ECONOMICS UNIQUENESS

24 ■ THE ECONOMICS OF UNIQUENESS
micro-simulations. Adding up the individual gains ΔV i across all the properties
in the area yields the aggregate monetary benefi t from the project:
∑
Δ V = ΔVi
Th e urban economics approach values the cultural component of the project
through its contribution to property prices, but ignores its direct consumption
value. However, both local residents and the population at large may derive subjective
utility from knowing that a historic landmark they associate with their
identity or value for its beauty is still standing and well maintained. Citizens who
live outside the intervention area may still feel pleased if its character is preserved,
even if they do not plan to visit oft en. Th is appreciation is independent of what
renovating that landmark may do to property prices. From this perspective, the
urban economics approach provides useful methods to estimate fi nancial and
private returns to an urban upgrading project with a cultural dimension, but it is
not suffi cient to estimate its economic returns.
In sum, the environmental economics approach is better at assessing nonmonetary
benefi ts from the project than it is at assessing its monetary benefi
ts. Conversely, the urban economics approach is more eff ective at capturing
the indirect eff ects of heritage on property prices but does not assess the nonmonetary
benefi ts from the project. It is thus appealing to bring together the
strengths of both approaches. From this point of view, project appraisal should
combine stated or revealed preferences to assess ΔH, and hedonic pricing and
micro-simulations to estimate ΔV.
Private Sector Participation
Economic returns of the project depend on how much is spent as part of the project
on upgrading the infrastructure of the area, on supporting its population, and
on renovating its historic landmarks and buildings with architectural value. But
economic returns also depend on how the private sector reacts.
Private Investment Decision
If local residents and outside developers see the project as an opportunity to
invest their own resources and make a profi t, the increase in the value of the properties
in the intervention area will be higher. In appraising an urban project with
a cultural dimension it is therefore important to understand the behavior of the
private sector and to take into account its investment response. Th is understanding
can then be used to maximize the economic returns of the project.
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