Edited by Michiel Bliemer, Corinne Mulley and Claudine J. Moutou
Chapter 15: Appraisal of infrastructure
This chapter considers the appraisal of transport investments or transport ‘schemes’ where public sector funding is required and thus the assessment needs to be far broader than the financial impact on companies affected. The focus here is on social cost–benefit analysis (SCBA) which seeks to assess all the costs and benefits of a scheme in money terms wherever they may fall. In practice, however, the range of impacts included is limited by practicality, proportionality, resources and challenges in measurement and/ or in valuation. Costs and benefits are estimated over the lifetime of the investment and discounted to give a present value. The present value of the benefits minus the present value of the costs gives the net present value, where this exceeds zero the scheme has a positive net social benefit. Social cost–benefit analysis has its basis in welfare economics and in particular the concept of Pareto efficiency whereby an efficient solution is reached when no changes would make some better off and none worse off. Any transport investment will involve costs, but if the gainers could (in theory) compensate the losers and still be better off, then a Pareto improvement is achieved, in this case measured by the net present value.
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