Research 350 - NZ Transport Agency

2. APPROACHES TO ASSESSING NATIONAL ECONOMIC BENEFITS
2. Approaches to assessing national
economic benefits
2.1 Scope
This chapter seeks to address the issue of the most appropriate approach to assessment of
national economic benefits of transport projects. A significant theme is the adequacy (or lack
thereof) of traditional social cost benefit analysis (SCBA) in assessing the totality of benefits
flowing from a given transport project. Key questions this chapter seeks to address include:
• Question 2.1: In what circumstances, and to what extent, does a (fully-specified)
SCBA not capture all the national economic costs and benefits arising from a
transport investment?
• Question 2.2: What alternative approaches exist to assessing the national
economic impacts of transport investments, and what are their merits in place of
or to supplement SCBA (particularly to capture any costs and benefits not
adequately addressed by SCBA)?
• Question 2.3: How should the impacts of transport investment on national
economic growth (GDP and similar measures) be assessed; and how do such
assessment methods and their outputs relate to the methods/outputs involved in
the SCBA approach?
These questions are addressed by considering three other evaluation approaches in addition
to SCBA – Input-Output, Computable General Equilibrium, and Land Use Transport Interface
approaches.
2.2 Introduction to evaluation approaches
2.2.1 Social Cost Benefit Analysis
A broad definition of SCBA is offered by Campbell and Brown (2003):
Social cost-benefit analysis is a process of identifying, measuring and comparing the
social benefits and costs of an investment project or program. A program is a series of
projects undertaken over a period of time with a particular objective in view. The project
or projects in question may be public projects – undertaken by the public sector – or
private projects.
Boardman, Greenberg, Vining and Weimar (2001) offer the following definition:
Cost-benefit analysis is a policy assessment method that quantifies in monetary terms the
value of all policy consequences to all members of society. The net social benefits measure
the value of the policy. Social benefits (B) minus social costs (C) equals net social benefits
(NSB).
However, apart from these broad textbook definitions, as Duncan (2001) notes, a critical
distinguishing feature of SCBA is its focus on the need to maximise economic efficiency by
maximising some objective function (generally societal welfare).
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