The Value of Cost Benefit Analysis of Road Projects. Quarterly Economic Commentary Special Article, April 1985

Mansergh, Nicholas and Baker, T.J. and Scott, S. and Hayes, L. (1985) The Value of Cost Benefit Analysis of Road Projects. Quarterly Economic Commentary Special Article, April 1985. [Working Paper]

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Abstract

The Government announced in the National Plan, and is now implementing, a major increase in road expenditure. One reason why this has happened is because cost benefit studies have suggested that such an increase could be justified in economic terms. The argument that cost benefit studies in some sense "justify" additional road investment has been accepted rather uncritically in recent years, and in view of its practical consequences requires closer examination. In discussing this argument I shall refer to Sean D. Barrett and David Mooney's recent cost benefit analysis of the Naas bypass, as a good recent example of such studies. There are two basic grounds for concern at the use of cost benefit analysis to support increases in road expenditure now. First, the type of justification for road investment which cost benefit analysis is able to provide is a rather specialised one. The fact that a project shows a high rate of return on a cost benefit study does not mean that our debt problems are unlikely to be made more acute by carrying out the project, or that the effect on permanent employment will necessarily be favourable, or that many other forms of public expenditure might not perform as well or better on both counts. It is doubtful whether an expansion of road investment represents an appropriate use of the very limited funds which can be assembled for expanding publicly funded activities, and we are only going to find out whether it is or not if we can develop techniques which will indicate what the likely effects of particular types of public expenditure on employment and the public finances are going to be.

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