It has been argued that the replacement by the New Zealand Resource Management Act 1991 (RMA) of its predecessor, the Town and Country Planning Act 1977, reduced the value of cost benefit analysis (CBA) as a tool for resource management decision-making. The argument is that, by taking an “effects-based” approach to resource management, the RMA seeks only to mitigate the negative effects of resource use, and allows the market (rather than a central planner) to determine the efficient allocation of resources. It follows that there may be no need for CBA to determine the efficient allocation.
Yet despite this, we do still see the use of CBA in decision-making under the RMA. In this article from the Resource Management Journal, NERA experts Kevin Counsell, Dr. Lewis Evans, and James Mellsop outline when CBA might have a role, and how CBA informs efficient resource allocation. The authors also discuss why CBA is more than just an economic tool for measuring efficiency: CBA provides a broader practical framework for organizing information and making decisions on resource allocation and use under the RMA.
This article first appeared in the November 2010 issue of the Resource Management Journal, the official journal of the Resource Management Law Association of New Zealand Inc.