Issue Q: The Quantification of Costs and Benefits
Background
200. In 1992, the Court of Appeal suggested that the Commission should quantify costs and benefits insofar as it is feasible.63 The Commission has consistently done so since and its practice is to produce a range of numbers based on different assumptions. The main advantage of quantification is that it places greater discipline on the Commission to think carefully about its assumptions, which in turn means that there is greater transparency about those assumptions. In addition, quantification enables the Commission to value and explicitly compare disparate factors.
The issue
201. A risk associated with quantification is that it can place too much emphasis on the things that are less important. Of the three types of efficiency (allocative, productive, dynamic), dynamic efficiency is by far the most important, because innovation drives most economic growth. However, dynamic efficiency is by far the hardest form of efficiency to measure. If quantification is relied upon too much then it may give a false sense of reliability and accuracy in relation to uncertain facts and conclusions. Disagreement over particular input values may prevail over the competition analysis. It may also be difficult to overturn a presumption for or against an authorisation application based on the quantifiable gains and losses. The need to quantify benefits can also be relatively expensive and time consuming for applicants as compared to a qualitative approach.
202. The issue that we wish to test with stakeholders is whether the Commission has the scope to exercise judgments in relation to dynamic efficiency factors along with other costs and benefits that are not easily quantified.
Question
Q28. Does quantification restrict the consideration of dynamic or other difficult to measure economic effects?
Back to Top