Tuesday, May 14, 2013

Archives: The Limits of Cost-Benefit Analysis

During the early nineteen sixties the famed development economist, Albert Albert HirschmanHirschman negotiated with the International Bank of Reconstruction and Development, part of the World Bank group, the financial support that he needed for an extended visit to several WB development projects scattered throughout the poor areas of the world. The document where he reports his visit was the matter of much controversy between the IBRD staff and Hirschman. One of the major points of disagreement was the latter´s refusal to employ the technique of cost-benefit analysis, then very popular at the WB, as a measure of the success of a project.

Hirschman claimed that a one-dimensional scale was unable to grasp the various indirect effects of a project, which, he argued, were so varied as to escape detection by one or even several criteria uniformly applied to all projects. The paper claims that the strong negative reaction that Hirschman found among the WB economists was a crucial factor in his decision to leave the strict realm of economics and to embrace the broader social sciences themes of his subsequent writings.

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Albert Hirschman and his controversial research report

- Ana Maria Bianchi (amafbian@usp.br)

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Ana Maria Bianchi has a Graduate Degree in Social Sciences from the Catholic Ana Maria Afonso Ferreira BianchiUniversity of São Paulo (1968), MA in Sociology from the University of São Paulo (1971) and Ph.D. in Sociology from the University of São Paulo (1981). Professor at the Faculty of Economics, Administration and Accounting from USP, where in 1992 she was named as a full professor. She is a researcher in the area of economics, with emphasis on the themes: economic methodology, economic sociology, history of economic thought and development economics. She has written on several occasions about the work and contributions of Albert Hirschman. She can be reached at amafbian(at)usp.br

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