U.S. Army Engineers and the Rise of Cost-Benefit Analysis

This chapter traces the history of cost–benefit analysis in the United States bureaucracy from the 1920s until about 1960. It is not a story of academic research, but of political pressure and administrative conflict. Cost–benefit methods were introduced to promote procedural regularity and to give public evidence of fairness in the selection of water projects. Early in the century, numbers produced by the Army Corps of Engineers were usually accepted on its authority alone, and there was correspondingly little need for standardization of methods. About 1940, however, economic numbers became objects of bitter controversy, as the Corps was challenged by such powerful interests as utility companies and railroads. The really crucial development in this story was the outbreak of intense bureaucratic conflict between the Corps and other government agencies, especially the Department of Agriculture and the Bureau of Reclamation. The agencies tried to settle their feuds by harmonizing their economic analyses. When negotiation failed as a strategy for achieving uniformity, they were compelled to try to ground their makeshift techniques in economic rationality. On this account, cost–benefit analysis had to be transformed from a collection of local bureaucratic practices into a set of rationalized economic principles.