Abstract
When agencies regulate, they must calculate the costs and benefits of their regulations. To do this, they must often price non-market goods—for instance, the value of protecting wildlife or the environment. Regulators have typically relied upon contingent valuation surveys to put prices on these types of goods. But contingent valuation surveys are fraught with error and often give rise to implausible valuations that cannot be trusted. Quadratic voting offers a better solution. Agencies should hold quadratic votes over nonmarket goods and use those votes to price the goods at issue.
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Notes
If this latter point turns out to be untrue, and voters who reject a valuation of $3 billion feel as though their vote was meaningless when the regulation is later promulgated based on a valuation of $1 billion, then the agency will be required to adjust accordingly. This will become a problem only if voters cease participating because they think their votes are not being respected, but it is a conceivable outcome.
The net health and safety benefits of Option A exceed those of Option B by $2 billion, and so Option B is preferable only if it produces at least $2 billion more in environmental benefits.
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Acknowledgements
I thank Eric Posner and Glen Weyl for helpful conversations and suggestions, and Kathrine Gutierrez for excellent research assistance. This work was supported by the David and Celia Hilliard Fund.
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Masur, J.S. Quadratic voting as an input to cost-benefit analysis. Public Choice 172, 177–193 (2017). https://doi.org/10.1007/s11127-017-0408-1
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DOI: https://doi.org/10.1007/s11127-017-0408-1