A critique of the productivity commissions cost benefit

In its 2011 NDIS report, the Productivity Commission rationalises its policy recommendation by means of a cost-benefit analysis, claiming that ‘the benefits of the [National Disability Insurance] scheme would significantly outweigh the costs’. But methodology the PC adopts departs from conventional cost-benefit analysis in ways that understates costs, presumes the benefits, muddies policy comparisons, and jumbles equity and efficiency issues. These problems are traceable to the Commission’s use of a ‘distributional weights approach’ to equity benefits. The ‘basic needs approach’ is an alternative way of dealing with equity considerations that better captures the underlying preferences of citizens and the rationale for disability care and support policies.