tag:blogger.com,1999:blog-7342528022617501525.post5104863022880000256..comments2024-03-28T15:05:33.781+13:00Comments on Economics New Zealand: Some sobering research on infrastructureDonal Curtinhttp://www.blogger.com/profile/03687495556590450225noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-7342528022617501525.post-29269687703619120132016-04-21T19:50:16.214+12:002016-04-21T19:50:16.214+12:00One reason why the cost overruns are less than fou...One reason why the cost overruns are less than found in the international studies that is that databases from megaprojects: projects can be more than $1 billion.<br /><br />A number of the post-implementation reviews are a very small road upgrades and so forth of a couple of million dollars. If you cannot spend few million dollars and stay in budget, things would be pretty hopeless.<br /><br />Jim Rosehttps://www.blogger.com/profile/02233668500637892711noreply@blogger.comtag:blogger.com,1999:blog-7342528022617501525.post-2149735210541127962016-04-07T12:21:31.481+12:002016-04-07T12:21:31.481+12:00I'm not Motu! I can only dream of such poetic...I'm not Motu! I can only dream of such poetical and economic heights.<br /><br />Seems to me Mr Nunns has the right of it with his comments about the political economy aspects. There's much more political gain in announcing new stuff than in going back later and assessing how far the expected benefits have actually been achieved in practice. This applies much more broadly than to infrastructure construction projects, of course, and it's not by any means limited to the NZ context.<br /><br />Wellington Haikuhttps://www.blogger.com/profile/07284287022645915266noreply@blogger.comtag:blogger.com,1999:blog-7342528022617501525.post-18466072983752286512016-04-06T20:23:36.571+12:002016-04-06T20:23:36.571+12:00The first estimate of the cost of building Stadium...The first estimate of the cost of building Stadium New Zealand on the Auckland waterfront was $500 million. 2 weeks later also the estimate was $900 million. Cabinet pulled the plug on that despite the heady excitement of hosting the Rugby World CupJim Rosehttps://www.blogger.com/profile/02233668500637892711noreply@blogger.comtag:blogger.com,1999:blog-7342528022617501525.post-9759984321605372792016-04-06T12:24:29.543+12:002016-04-06T12:24:29.543+12:00Thank you. That's very helpful indeed. I did w...Thank you. That's very helpful indeed. I did wonder myself if Flyvbjerg's data set of large to very large projects (which you'd think would carry more intrinsic risk than run of the mill smaller ones) might not be representative of New Zealand. Donal Curtinhttps://www.blogger.com/profile/03687495556590450225noreply@blogger.comtag:blogger.com,1999:blog-7342528022617501525.post-15154182276104609992016-04-06T10:54:55.037+12:002016-04-06T10:54:55.037+12:00NZTA occasionally does post-implementation reviews...NZTA occasionally does post-implementation reviews of its projects. I did a bit of quick-and-dirty analysis of the results here: http://transportblog.co.nz/2014/11/17/road-funding-survival-of-the-un-fittest/<br /><br />Costs seem to blow out, but there doesn't seem to be a trend towards systematically over-inflating benefits. And while NZTA's PIR dataset doesn't include a lot of really large projects, it may suggest that NZ's performance is better than what Flyvbjerg observes internationally.<br /><br />Another data point is that Auckland's motorway and arterial road network was originally (1956) projected to cost £15 million - or around $800 million in today's dollars. By 1962 they'd raised the cost estimates to £40 million ($2 billion today). That's still a laughable under-estimate...<br /><br />One reason to expect optimism bias to be a perennial issue for public infrastructure projects is that political actors can benefit from announcing or opening projects, even if they're not actually socially beneficial. Voters reward politicians who are "doing stuff", and the costs are often sufficiently dispersed to be invisible.<br /><br />Private participation in project financing hasn't necessarily enhanced financial discipline. The Australian experience with private toll roads has led private investors to favour an "availability payment" model in which demand risks remain with the government. Consequently, an availability payment PPP model doesn't offer _that_ many advantages over standard design-and-build contracts.Peter Nunnsnoreply@blogger.com