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Typical infrastructure investments fail to deliver positive risk-adjusted return [pdf]

12 points by apsec112 6y ago

xiphias2 6y ago
I'm happy that government contracts are being analyzed as investments, but the goals are generally different: - Infrastructure investments inside a nation can make workers depend more on government and can get politicians elected/reelected - As they are simple businesses without many risks, they are a great way for corruption, which helps politicians to keep and strengthen their power. The investments should be viewed as getting ROI for the politicians themselves as well. As I'm living through a democracy turning into a dictatorship, I can attest that so far it works.
- Lemmih 6y ago
  Where do you live?
  - xiphias2 6y ago
    I live in Hungary, the country where a new empty soccer stadium is built in every month.
sideshowb 6y ago
Title should add "in China" Not saying that's true or false elsewhere, indeed I'd be interested to know.
londons_explore 6y ago
It seems almost impossible to measure the "return" on most government investments... How much exactly did the economy benefit from building a new road?
- leetcrew 6y ago
  probably impossible to do with great precision, but you can at least estimate the direct impact. it's important to do this, because there are always many more projects that would be nice to do than the government can actually pay for. above all, the project has to at least be better than simply distributing the money as cash to the citizens, or just not having taxed them so much in the first place. I wouldn't think roads are quite so tricky. there are a few potential benefits of a new road: land on either side of the road is made viable for homes/businesses, more people can get from A to B, people can get from A to B faster. you can probably make a decent prediction here based on current building and traffic trends. potential downsides of a new road: future obligation to maintain it, increased emissions, other environmental impacts. a government ought to have a pretty good idea how much it costs to maintain a certain type of road, considering it is already doing that. a decent estimate for emissions should be obtainable from extrapolating current traffic patterns. other environmental impacts (floodplain, watershed, roadkill, etc.) are probably the hardest to quantify. in any case, the estimate doesn't have to be perfect. you just need the low end of the error bar to be comfortably above breaking even on the investment.

12 points by apsec112 6y ago

I'm happy that government contracts are being analyzed as investments, but the goals are generally different: - Infrastructure investments inside a nation can make workers depend more on government and can get politicians elected/reelected - As they are simple businesses without many risks, they are a great way for corruption, which helps politicians to keep and strengthen their power. The investments should be viewed as getting ROI for the politicians themselves as well. As I'm living through a democracy turning into a dictatorship, I can attest that so far it works.

Lemmih 6y ago
Where do you live?
- xiphias2 6y ago
  I live in Hungary, the country where a new empty soccer stadium is built in every month.

sideshowb 6y ago

Title should add "in China" Not saying that's true or false elsewhere, indeed I'd be interested to know.

londons_explore 6y ago

It seems almost impossible to measure the "return" on most government investments... How much exactly did the economy benefit from building a new road?

leetcrew 6y ago
probably impossible to do with great precision, but you can at least estimate the direct impact. it's important to do this, because there are always many more projects that would be nice to do than the government can actually pay for. above all, the project has to at least be better than simply distributing the money as cash to the citizens, or just not having taxed them so much in the first place. I wouldn't think roads are quite so tricky. there are a few potential benefits of a new road: land on either side of the road is made viable for homes/businesses, more people can get from A to B, people can get from A to B faster. you can probably make a decent prediction here based on current building and traffic trends. potential downsides of a new road: future obligation to maintain it, increased emissions, other environmental impacts. a government ought to have a pretty good idea how much it costs to maintain a certain type of road, considering it is already doing that. a decent estimate for emissions should be obtainable from extrapolating current traffic patterns. other environmental impacts (floodplain, watershed, roadkill, etc.) are probably the hardest to quantify. in any case, the estimate doesn't have to be perfect. you just need the low end of the error bar to be comfortably above breaking even on the investment.