Question

There is some debate about whether secondary benefits should be considered when assessing public policy

proposals. Identify two reasons why secondary benefits might be excluded from a benefit-cost analysis of

proposed environmental policy.

Answer 1

Secondary benefits are the indirect benefits of a environmental policy. These benefits are not the main benefits which were the focus of attention of the policy but rather they get accrued in the background.

For e.g. a pollution reducing environmental policy aimed at improving worker health will count improved worker health as a primary benefit while the increased productivity of the worker because of good health will be the secondary benefit of the policy.

However these secondary benefits must not be included in a benefit-cost analysis because:

1. These are not important benefits wanted out of the policy. These are just positive externalities which can or cannot occur. There is no certainty to their occurence and thus they should not be counted in as benefits while doing analysis

2. These benefits occur much much later than the primary benefits are require many other factors in play and not just the policy imposed. Thus, taking it into account while formulating the policy would give biased results

Thus, these secondary benefits should be ignored while doing benefit cost analysis for a public policy.