In the last post I looked at the notion of taking the benefit life cycle into account in infrastructure planning. Today I want to raise an equally important issue for infrastructure planners, and that is ‘what do we mean, and measure, by “benefits”?
When the Adelaide Casino was first mooted, many years ago now, the benefit-cost analysis vaunted the new employment opportunities that would be created. The analysis failed to mention how many existing jobs would be lost. The losses included a nearby coffee shop with great ambiance that provided chess sets for customers to enjoy and was well patronised. However, it was unable to compete with the allure of the new casino and closed. Many other small eateries also closed. Later, when the excitement factor of the new casino died down, and customers wished to return, many of these small businesses were financially unable to afford to start up again. They were lost for good. The casino also laid off staff as demand declined. The employment ‘benefits’ were gross, not net, and thus were considerably overstated.
Given that many of our new infrastructure projects are roads, how many of the proposed benefits are similarly ‘gross’ not ‘net’ benefits? For example, how many existing roads now become under-utilised? (And what else needs to be ‘netted out’?)
What examples do you know of where the ‘benefits’ in the ‘benefit-cost’ analysis took these factors into account? Or didn’t?