What is the value of a park or subway?
September 11, 2012 8:48 AM   Subscribe

How do they determine the real costs/values of things like Amtrak, a subway, a highway or a dam?

It is easy enough to add up operating/maintenance costs, tolls, and projected lifetime; but how do economists/social scientists factor in the value of say, 5.3 million rides/weekdays, on the NYC subway? (they are not clogging the roads, polluting, late for work due to a traffic jam) The bridges and highways that trucks use to supply goods? Bus stops that are well-lit and convenient, encouraging bus-ridership? bike lanes? Planting more trees in urban areas? After all, if we built more roads, we'd sell more cars, mechanics would have more work, add construction jobs, and Detroit benefits. Can you put a number on the social good of things like parks? Who crunches these things, and how?
posted by ebesan to Society & Culture (8 answers total) 6 users marked this as a favorite
The subject is called cost-benefit analysis. It's a large field; many thousands of people do it. If you want more, just Google "cost-benefit analysis."
posted by Mr.Know-it-some at 9:02 AM on September 11, 2012 [2 favorites]

For parks economists use something called contingent valuation. Basically they ask how much people are willing to pay for say a park or to save the rain forest. You can test how accurate this is by asking people to donate for real then adjust the fact people over state how much they would pay.
posted by akabobo at 9:04 AM on September 11, 2012 [1 favorite]

It's also worth noting that "they" involves not just economic calculations using models that have varying degrees of accuracy (and there are a gazillion discussions between new urbanists and traffic engineers and the like showing just how far different those models can be), but all sorts of political decisions.

Who crunches these things and how? Go find your local municipality's "general plan" (at least out here in California) and start working backward: Talk to the politicians and local advocacy groups about how the various elements in that plan came to be. These things are messes, the models for economic forecasting aren't at all clear, and many of the decisions come down to someone convinced someone else that it was the right thing to do.

For comparison: Compare bus stop lighting and placement to similar decisions made in retail. Some stores work for some demographics, some don't, this stuff is hard. And there are a gazillion pundits out there throwing brickbats and making suggestions.

(I've been listening to Chuck Marohn's Strong Towns podcast recently, which delves into some of the larger transportation network issues)
posted by straw at 9:29 AM on September 11, 2012 [1 favorite]

Mr. Know-it-some has it.

To calculate benefits for the roads and bridges case, an estimation is made of how many people would be using that road or bridge during it's lifetime. To find this out involves figuring out who would decide to take the new road instead of using the road they were using before, presumably because it's a shorter or faster route. Then they figure out how much time these people are saving by taking the new road/bridge. The saved time is then converted into a dollar figure by presuming that these people would thus be able to spend more time working at their job or doing some other activity which the economist puts a dollar value on, instead of being stuck in traffic on the old route (they would save gas, emit less pollution, and reduce wear and tear on their cars, too). Maybe the shorter route lets people commute from farther away, which will either help them save on rent in a cheaper community, or will drive up rents in that community due to the higher demand. Less congestion leading to fewer annual fatal traffic accidents is another benefit; economists morbidly have a standard dollar value that they use for each life saved in these sorts of analyses.

Another benefit is calculated for all of the shops, services, and businesses along the new route that would presumably get more customers, creating more tax revenue for the municipality that's funding the construction project in the first place.

A city planner, or someone in a similar role working for the municipality undertakes the CBA task as part of the project proposal. Obviously the goal is only to approve the ones that will generate a net benefit over the lifetime of the facility. Cynically, it also has to be a net benefit to the region funding the project.
posted by ceribus peribus at 9:33 AM on September 11, 2012

The term externality might be helpful for some aspects of this topic.
posted by XMLicious at 11:12 AM on September 11, 2012

Because I just stumbled across it, this article talks with David Gunn about some of the process of funding Amtrak's Harrisburg line. In short, there's far more ego at the high end and less actual analytics than you'd hope.

But on building transportation systems in general, the models are rather primitive. It is, for instance, groundbreaking research that people don't drive the shortest route to their destination. And I don't, for a minute, mean to snark on that paper, that observation is simply to note that there is an absurd amount of handwaving and agenda pushing behind economic impact reports and cost benefit analyses, especially in the area of transportation, and the state of the art is way less advanced than those pushing the models on you would have you believe.
posted by straw at 12:22 PM on September 11, 2012

Economists do some of this, people working in various parts of the public policy field as analysts do it, urban and regional planners do it.

Be aware, if you are researching cost-benefit analysis, that many of the criteria which you have listed and seem interested in (e.g. the "social good of parks," pollution) are NOT included in traditional analyses. These are sometimes referred to as "externalities" (because they are external to traditional money-oriented costs and benefits) and there is a hot debate about how they should be considered, since some are very, very difficult to put a price tag on. Though there are many people who are doing hard work trying to figure out how to measure things like environmental and social good in a framework that only prioritizes dollars--for an example, see any discussion on emissions pricing and the history of cap-and-trade in the US.
posted by epanalepsis at 12:36 PM on September 11, 2012

You might find this blog post by Slate's Matthew Yglesias informative. Apparently, when evaluating funding for mass transit projects, the U.S. federal government used to consider only reduced commuting times and none of the other potential benefits. According to this, a new rule had been proposed that would instead focus on ridership numbers. The post is from January, but I can't seem to find whether the rule was approved.
posted by SuperNova at 2:23 PM on September 11, 2012 [1 favorite]

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