depend on the nature of the arguments made. If one rejects the basic principles of cost–benefit analysis, then the technique cannot be applied at all. If, on the other

* Tel.: +47-22573800; fax: +47-22570290. E-mail address: [email protected] (R. Elvik).

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R. El6ik / Accident Analysis and Pre6ention 33 (2001) 9–1710

hand, one thinks that the economic valuation of a certain non-marketed good is too uncertain, then more research is called for to obtain a more precise valua- tion. This paper attempts to clarify the implications for the applicability of cost–benefit analysis of various types of criticism made against it. By doing so, the paper also tries to clarify the assumptions that must be made for the use of cost–benefit analysis to make sense. The context for the discussion is the application of cost–benefit analysis to road safety measures. The main questions discussed in the paper are: 1. How can the applicability of cost–benefit analysis

to a specific topic be determined? 2. What are the implications of various types of criti-

cism against the use of cost–benefit analysis for its applicability?

The outline of the paper is as follows. Following a brief presentation of how most textbooks introduce cost–benefit analysis, a framework for discussing its applicability is proposed. This framework forms the basis for a discussion of the implications of various types of criticism levelled against cost–benefit analysis. The discussion is concluded with an assessment of how adequate current cost–benefit analyses of road safety measures in Norway are as a basis for deciding on their use. Some alternatives to cost–benefit analysis are briefly discussed.

2. Cost–benefit analysis as presented in textbooks

Most textbooks in cost–benefit analysis and applied economic welfare theory (Dasgupta and Pearce, 1972; Sassone and Schaffer, 1978; Sugden and Williams, 1978; Boadway and Bruce, 1984; Mishan, 1988; Gram- lich, 1990; Johansson, 1991; Hanley and Spash, 1993; Williams and Giardina, 1993; Layard and Glaister, 1994) contain examples of such analyses, intended to show their basic logic. In general, the problems used to illustrate cost–benefit analysis in textbooks share the following characteristics: 1. They involve public expenditures, often investments.

Projects are sometimes financed by direct user pay- ment, but more often by general taxation.

2. There are multiple policy objectives, often partly conflicting and requiring tradeoffs to be made. It is assumed that policy makers want solutions that realise all policy objectives to the maximum extent possible.

3. One or several of the policy objectives concern the provision of a non-marketed public good, like less crime, a cleaner environment or safer roads.

4. It is assumed that an efficient use of public funds is desirable, since these funds are scarce and alterna- tive uses of them numerous.

These, then, are the main characteristics of problems that economists regard as well suited for cost–benefit analysis. Applied welfare economics supplies the basic principles of cost–benefit analysis. There are four main principles: Consumer sovereignty, welfare maximisa- tion, valuation of goods according to willingness-to- pay, and neutrality with respect to distributive outcomes. The principle of consumer sovereignty, briefly stated, means that welfare is defined in terms of how consumers choose to spend their income between commodity bundles. The right of consumers to choose how to spend their income is respected. The strength of consumer preferences for the provision of public goods is measured by the amount of money that consumers are willing to pay for these goods. Various techniques have been developed to assess willingness to pay for non-marketed goods. It is beyond the scope of this paper to discuss these techniques in detail.

The objective of cost–benefit analysis is welfare max- imisation. To determine whether a project increases welfare or not, cost–benefit analysis relies on the Pareto-criterion. This criterion states that welfare is increased when a change makes at least one person better off and nobody worse off. In practice, many public projects will make some people better off and others worse off. Hence, the Pareto criterion is not very practical. Most economists therefore subscribe to a less demanding criterion of welfare maximisation, stating that welfare is increased when a potential Pareto im- provement occurs. A project satisfies this criterion when those who benefit from it can compensate those who lose from it (in utility terms) and still retain a net benefit (in utility terms). In practice, a project is re- garded as satisfying this criterion when benefits are greater than costs. There is, however, no requirement that actual compensation of those who lose takes place. Cost–benefit analysis is neutral with respect to distribu- tive outcomes. What counts is the aggregate size of benefits and costs, not how these impacts are dis- tributed between various groups of the population.

3. A framework for assessing the applicability of cost–benefit analysis to assess road safety measures

In order to sort out various objections to cost– benefit analysis with regard to their implications for the use of this technique, a framework for assessing the applicability of cost–benefit analysis has been devel- oped. This framework is displayed graphically on Fig. 1.

The framework identifies five stages in assessing the applicability of cost–benefit analysis to a certain prob- lem. These stages are: 1. Assess the basic principles of cost–benefit analysis. 2. Determine the type of issue to be decided.

R. El6ik / Accident Analysis and Pre6ention 33 (2001) 9–17 11

3. Evaluate the suitability of policy objectives for cost–benefit analysis.

4. Determine if suitable policy programmes can be developed.

5. Evaluate the consequences of policy programmes, especially with respect to the possibility of monetary valuation.

Table 1 elaborates each of these stages and lists some of the most common objections to cost–benefit analy- sis. These objections are discussed more in detail below. Table 1 is intended only to give an overview.

In practice, the distinction between the various stages in Fig. 1 is likely to be blurred. Some objections to the use of cost–benefit analysis can be placed at more than

Fig. 1. A multi-stage model to determine the applicability of cost–benefit analysis to a specific policy programme.

Table 1 Basic assumptions of cost–benefit analysis and common objections to these assumptions

Common objections to the basic tenetsCriterion of applicability Basic tenets of cost–benefit analysis

1: Consumer sovereignty O1: Consumers do not know their own bestBasic principles of 2: Willingness-to-pay as measure of value O2: Amounts paid depend on ability to pay, not just willingnesscost–benefit analysis 3: Welfare maximisation O3: Compensation of losers is rare in practice

O4: There are many invaluable goods4: Irrelevance of distributive outcomes

1: Efficient use of scarce resourcesTypes of issues O1: Fair distribution can be an overriding policy objective desirable 2: Fairness of distribution not an issue O2: Protecting basic rights is not subject to a 3: Basic rights not an issue calculation of costs and benefits

1: Explicitly stated, but may be partlyNature of policy objectives O1: In some cases, vagueness in policy objectives is rational for conflicting politicians

O2: Some policy objectives are absolute constraints2: Amenable to tradeoffs (not lexicographic) 3: Policy objectives are not politically O3: Political controversies cannot be solved by making calculations controversial

Nature of policy 1: Recursive in relation to policy O1: Sometimes maintaining a strict separation of means and ends objectives is difficultprogrammes

O2: Some policy programmes that are efficient may be2: Effective in solving problem at hand unacceptable for other reasons

3: Economically efficient (benefits exceed costs)

Consequences of policy O1: All consequences are never known1: All are known 2: All can be valued monetarily O2: Experimental policies are impossibleprogrammes

O3: Monetary valuations are incomplete or arbitrary

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Table 2 Typology of policy issues according to their suitability for cost– benefit analysis

Some examples ofType of policy Suitability for the type of issueissue (ideal types) cost–benefit analysis

Basic human rights, Very poorConstitutional issues voting systems,

constitutional amendments Income distribution, PoorIssues of justice rights to educationand fairness or other scarce goods

Macro-economic Design of tax General equilibrium issues system, fiscal policy, analysis

monetary policy, foreign trade

Sometimes well suitedReducing crime,Solving social problems unemployment,

accidents, poverty and so on

make these choices, because there is a certain probabil- ity that death will be the outcome. There is always a certain probability that death may occur — in every human activity. There is nothing special about road traffic in this respect.

Another common objection to using cost–benefit analysis to assess road safety measures is that the major policy objective ought to be to reduce the differences in accident risk between different groups of road users. It is true that the measures that pass a benefit–cost test will not necessarily be those that chiefly benefit the groups that have the highest risk level, and thus reduce the differences between groups of road users in this respect. Objections to cost–benefit analysis referring to how benefits and costs are distributed are based on the perception of the nature of the policy issue to be decided. Cost–benefit analysis is not equally well suited for all types of policy issues.

3.2. Stage 2: determine type of issue to be decided

The second stage in an assessment of the applicability of cost-benefit analysis is, therefore, to determine the nature of the policy issue to be decided. A typology of four main types of policy issues has been developed in Table 2, which gives some examples of issues belonging to each category. The types of issues identified by the typology are ‘ideal types’ in the sense of Max Weber (1971). In practice, most policy issues will be a mixture of two or more of the ‘ideal types’ listed in Table 2.

Proponents of cost–benefit analysis recognise the fact that it is not appropriate to use the technique as an aid to help decide every type of issue. Some issues concern universal human rights, whose existence is not subject to a calculation of costs and benefits. Arrow (1997) refers to these goods as invaluable goods. They include, at least in the highly industrialised countries of the OECD-area, the right to vote, freedom of speech, freedom of movement, and the protection of personal integrity (protection from violent assault and selling of the body). Issues that concern the existence, exercise or protection of these rights are labelled ‘constitutional issues’ in Table 2, and are widely agreed to lie outside the scope of economic reasoning.

Issues that mainly concern justice and fairness are also widely agreed to lie outside the scope of cost– benefit analysis. It is important to note that the percep- tion of a public policy issue is, at least to some extent, subjective and varies between people. Whereas some people regard the provision of road safety mainly as a technical and economic issue, others regard it as a matter of bringing justice to those who are dispropor- tionately at risk in the present road system. The former group may accept the use of cost–benefit analysis of road safety measures whereas the latter group is likely to reject it.

one stage of the model shown in Fig. 1. It is hoped, however, that the model can at least sort out the major types of objections that are made against the use of cost–benefit analysis.

3.1. Stage 1: assess basic principles of cost–benefit analysis

According to the framework of Fig. 1, assessing the applicability of cost–benefit analysis proceeds through five stages. The first stage is to assess the basic princi- ples of cost–benefit analysis. Those who reject these principles, rule out using cost–benefit analysis at all. A commonly made argument for rejecting the principle of consumer sovereignty as far as road safety is concerned, is that road users are poorly informed about accident risks and have no idea of what it is like to be severely injured. Hence, it is argued road users are not in a position to form well-informed preferences with respect to the need for improving road safety. Hauer (1994) argues that trying to put a monetary value on human life is impossible, because it is ‘‘impossible to have preferences for an option involving the death of the deciding organism and it is meaningless to speak about them’’ (p. 12).

This point of view could have troublesome implica- tions. Very many activities and choices that people are allowed to make influence their survival prospects. This is true of choice of occupation, where to live, how much and by what means to travel, and lifestyle habits with respect to, for example eating, exercising, sexual activities, smoking, and alcohol consumption. All these choices can reasonably be modelled as lotteries involv- ing death as one of their possible outcomes. It does not make sense to claim that people cannot intelligently

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The third type of issue listed in Table 2 is macro-eco- nomic issues. To the extent that these issues are dealt with by means of formal analyses, those analyses are in most cases likely to be some form of general equi- librium model for the economy as a whole. Macro-eco- nomic issues are widely agreed not to be particularly suitable to cost–benefit analysis. The fourth category of issues in Table 2, issues that concern specific social problems, are probably those that are best suited for cost–benefit analysis. Cost–benefit analysis is typically applied to problems that are not adequately solved by means of the market mechanism. This includes pro- grammes designed to reducing crime, provide better health care, reduce environmental problems or reduce accidents.

3.3. Stage 3: e6aluate the suitability of policy objecti6es for cost–benefit analysis

In order to allow for a cost–benefit analysis of policy options, policy objectives have to satisfy certain formal requirements. The first requirement is that policy objec- tives must be sufficiently clearly stated to make it possible to value their attainment in monetary terms. This does not necessarily require policy objectives to be quantified. On the contrary, quantified policy objectives may, depending on how they are formulated, be incon- sistent with the principles of cost–benefit analysis. A policy objective must, however, be so clearly stated that economists can design a study intended to assign mone- tary values to various levels of goal attainment.

A second requirement is that multiple policy objec- tives are all stated in terms that allow tradeoffs between

them to be made. This means, that a policy objective, which is lexicographically prior to all other objectives, is ruled out. An example of target formulation fitting this description is Vision Zero for road accident fatali- ties. It states that there should not be any deaths or injuries resulting in permanent impairment in road traffic and explicitly rules out any trade off of this objective against other policy objectives (Vägverket, 1997).

Finally a third requirement, not formally stated in most textbooks, but recognised as important in practice by Eriksen et al. (1994), is that policy objectives should not be highly controversial. Political controversies can- not be resolved by resorting to calculations of how much various policy objectives are ‘worth’ in monetary terms. If people disagree about the political objectives worth pursuing, this disagreement must be resolved either by majority vote or by negotiations that bring the different opinions closer together.

Policy objectives are not always as clearly stated as analysts would like in order to do a meaningful cost– benefit analysis. In fact, it is sometimes rational for politicians to prefer vague policy objectives. This is easily shown by means of a model making fairly in- nocuous assumptions about the preferences of politi- cians. An example of such a model is shown in Fig. 2, taken from Elvik (1993). Fig. 2 is a decision tree, showing the options facing politicians with respect to the formulation of road safety targets. The squares denote decision nodes, that is points at which a decision is made between the options that form the branches emerging from the squares. The circles denote chance nodes. These are points at which the outcome of a

Fig. 2. Decision tree for politicians’ choice with respect to setting clear policy targets. Illustration for road safety policy targets.

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decision is determined partly by chance, meaning that politicians do not have full control of the outcome.

Politicians are faced with the choice of either setting a clear, perhaps quantifiable, road safety target, or not doing so. If a clear target is set, there is a choice between popular and unpopular measures to realise it. The measures taken, irrespective of whether they are popular or not, will either realise the target or they will not. These outcomes are indicated by the boxes to the far right in Fig. 2. Inside each box, the payoff to politicians of that outcome is shown. The numbers denoting payoffs are meant as an indicator of ordinal preference only.

If a clear policy target is not set, it is assumed that the actions taken by politicians will depend on how the number of accidents develops. If accidents increase, politicians can take either popular or unpopular action to curb the increase. If accidents go down, the same options are available, but the need for exercising them will perhaps not be felt as equally pressing. Fig. 2 shows that as long as accidents tend to decline, politi- cians are likely to prefer not setting a clear policy target. It is only when accidents increase that the option of setting a clear target becomes more attractive. Al- though this conclusion is bound to follow from the assumptions made in the model, it is still of some interest, as these assumptions are not highly unreasonable.

3.4. Stage 4: determine if a suitable policy programme can be de6eloped

The theory of cost–benefit analysis tells decision- makers to choose those policy programmes that give the greatest benefits in relation to costs. It does, how- ever, not tell decision-makers how best to develop alternative policy programmes to choose from. The policy options are simply taken as given, very little is said about how to obtain them. Can anything at all be said about this, or is it outside the scope of science to advice policy makers with respect to how best to de- velop alternative policy options?

Before briefly discussing this question, some criteria are needed to determine what a suitable policy pro- gramme is. The following criteria are proposed: 1. A suitable policy programme should be effective,

which means that it ought to help in solving the problem it is designed to solve. Purely symbolic programmes, designed merely to give an impression that something is being done to solve a problem, are not suitable.

2. A suitable programme should be cost-effective, which means that benefits should be greater than costs. If benefits are smaller than costs, the pro- gramme cannot be justified within the framework of a cost–benefit analysis.

3. A suitable programme should be ethically accept- able, which means that it should not employ policy instruments that violate widely supported ethical principles.

These criteria impose a set of restrictions on the process of developing suitable policy programmes. As far as road safety policy is concerned, the search for a suitable policy programme should start by conducting a broad survey of potentially effective road safety mea- sures (Elvik, 1997, 1999; Elvik et al., 1997). To make sure that the measures that are really the most cost-ef- fective are included in the policy programme, it is important to remain ‘actively open minded’ (Baron, 1994) when screening potentially effective measures for inclusion in a programme. This implies, for example, that one should search a wide range of sources that could be relevant. Offering detailed guidelines about how to identify potentially effective measures is beyond the scope of this paper.

Cost–benefit analysis rests on an assumption that it is possible to separate means from ends, at least in the sense that a recursive (unidirectional) relationship pre- vails between ends and means. What this means can perhaps be clarified by means of an example. Suppose that an acceptably reliable estimate of the willingness- to-pay of the population for safer roads is available. A road safety programme is developed and a cost–benefit analysis performed. Suppose it turns out that cost-effec- tive road safety measures (measures for which benefits are greater than costs) can reduce the number of road accident fatalities by 25%. Assume further that a quantified target has been set of reducing the number of road accident fatalities by 50%. It is then against the rules of cost–benefit analysis to tamper with the will- ingness-to-pay estimate in order make a programme reducing the number of fatalities by 50% cost-effective. A more appropriate conclusion, consistent with the principles of cost–benefit analysis, would be to give up the target of a 50% reduction in fatalities, because the population is not willing to pay what it costs to reduce fatalities by 50%. This example illustrates both what the principle of consumer sovereignty implies and how a quantified policy target can be inconsistent with the application of cost–benefit analysis.

3.5. Stage 5: e6aluate the consequences of policy programmes

Cost–benefit analysis rests on the assumption that all economically relevant impacts of a project are valued in monetary terms according to the principles of welfare economics (Hanley and Spash, 1993). An economically relevant impact is one that affects the utility of an individual. Roughly speaking, this means that all im- pacts that are subject to individual preferences are relevant.

R. El6ik / Accident Analysis and Pre6ention 33 (2001) 9–17 15

Table 3 Items included in and omitted from current cost–benefit analyses of road investment projects in Norway

Physical units, etc. Unit of valuationMain policy objective Value per unit (NOK 1995)Subcategories

PedestrianImproving mobility Person/hTravel time Not included Cyclist Person/h Not included Moped, motorcycle Person/h Not included Car occupant Person/h 48 Truck driver Truck/h 272 Bus driver Bus/h 244 Bus passenger Person/h 35 Delays, closed roadsReliability of transport Not yet defined Not included

Vehicle operating cost Passenger car km/travel 0.86Reducing transport Single truck km/travelcost 2.22 Truck with trailer km/travel 3.26 Bus km/travel 3.98

Improving road safety Police reported injuriesRoad accidents Fatality 16 600 000 Critical injury 11 370 000 Serious injury 3 780 000 Slight injury 500 000 Mean for all severity levels 1 430 000

Insecurity Road users Not yet defined Not included Residents along roads Not yet defined Not included

Better environment Traffic noise Small cars km/travel 0.055 Heavy cars km/travel 0.550 CO2 Tonne of CO2Air pollution 220 NOx kg of NOx 115 SO2 kg of SO2 37 VOC kg of VOC 15 PM10 kg of PM10 1800 Unspoilt nature Not yet definedLandscape preservation Not included Aesthetic qualities Not yet defined Not included Severance of habitats Not yet defined Not included

It is of course difficult to know when all economi- cally relevant impacts have been included in a cost– benefit analysis. An area in which cost–benefit analysis has been applied for a long time is road investment planning (Elvik, 1995). The use of cost–benefit analysis for road investment planning goes back to the 1960s. The cost–benefit analyses of road investment projects that were made in the 1960s were pioneering work. Therefore, when these analyses are examined today, they appear as rudimentary. The items that were in- cluded were, most often, the costs of travel time, vehicle operating costs, road accident costs and road invest- ment costs. No environmental costs were included. Road accident costs were usually estimated by means of the lost output method, and did not include any eco- nomic valuation of lost quality of life.

In recent years, the list of effects that are included in a cost–benefit analysis has grown as more and more items are valued in monetary terms. To give an example of the types of effects that are included in cost–benefit analyses of road investment projects, Table 3 lists the items that are currently included in such analyses in Norway (Statens vegvesen, 1995; Elvik, 1998).

It is seen that, although a large number of possible impacts of road investment projects have been valued in monetary terms, there is still a substantial number of impacts that are not included in cost–benefit analyses. Inclusion of these impacts could make a major differ- ence for the results of a cost–benefit analyses.

4. Discussion

The framework proposed for assessing the applicabil- ity of cost-benefit analysis works like a sieve. A project has to pass through all stages of the framework in order to apply cost–benefit analysis. Briefly stated, this means that: 1. Consumer sovereignty is respected, willingness-to-

pay is accepted as the basic criterion of value and welfare maximisation in the Pareto sense is taken as the basic objective of analysis.

2. The policy issue is regarded as one that mainly concerns the provision of non-marketed public goods, and not as an issue that concerns basic human rights, justice or fairness in distribution or macro-economic policy.

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3. Policy objectives are stated in sufficiently clear terms to allow the willingness-to-pay for their realisation to be determined. There are no policy objectives that are lexicographically prior to all other objectives.

4. Effective policy programmes can be developed. A recursive relationship between policy objectives and programmes is respected.

5. All economically relevant impacts of policy pro- grammes are valued in monetary terms in a way that is consistent with the basic principles of applied welfare economics.

Taken together, these conditions seem to be rather strict and may seem to preclude the application of cost–benefit analysis in all but a very few areas. Such a conclusion is, however, premature and misleading. There are three points that need to be discussed in this connection. In the first place, policy decisions have to be made, and some basis for making them has to be provided. The relevant issue is, therefore, how to provide the best basis for making policy decisions. Cost–benefit analysis is just one of several formal techniques that have been developed in order to provide a better basis for policy decisions. Other tech- niques include cost-effectiveness analysis, decision anal- ysis based on multi-attribute utility theory, and various techniques derived from planning theory, like the goal achievement matrix and the planning balance sheet. All these techniques share the following basic characteris- tics with cost–benefit analysis: 1. The techniques take the preferences of the general

population or their elected representatives as the basis for defining policy objectives or utility.

2. The techniques recognise the fact that preferences can be multi-dimensional and that tradeoffs between competing values often need to be made.

3. The purpose of the analysis is to find the ‘best’ policy alternative, where best is taken to be what maximises overall utility or goal attainment.

Hence, all formal techniques developed to support policy making share a commitment to individual free- dom of choice (consumer sovereignty) and rationality (welfare maximisation). What sets the different tech- niques apart is how these basic principles are inter- preted in detail and applied in a specific context. Thus, the second point to be made in this discussion is that all formal techniques designed to support policy making encounter essentially the same problems when they are applied in a real context. The valuation of non-mar- keted goods is often regarded as a difficulty that can be avoided by not using cost–benefit analysis. The point of monetary valuation in cost–benefit analysis is, how- ever, simply to make all effects comparable and to measure the strengths of individual preferences for the provision of the goods that are valued. But this has to be done no matter what formal technique is used, if a

basis is to be provided for a rational choice. Proponents of decision analysis, for example, argue that one of its virtues is that it does not require a monetary evaluation of all relevant consequences of a decision. It does, however, require an evaluation of preferences for vari- ous outcomes in utility terms, which is not necessarily an easier task than a monetary evaluation. On top of this, if at least one of the relevant consequences of a decision is denominated in monetary terms, it is possi- ble to ‘price out’ all the others by solving a set of equations for the implicit economic valuations of these consequences (Keeney and Raiffa, 1976). The real issue, as far as the use of any formal technique for policy making is concerned, is whether sufficiently well or- dered and precise preferences exist for the use of these techniques to make sense. Recent reports (Fischhoff, 1991; Dubourg et al., 1997) express considerable scepti- cism in this respect.

The third and final point worth stressing in this discussion is that objectively correct conclusions from using the framework for assessing the applicability of cost–benefit analysis do not exist. As noted above, some people may see road safety mainly as an issue of justice and fairness, others mainly as issue of how best to minimise the total number of injuries. Neither opin- ion is more correct than the other one but their implica- tions for the applicability of cost–benefit analysis are different. By the same token, some people may regard estimates of the willingness-to-pay for a non-marketed good as sufficiently valid and reliable for use in a cost–benefit analysis, while others reject this research. Both parties in such a debate may be able to marshal good arguments to support their opinion.

5. Conclusions

This paper has proposed a framework for assessing the applicability of cost–benefit analysis to road safety measures. The framework is intended as a heuristic device for discussing the implications of various types of criticism often made against the use of cost–benefit analysis. The main implications of various types of criticism against cost–benefit analysis can be sum- marised as follows: 1. Those who reject the basic principles of cost–benefit

analysis rule out its use altogether. Rejecting these principles is, however, a difficult position to defend, since all other formal techniques for analysing pol- icy options, as well as the democratic system of government, rely on the same basic principles (indi- vidual freedom of choice and norms of rationality). The real issue is whether preferences are sufficiently well ordered to allow a rational choice to be made.

2. Some issues are less well suited for cost–benefit analysis than others. If road safety is treated as an

R. El6ik / Accident Analysis and Pre6ention 33 (2001) 9–17 17

issue involving basic rights and fairness in distribu- tion, it is less suited for cost–benefit analysis than if it is treated as a technical issue about how to use the most cost-effective measures to reduce the number of accidents and injuries.

3. Policy objectives need to be clearly stated to support a cost–benefit analysis. However, they do not neces- sarily have to be quantified. A problem with respect to policy objectives is that it can sometimes be rational for politicians to adopt vague or non-com- mittal policy objectives. Lexicographic policy objec- tives are unsuited for cost–benefit analysis.

4. Policy programmes should be effective; the use of purely symbolic measures that are ineffective is not sanctioned by cost–benefit analysis. Moreover, pol- icy programmes must be treated as instruments only, and not as ends by themselves.

5. All economically relevant impacts of a policy must be valued in monetary terms. Unless they are, a cost– benefit analysis can give misleading results. While this requirement may seem very restrictive, it is in fact only a statement of a necessary condition of rational choice, namely that all relevant consequences of a choice need to be made comparable in terms of a common scale of desirability. All formal techniques designed to support policy making try to reduce multi-dimensional or incommensurable consequences to a common denominator in this sense.

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