Public Investment Decisions Research Articles

Capital rationing and discounting in public sector investment decisions

Capital rationing and discounting in public sector investment decisions

Public Investment Decision Rules in a Neo-Classical Growing Economy

Public Investment Decision Rules in a Neo-Classical Growing Economy

Measurement of Economic Uncertainty in Public Water Resource Development: An Extension

Renewed interest in incorporating measures of uncertainty in public investment decisions is a welcome addition to applied benefit-cost analysis. Taylor and North's (T-N) recent effort in this Journal to incorporate the consideration of uncertainty in benefit-cost analysis follows a technique that we have endorsed for some time (Mercer and Morgan 1975a, b, and 1976; Stacy and Buxbaum). This paper logically follows T-N by illustrating a more general procedure and demonstrates that inclusion of uncertainty in benefit-cost analysis need not be limited to the triangular distribution. The probability distribution used here is the Weibull. The major advantage of the Weibull distribution is its generality. It does not depend on fixed (absolute) estimates of endpoints (range) and thus offers increased capability to test for sensitivity to uncertainty. Use of the Weibull distribution is illustrated here by application to the Spewrell Bluff project and comparison of the results to those of T-N.

Measuring the Monetary Value of Lifesaving Programs

Abstract : A multitude of public investment and regulatory decisions which have some effect on mortality and morbidity rates are made by legislatures, administrative agencies, and the courts every year. A decision to require something other than the minimum technologically feasible mortality rate reflects in effect a judgment that mortality (or safety) is not to be given lexical priority in public decisions over all other commodities which money can buy - a judgment which is certainly reasonable and in accord with everyday decisions made by households. If mortality is not to be given lexical priority, some other standard or procedure is needed to determine which projects are worthwhile. In particular, a procedure is needed for measuring the benefits of such programs in units which can be readily compared with the costs.

A new approach to public investment

Public investment decisions are usually based on multiple objective criteria. In this paper, Optimal Investment Decision Problem is formulated as a Multicriterion Optimal Control Problem. Apart from accounting for the multiple objectives, the dynamics of the economic system can also be incorporated in this formulation. Some techniques of solving these problems are discussed and trade-off schemes for the various objectives are suggested through the associated shadow prices.

Utilization of Cost/Benefit Analysis in Planning Prevention Programs

Summary. Benefit‐cost analysis is a type of policy analysis still in a developing stage, particularly with respect to investments in people. Policy analysts, policy makers, and other users concur this type of analysis cannot be a sufficient basis for public policy decisions. For health programs, it is an approach that can supplement medical and epidemiologic bases for public investment decisions. It is a useful tool where an understanding of health problems is deficient in some areas. This paper discusses some examples of the use of benefit‐cost analysis in planning disease prevention programs and the explicit consideration to the quality of life benefits associated with reduced disease.

The Value of Changes in the Probability of Death or Injury

One of the more puzzling questions encountered in public investment decision making (especially in the health and transport fields) concerns the value placed on improvements (or reductions) in the safety of human life. Schelling (1968) appears to have been the first to suggest that any change in the fatal (or nonfatal) accident rate may be regarded as a (typically small) change in the probability of death (or nonfatal accident) for any particular individual. Mishan (1971) takes a similar view of the problem and argues that, if alternative resource allocations are to be compared solely on the basis of potential Pareto improvements, then public investment projects which increase the safety of human life will be recommended only if the total of sums which individuals would be prepared to forfeit to effect such probability changes (and the other desirable consequences of the investment) exceeds the capital costs of the projects concerned. Given the manner in which Schelling and Mishan formalize the problem, the central question is therefore the nature of the Hicksian in wealth1 for various changes in probability of death or injury. In fact, even if Mishan's Pareto improvement criterion is rejected as a basis for allocative decisions, information concerning these compensating variations will still be relevant for all but those public investment decisions which completely ignore private preferences. The primary purpose of this paper is to develop a qualitative analysis of compensating variations for changes in the probability of an individual's own2 fatal accident. In addition, brief consideration will also be given to

The Evaluation of Urban Public Facility Location: An Alternative to Benefit‐Cost Analysis

AbstractThis paper attempts to overcome some specific problems which exist with the use of benefit‐cost analysis in evaluating the impact of public facilities. The concepts developed explicitly recognize the importance of the spatial distribution of impacts and the fact that tastes can differ substantially among people. By utilizing the concepts of the generalized environment and of place utility, a more general and valuable conceptual model can be developed which may be useful in preventing much current conflict over public investment decisions. The model has an explicit concern with the problem of equity and is thus only a small step in a growing field of inquiry within geography.

Environmental Goods: Determination of Preferences and Trade-off Values

ABSTRACTIn the last decade environmental goods such as scenic beauty, sites of cultural and aesthetic significance, human safety and health, tranquility, environmental quality, and other related attributes of the environment have caught the attention of the public. Natural resource development projects emphasizing primarily economic benefits are no longer acceptable to the public. The National Environmental Policy Act of 1969 clearly requires that “…Federal decision making incorporate environmental values along with technical and economic values; that both short-and long-term effects be given careful consideration “ (Council on Environmental Quality, 1971: 240).The purpose of this paper is threefold: first, to assess the current status of considering environmental goods in public investment decisions; second, to consider the Priority Evaluator technique developed by Social and Community Planning Research, London, as a viable technique for valuation of environmental goods; and third, to present and discuss...

AESTHETIC PREFERENCE FOR WATER RESOURCE PROJECTS: AN APPLICATION OF Q METHODOLOGY1

ABSTRACT Many of the resources generating aesthetic and visual benefits are publically owned and their optimum use and development depends upon public investment. Traditionally, public investment decisions have been couched in economic terms requiring quantitative measurement of benefits and costs. Since many of the benefits these resources provide are not consumed when they are enjoyed, the total contribution of the resource is imperfectly measured in the usual market sense. Thus, if the provision of these public goods is left to the conventional market mechanism, less than socially optimal investment may occur. This study was designed to investigate whether aesthetic preferences related to water projects could be determined, and whether they differ among different groups of people. A Q sort of 44 photographs of a wide variety of water development projects was conducted with two groups, i.e., photographers (aesthetic man) and town assessors (economic man). The resultant analysis identified two significant factors. Factor 1 provided insight into a hypothesis of nature dominant or man dominant scenes. Factor 2 indicated that the respondents had a negative preference for projects which were in varying stages of completion or appeared to be polluted. Preferences were consistent between the two groups tested. The test revealed that people do not necessarily equate only naturalness with aesthetic appeal, but will accept development as aesthetic, provided that it is designed to complement the natural landscape.

The Delphi Method as Applied to Public Investment Decisions: Comment

This paper is a comment on the research of Gunther and Vallery (1961).

The Delphi Method as Applied to Public Investment Decisions

This article considers some recent developments in the area of “opinion technology” and the potential use of these developments in formulating regional development policy. In particular, we explore the role of the Delphi Technique for eliciting and refining local “informed opinion” in the determination of regional development plans and policies.

Pressure groups and public investment decisions: A note

No model of public investment is complete without introducing the effects of the interaction between pressure groups and agency officials. The contention that public managers attempt to extend control over resources is a convenient starting point for the analysis. The logrolling models that describe the trading among pressure groups describe the end point of the process. Somehow the gap in between must be filled by an analysis of the role of pressure groups in the design and promotion of public projects and programs. Only then can analysts pretend to have a reasonably complete model of public investment decisions. This note is presented as a possible beginning in the quest for such a model.

Politicians, Public Servants and Public Investment Decision Making

Politicians, Public Servants and Public Investment Decision Making

Howe, Charles W., et al., Inland Waterway Transportation—Studies in Public and Private Management and Investment Decisions, Baltimore, The Johns Hopkins Press for Resources for the Future, 1969, vii + 144 pp. ($5.00 paper)

Howe, Charles W., et al., <i>Inland Waterway Transportation—Studies in Public and Private Management and Investment Decisions</i>, Baltimore, The Johns Hopkins Press for Resources for the Future, 1969, vii + 144 pp. ($5.00 paper)

Discussion: Water Resource Economics

[5] BREWSTER, JOHN M., Impact of Technical Advance and Migration on Agricultural Society and Policy, J. Farm Econ. 41:1169-84, Dec. 1959. [6] CASTLE, EMERY N., Economics of Massive Inter-basic Transfers, seminar paper presented to the Resources Center at Washington State University on April 15, 1968. (To be published.) [7] , Market Mechanism, Externalities, and Land Economics, J. Farm Econ. 47:542-556, Aug. 1965. [8] CASTLE, EMERY N., AND HERBERT STOEVENER, Water Resources Allocation, Extramarket Values and Market Criteria: A Suggested Approach, Oregon Agr. Exp. Sta. Tech. Paper 2387, presented to the Irrigation and Drainage Division of the American Society of Civil Engineers, Sacramento, California, Nov. 1, 1967. [9] CASTLE, EMERY N., MAURICE KELSO, AND DELWORTH GARDNER, Water Resources Development: A Review of the New Federal Evaluation Procedures, J. Farm Econ. 45:693-704, Nov. 1963. [10] CAUFIELD, HENRY P., Policy Framework for Economic Analysis in Comprehensive River Basin paper given at Conference on Economic Analysis in Comprehensive River Basin Planning, Washington, D.C., March 1213, 1968. [11] CIRIACY-WANTRUP, S. V., Benefit-Cost Analysis and Public Resource in Economics and Public Policy in Resource Development, ed. Smith and Castle, Ames, Iowa State University Press, 1964, pp. 9-21. [12] HImSCHMAN, ALBERT O., The Strategy of Economic Development, New Haven, Conn., Yale University Press, 1959. [131 HOWE, CHARLES W., Water Resources and Regional Economic Growth in the United States, 1950-1960, Southern Econ. J. 34:477-489, April 1968. [14] KELSO, M. M., Criterion Problem in Decision-Making for Public Investment, Rep. 15, Conference Proceedings on the Economics of Resources Development of the Western Agricultural Economics Research Council, Las Vegas, Nevada, December 7-9, 1966. [15] LEWIS, W. ARTHUR, Is Economic Growth Desirable? in The Theory of Economic Growth, Homewood, Ill., Richard D. Irwin, Inc., 1955, pp. 478--491. [16] MAASS, ARTHUR, Benefit-Cost Analysis: Its Relevance to Public Investment Decisions, in Research, ed. Kneese and Smith, Baltimore, The Johns Hopkins Press, 1965, pp. 311-328. [17] U.S. Congress, Flood Control Act of 1936, 49th Statute 1570. [18] U.S. Senate, Policies, Standards, and Procedures in the Formulation, Evaluation, and Review of Plans for Use and Development of and Related Land Resources, Senate Doc. 97, 87th Cong., 2d Sess., May 29, 1962. [19] WHITE, GILBERT F., Social and Economic Aspects of Natural Resources, National Research Council Pub. 1000G, Washington, D.C., National Academy of Sciences, 1962. DAVID J. ALLEE

Undeveloped Land Prices During Urbanization: A Micro-Empirical Study Over Time

IN most of the world's urban centers, the price of land has been rising at a rapid rate. In some cases the increases observed have been phenomenal indeed increases of 5 to 7 times in 17 to 20 years, in Israel for example 1but even in more settled areas the increase in the price of land appears to have been considerably greater than the rise in prices generally or in construction. While builders tend to adjust to higher land prices by more intensive land use, such as high-rise buildings, there is evidence that the land component of housing costs is increasing. Considerations of housing policy and equity have focused attention on the growth of land prices here and abroad.2 The relevance of land prices to public investment decisions is also being increasingly recognized. New roads and rapid transit, sewer and water lines, and urban renewal projects yield sizeable benefits (or, in some instances, costs) to adjacent properties. The capitalization of these externalities in land values is a measure of the benefits obtained.3 Finally, land is one of the principal forms of assets held in the economy and one, moreover, in which large speculative gains have sometimes been made. So far the interrelationships between land asset values and the macro variables of the economy have not been closely analyzed. Theory suggests the possibility of effects of the interest rate and certain macro variables on land prices and in turn there may be effects in the opposite direction. Over time, the recorded prices of land transactions reflect an intermingling of various influences. The capitalization of expected returns implies an underlying time path for land prices given expectations and interest rates. Changes in the economy at large -by way of interest rates, business conditions generally and in the real estate market, and construction activity influence land prices. Along with these factors over time, there are the effects of the qualitative characteristics of the land being sold, which are not likely to remain fixed as the development of an urban area proceeds. These effects must be considered simultaneously. This study is an attempt to disentangle the various influences affecting the price of vacant land with particular emphasis on the movement of prices over time. The empirical analysis is based on a body of micro-data, consisting of 1111 land transactions in Northeast Philadelphia over the perod 19451962, together with selected characteristics of the parcels sold at the time of the transactions. These data were collected for an extensive study of the process by which vacant land on the edge of a city goes into urban use, and particularly of factors influencing the rate of development and rise in prices during the process.4

Benefit-Cost Analysis: Its Relevance to Public Investment Decisions]: Reply

Journal Article Benefit-Cost Analysis: Its Relevance to Public Investment Decisions: Reply Get access Arthur Maass Arthur Maass Harvard University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 81, Issue 4, November 1967, Pages 700–702, https://doi.org/10.2307/1885589 Published: 01 November 1967

Benefit-Cost Analysis: Its Relevance to Public Investment Decisions: Comment

Benefit-Cost Analysis: Its Relevance to Public Investment Decisions: Comment

Benefit-Cost Analysis: Its Relevance to Public Investment Decisions

What is the problem? 208. — Have benefits been overestimated? 211. — How did we get to where we are? 212. — What changes in welfare economics theory are needed? 213. — What is the evidence that trade-offs can be determined? 218. —The lesson, 225.