Friday, 7 January 2011

NBN cost benefit analysis blah blah blah

Last time I wrote something about the NBN, I got this comment:

How many nation building projects would not be started if they had cost-benefit analysis done against them? Sydney Harbour Bridge? At what point is or should vast nation building projects be less subjected to being forced to turn a profit or not exist? Public parks are wasted real estate oh very high value in some cases, they don't make a profit, why do we allow these spaces to exist then? Where was the cost-benefit analysis of these places?
It's been a few years since I have been involved in producing a cost-benefit analysis for a major project; my last one was the Sydney Airport Rail Link. I was only a junior flunky at the time - my main role was to proof read the research, prepare presentations for Cabinet etc and ask a lot of dumb questions (something I am good at).

The rail link was never expected to be profitable for the government by itself. Most of the financial benefits to the government were to come from the following areas:

  • increased land values (and land taxes and stamp duty) from converting light industrial land along the route to high density housing
  • avoidance of having to pay for lots of new roads, water lines, sewerage, power lines etc on the urban fringe by redeveloping an area that already had them
The other benefits that we looked at had to do with lowering the cost of congestion and the avoidance of a lot of new air pollution that would be created by housing people out on the fringe (where they'd drive a lot).

All these benefits added up to more than the cost of building the line. Estimating them was a lot of fun though - glad I didn't have to do that. However, the thing was, experts were able to come up with rough estimates for all of them, and they were able to justify their estimates using various economic and financial models etc.

I don't get why this can't be done for the NBN - it really isn't that hard once you have identified the benefits.

The thing is, if you can't identify any benefits, then you're in a bit of a pickle.


1735099 said...

"Not everything that counts can be counted, and not everything that can be counted counts." (Sign hanging in Albert Einstein's office at Princeton)

TimT said...

Tony Windsor was spouting crap last year about how if a cost benefit analysis had had to be done for the Snowy-River scheme it would have never happened. It was, of course, utter bullshit on Windsor's part.