ECONOMICS UNIQUENESS

20 ■ THE ECONOMICS OF UNIQUENESS
building with character and replacing it with a high-rise structure less appealing
than renovating it.
Economic, Financial, and Private Returns
Economic returns are defi ned as the society-wide gains from the project compared
to the situation that would prevail if the project were not undertaken. Considering
society as a whole implies that the local residents are not necessarily
the only benefi ciaries. Households that do not live in the intervention area but
value its architecture and culture are among those gaining from the project, as are
outside investors who make a profi t from it. When comparing expected project
results with the situation that would prevail in the absence of the project, the
relevant benchmark is not necessarily the situation that prevails when the project
is considered. For instance, in the absence of the project, many buildings with
architectural or cultural value could collapse due to disrepair or be replaced by
more modern structures. In that case, the relevant comparison could be with a
situation in which the architectural and cultural value of the intervention area is
lower than at present or simply nonexistent.
Th e cost C of the project to society includes spending by the government, but
also the spending I by local residents and outside investors induced by the project.
Improved infrastructure, and potentially a greater heritage value of the area,
could indeed encourage private sector eff orts to upgrade existing properties and
construct new buildings. Th erefore, the cost C can be defi ned as:
C = U + R + I
Transfers T from the project to local residents are not counted as costs to society,
as they basically involve a transfer between the government and the private
sector. Much the same as taxes, they entail redistribution but not an additional
pressure on resources.
Defi ning society-wide benefi ts is not that straightforward, as some of the
ensuing gains are monetary while others are not. Th e non-monetary dimension
is related to the value attached by society to aesthetics and culture, or heritage
value H for short (Bruekner et al. 1999). 1 Th e monetary dimension concerns
the market value V of all the properties in the intervention area, regardless of
whether the owners are local residents. In algebraic form, the benefi t B to society
is the sum of the net gains from the project along the two dimensions:
B = ΔH + ΔV
ΔH is the change in the heritage value of the intervention area compared to a
situation where the project would not be undertaken, and ΔV is the change in the
value of all properties in the area.