Chapter 15- Fourth, evaluate the outcome using a method of
cost- effectiveness in which the benefits are mea-
sured in units of happiness.^1 This last step is the
subject of this chapter.
The New Approach
So how would the policy maker evaluate a policy proposal?^2
Whoever we are, we want to see the greatest possible happi-
ness in the community.^3 And let us assume we have a given
amount of money to spend. We also have many possible
policies we would like to consider. We cannot undertake
them all, and we ought obviously to give top priority to
those that give the largest happiness- benefits per unit of
cost. So we would rank policies according to that criterion
and then proceed down the list, commissioning all that we
could until the money runs out.^4 Or, which is exactly the
same thing, we would rank policies according to their ratio
of cost to benefit and adopt only those with low enough
cost/benefit ratios.
That is, if you like, the planning approach, but there is
also a decentralized approach that is more practical and
produces the same result. For, implicit in the planning
approach, there is a critical cost- benefit ratio, below which
policies are accepted and above which they are rejected.
This critical ratio is at the point where the money just runs
out. Once this ratio is established, it can be left to decen-
tralized decision makers to evaluate whether any particular
policy passes the test. The critical ratio can be adjusted from
time to time on the basis of experience.