Integrating Multiple Economic Analysis Methods for More Effective Decision Making: Three-Dimensional Framework

Abstract

The infrastructure planning process requires broad consideration of the benefits, costs, and impacts of proposed projects. However, planners and decision makers often are unclear about how they can best use economic analysis methods to inform decision making and how they can unsort what appear to be competing methodologies to portray the consequences of projects: benefit–cost analysis (BCA), economic impact analysis (EIA), and financial impact analysis (FIA). The result can be an inappropriate or ineffective use of economic analysis and failure to match its capabilities to the requirements of infrastructure investment planning. This paper reviews the evolving application of economic analysis techniques for transportation infrastructure investment decision making and identifies sources of confusion for analysts and decision makers. The paper introduces a new structure for the application of economic analysis in the planning process. The structure is built on a unifying framework to view the various forms of economic analysis in terms of how they differentially cover a three-dimensional universe of space, time, and economy elements. The paper shows how a structural framework can be used to match economic analysis techniques to stakeholder issues and decisions on the basis of spatial and temporal information requirements that are applicable at different stages of the planning and decision-making process. Finally, the paper provides an example of how state agencies can use this framework to bring together information from BCA, EIA, and FIA to support decisions on investment in a major transportation infrastructure project.