Accuracy[edit]
The value of a cost–benefit analysis depends on the accuracy of the individual cost and benefit estimates. Comparative studies indicate that such estimates are often flawed, preventing improvements in Pareto and Kaldor-Hicks efficiency.[citation needed] Causes of these inaccuracies include:[citation needed]
Overreliance on data from past projects (often differing markedly in function or size and the skill levels of the team members)
Use of subjective impressions by assessment team members
Inappropriate use of heuristics to derive money cost of the intangible elements
Confirmation bias among project supporters (looking for reasons to proceed).
Interest groups may attempt to include or exclude significant costs from an analysis to influence the outcome.[38]
In the case of the Ford Pinto (where, because of design flaws, the Pinto was liable to burst into flames in a rear-impact collision), the company's decision was not to issue a recall. Ford's cost–benefit analysis had estimated that based on the number of cars in use and the probable accident rate, deaths due to the design flaw would cost it about $49.5 million to settle wrongful death lawsuits versus recall costs of $137.5 million. Ford overlooked (or considered insignificant) the costs of the negative publicity that would result, which forced a recall and damaged sales.[39]
In health economics, some analysts think cost–benefit analysis can be an inadequate measure because willingness-to-pay methods of determining the value of human life can be influenced by income level. They support use of variants such as cost–utility analysis and quality-adjusted life year to analyze the effects of health policies.[40]
In environmental and occupational health regulation, it has been argued that if modern cost–benefit analyses had been applied prospectively to decisions such as whether to mandate the removal of lead from gasoline, build the Hoover Dam in the Black Canyon of the Colorado, and regulate workers' exposure to vinyl chloride, these measures would not have been implemented even though they are considered to be highly successful in retrospect.[41] The Clean Air Act has been cited in retrospective studies as a case where benefits exceeded costs, but the knowledge of the benefits (attributable largely to the benefits of reducing particulate pollution) was not available until many years later.[41]