One of the pitfalls of cost-benefit analysis is that the opportunity-cost approach to the social rate of discount may bias the analysis against worthwhile public undertakings.

Question

Quizplus · Accepted Answer

The opportunity-cost approach to the social rate of discount can result in a higher discount rate, which can make the present costs of a public undertaking appear higher than the future benefits. This can lead to undervaluing the benefits and overvaluing the costs, potentially biasing the analysis against worthwhile public projects.

One of the Pitfalls of Cost-Benefit Analysis Is That the Opportunity-Cost