Description:
Cost-Benefit Analysis (CBA) for public policies assumes 'consumer sovereignty', implying that impacts of government projects can be valued by aggregating individuals' private willingness to pay. However, individuals' private willingness to pay might not reflect their preferences towards public policies. Participatory Value Evaluation (PVE) is a novel evaluation approach which rectifies this limitation of CBA. PVE establishes the social welfare effects of government projects through the elicitation of individuals' preferences over the allocation of public budgets as well as their net income. The most important innovation of PVE is therefore that the approach goes beyond the paradigm of 'consumer sovereignty' by starting from the assumption of 'citizen sovereignty'. This paper positions PVE relative to past innovations in applied welfare economics and illustrates the potential of the approach through a case study on flood protection schemes in the Netherlands.