Abstract

Cost-benefit analysis is a fundamental tool to aid decision-making in public policy, as it permits to assess the economic efficiency of an intervention by making its costs and benefits comparable. Even though philosophical discussions have highlighted some important limitations and assumptions in the methodology of cost-benefit analysis, they have largely overlooked those due to uncertainty. In this paper, we identify the different uncertainties that can potentially concern a cost-benefit analysis, and we claim that a good understanding of the role that these uncertainties can play is crucial to identify the limits of its different applications. We explore what implications uncertainty has for cost-benefit analysis in the specific context of seismic risk management, in which the aleatory nature of seismic activity and the complexity of earthquakes with their socio-environmental impacts put severe limitations to many types of applications of cost-benefit analysis. We analyse several of these types for both reconstruction and mitigation measures and we conclude that, in that context, ex-post analyses of reconstruction policies, while being less frequent than other types, are nonetheless both useful and less exposed to uncertainty.