Benefit-Cost Analysis (BCA) and Consideration of Distributional Effects and Social Equity

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Making Benefit-cost analysis (BCA) the ultimate criterion for government decision-making raises concerns over the limitations and inherit biases within BCA. By aggregating the benefits and costs of a government action, BCA can obscure who “wins” and who “loses”. Recent Executive Orders (EO) (EO 14008, EO 13990, EO 13985, and the memorandum dated January 20, 2021) stress the importance of addressing social equity and environmental and economic justice for underserved communities. Understanding how the costs and benefits are distributed is imperative to interpreting the impacts of a government action upon vulnerable and underserved populations. This report focuses on current practices used in evaluating distributional effects and addressing social equity.