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> It's a shame that the focus is always on the capital outlay and not on the cost benefit potential to be realized (both economic and non-economic). This sort o

> It's a shame that the focus is always on the capital outlay and not on the cost benefit potential to be realized (both economic and non-economic). This sort of spending should always be seen as an investment. Every major city hires economists, often from universities, to do cost/benefit analysis of major capital projects. To say the focus is always on cost is nonsense. I've had to do cost-benefit analysis work before on earmarks. One of my professors did cost/benefit in Nashville for bringing the Titans to town in the late 90s. He recommended against it, in fact I think most economists on the board did...but they ignored it because cost is more often ignored or understated (by politicians,) contrary to your post. Look at the "big dig" in Boston for instance, or the California high speed rail, both exploded over 5x their expected budget. Those are just examples, there are many others. I am willing to bet this number is a low ball, especially when contractors, regulators, etc get involved.

sgnelson 8y ago
"Every major city hires economists...but (the politicians) ignored (the advice.)" I think this is what he's getting at.
xzel 8y ago
I think he's talking about the media/politicians/pundits that talk about it, not the people actually responsible for making and analyzing the decisions.
triggercut 8y ago
>Every major city hires economists, often from universities, to do cost/benefit analysis of major capital projects. To be clear I was referring to how the greater public are informed on such matters by the media / politicians. I'm well aware of the projects you mention. I'm a consultant on capital program / project governance but not sure I understand the relevance, I wasn't really talking about the validity of estimates at any stage, just the focus on them.
- stevep001 8y ago
  If you’re interested in cost benefit analysis of large public projects, Megaprojects and Risk is a must-read. https://en.m.wikipedia.org/wiki/Megaprojects_and_Risk https://en.m.wikipedia.org/wiki/Megaprojects_and_Risk
  - triggercut 8y ago
    Yes, a fantastic read. If you're interested in how we can avoid this happening, I can't talk to the US, but in other jurisdictions governments and authorities (and some private sector giants) are slowly adopting more mature governance approaches. Implementing a Benefits Realization methodology [https://en.wikipedia.org/wiki/Benefits_realisation_management https://en.wikipedia.org/wiki/Benefits_realisation_managemen...] in their Portfolio for instance, Alliance contracting procurement models and Integrated Project Delivery to more fairly apportion risk and accountability. I'm cautiously optimistic.
bytematic 8y ago
you completely missed his point
wahern 8y ago
California high-speed rail has not exploded 5x. When originally approved in 2008 the estimate was $40 billion.[1] The 2018 estimate for both phases is, I think, roughly $100 - $120 billion (low and high).[2] That's 2.5x - 3x.[3] These numbers are actually in line with opposition figures[4], and for other reasons it's reasonable to expect these are solid upper limits unless people continue to sabotage the project. It's also worth pointing out that $120 billion is still significantly less than estimated costs for the alternative of expanding the highways and airports--$156-186 billion.[5] Note that those alternative costs are likely optimistic like the original HSR costs, particularly airport expansion and urban highway expansion. One of the biggest reasons for the cost inflation is the political opposition. Some of the construction contracts have actually come in significantly under budget.[6] The real killer so far is land acquisition.[7] The authority is effectively trying to bribe farmers with huge payouts (clearly beyond market prices) in order to mitigate political pressure in Sacramento. All the political and legal fighting causes expensive delays. (Time is very costly in construction because there are fixed costs in keeping labor and equipment mobilized, plus huge costs in having to re-orchestrate schedules. Lots of interdependent moving parts.) But political pressure wouldn't be so strong if discourse was more honest and less tribal. The opposition is creating a self-fulfilling prophecy, particularly with the hyperbole and sabotage. By all means fight for transparency, but civic responsibility means we all need to check ourselves. [1] https://ballotpedia.org/wiki/index.php/California_Proposition_1A,_High-Speed_Rail_Act_%282008%29 https://ballotpedia.org/wiki/index.php/California_Propositio... [2] https://sf.curbed.com/2018/1/29/16946576/san-jose-mercury-high-speed-rail-budget https://sf.curbed.com/2018/1/29/16946576/san-jose-mercury-hi... and http://www.hsr.ca.gov/docs/about/business_plans/Draft_2018_Business_Plan.pdf http://www.hsr.ca.gov/docs/about/business_plans/Draft_2018_B... [3] I think both numbers are year-of-expenditure, which means each sub-project is separately inflation adjusted to the midpoint year of scheduled construction. [4] https://reason.org/wp-content/uploads/files/california_high_speed_rail_report.pdf https://reason.org/wp-content/uploads/files/california_high_... [5] http://www.hsr.ca.gov/docs/about/business_plans/BPlan_2012CompareEquivalentCapacity.pdf http://www.hsr.ca.gov/docs/about/business_plans/BPlan_2012Co... [6] http://www.cahsrblog.com/2013/04/chsra-selects-tutor-perini-zachry-parsons-bid-for-central-valley-section/ http://www.cahsrblog.com/2013/04/chsra-selects-tutor-perini-... [7] https://www.mercurynews.com/2018/01/17/worst-case-scenario-high-speed-rail-costs-jump-2-8-billion-to-10-6-billion/ https://www.mercurynews.com/2018/01/17/worst-case-scenario-h...

sgnelson 8y ago

"Every major city hires economists...but (the politicians) ignored (the advice.)" I think this is what he's getting at.

xzel 8y ago

I think he's talking about the media/politicians/pundits that talk about it, not the people actually responsible for making and analyzing the decisions.

triggercut 8y ago

>Every major city hires economists, often from universities, to do cost/benefit analysis of major capital projects. To be clear I was referring to how the greater public are informed on such matters by the media / politicians. I'm well aware of the projects you mention. I'm a consultant on capital program / project governance but not sure I understand the relevance, I wasn't really talking about the validity of estimates at any stage, just the focus on them.

stevep001 8y ago
If you’re interested in cost benefit analysis of large public projects, Megaprojects and Risk is a must-read. https://en.m.wikipedia.org/wiki/Megaprojects_and_Risk https://en.m.wikipedia.org/wiki/Megaprojects_and_Risk
- triggercut 8y ago
  Yes, a fantastic read. If you're interested in how we can avoid this happening, I can't talk to the US, but in other jurisdictions governments and authorities (and some private sector giants) are slowly adopting more mature governance approaches. Implementing a Benefits Realization methodology [https://en.wikipedia.org/wiki/Benefits_realisation_management https://en.wikipedia.org/wiki/Benefits_realisation_managemen...] in their Portfolio for instance, Alliance contracting procurement models and Integrated Project Delivery to more fairly apportion risk and accountability. I'm cautiously optimistic.

bytematic 8y ago

you completely missed his point

wahern 8y ago

California high-speed rail has not exploded 5x. When originally approved in 2008 the estimate was $40 billion.[1] The 2018 estimate for both phases is, I think, roughly $100 - $120 billion (low and high).[2] That's 2.5x - 3x.[3] These numbers are actually in line with opposition figures[4], and for other reasons it's reasonable to expect these are solid upper limits unless people continue to sabotage the project. It's also worth pointing out that $120 billion is still significantly less than estimated costs for the alternative of expanding the highways and airports--$156-186 billion.[5] Note that those alternative costs are likely optimistic like the original HSR costs, particularly airport expansion and urban highway expansion. One of the biggest reasons for the cost inflation is the political opposition. Some of the construction contracts have actually come in significantly under budget.[6] The real killer so far is land acquisition.[7] The authority is effectively trying to bribe farmers with huge payouts (clearly beyond market prices) in order to mitigate political pressure in Sacramento. All the political and legal fighting causes expensive delays. (Time is very costly in construction because there are fixed costs in keeping labor and equipment mobilized, plus huge costs in having to re-orchestrate schedules. Lots of interdependent moving parts.) But political pressure wouldn't be so strong if discourse was more honest and less tribal. The opposition is creating a self-fulfilling prophecy, particularly with the hyperbole and sabotage. By all means fight for transparency, but civic responsibility means we all need to check ourselves. [1] https://ballotpedia.org/wiki/index.php/California_Proposition_1A,_High-Speed_Rail_Act_%282008%29 https://ballotpedia.org/wiki/index.php/California_Propositio... [2] https://sf.curbed.com/2018/1/29/16946576/san-jose-mercury-high-speed-rail-budget https://sf.curbed.com/2018/1/29/16946576/san-jose-mercury-hi... and http://www.hsr.ca.gov/docs/about/business_plans/Draft_2018_Business_Plan.pdf http://www.hsr.ca.gov/docs/about/business_plans/Draft_2018_B... [3] I think both numbers are year-of-expenditure, which means each sub-project is separately inflation adjusted to the midpoint year of scheduled construction. [4] https://reason.org/wp-content/uploads/files/california_high_speed_rail_report.pdf https://reason.org/wp-content/uploads/files/california_high_... [5] http://www.hsr.ca.gov/docs/about/business_plans/BPlan_2012CompareEquivalentCapacity.pdf http://www.hsr.ca.gov/docs/about/business_plans/BPlan_2012Co... [6] http://www.cahsrblog.com/2013/04/chsra-selects-tutor-perini-zachry-parsons-bid-for-central-valley-section/ http://www.cahsrblog.com/2013/04/chsra-selects-tutor-perini-... [7] https://www.mercurynews.com/2018/01/17/worst-case-scenario-high-speed-rail-costs-jump-2-8-billion-to-10-6-billion/ https://www.mercurynews.com/2018/01/17/worst-case-scenario-h...