ECONOMICS UNIQUENESS

INVESTING IN THE SENSE OF PLACE ■ 21
Because some of the gains from the project are non-monetary, a clear distinction
emerges between economic returns E and fi nancial returns F. Th e former
include the heritage dimension, whereas the latter do not:
E = B − C
F = ΔV − C
Th e heritage dimension is relevant from the point of view of fi nancial returns,
but its role is indirect. Th e increase in the monetary value of the properties in the
intervention area is aff ected by spending on the various project components, but
it can also be amplifi ed if the increase in the heritage value of the area is substantial.
Typically, property in areas with architectural or cultural character is more
expensive than similar property in generic areas.
An important connection between spending by the project and the increase
in the value of properties in the area is spending I by local residents and outside
investors on building improvements and new constructions. Th is spending
can be partly funded by transfers T from the project. With this notation, private
returns P to building improvements and new construction in the intervention
area can be summarized as:
P = ΔV − (I − T)
An urban upgrading project with a cultural component will have an economic
justifi cation if E > 0. However, as will be discussed below, assessing the
non- monetary gains ΔH from such project is bound to be diffi cult. Th is is why
fi nancial returns may provide a safer benchmark. Indeed, provided that the project
does not undermine the heritage value of the area (ΔH ≥ 0) a suffi cient condition
for it to be justifi ed is F > 0. Last but not least, the project will succeed
in attracting private investment if P > 0. In what follows, it is assumed that this
condition is met. However, decentralized profi t maximization by local residents
and outside investors may not lead to the maximum collective profi t, as will be
discussed below.
Project Appraisal in Practice
A range of practical methods has been proposed to estimate the monetary and
non-monetary gains from urban upgrading projects with a cultural dimension
(Snowball 2008 and Nijkamp in this volume). At the risk of oversimplifying, they
can be consolidated under two main conceptual approaches. One of them borrows
from environmental economics, trying to attach a consumer utility to something
that is intrinsically unique and hence has no market reference point for it.
In the environmental literature, uniqueness can refer to a threatened species or
a natural habitat, but in principle the method would be the same if it referred