Exercises in arbitrariness and ambiguity — A study of twelve cost benefit analyses of industrial disinvestment decisions

The choice whether to continue or discontinue business operations always includes a strong element of valuation and hence a certain amount of arbitrariness. In order to limit this arbitrariness there are laws and a very firm old tradition regulating common business accounting.If an annual report shows repeated losses over a number of years and thus indicates that operations should be discontinued totally or partially, a so-called cost benefit analyst may appear claiming to produce a better basis for decision “from society's point of view” than the one which is given by ordinary business accounting practices. In this article that claim is questioned by an examination of twelve Swedish cases. It has been found ungrounded. Cost benefit analysis does not seem preferable as a basis for decision making where ordinary business accounts are available.