What does it mean to say that some policy, project, or action is in the public interest?
Economists have, for over a hundred years, been refining ways of measuring whether and how much policies and projects are, overall, good for society. Cost Benefit Analysis (CBA) has been used for over a century to decide what, where, and how to build, or deliver a program. The valuation concepts behind CBA go back even further to Cromwell’s England to decide how much agricultural land was worth. Around eighty years ago, to stop unfair competition amongst competing projects, CBA was standardized by the US Army Corps of Engineers for flood control projects. CBA has been further standardized and has been endorsed by US federal governments for all aspects of spending justification for the past three decades and by five presidents of different political stripes. We need to reinforce CBA’s use as an objective, transparent, decision making tool and a curb on competing definitions of the public good.
Ask a politician and he or she will usually define the public interest as jobs. Good paying, middle class jobs, and often in whose riding those jobs are, seems to be the rationale for most public policy. On an economist’s ledger creating jobs is in the public interest only if the proposed policy or project hires the unemployed. Otherwise jobs are a cost; not a benefit. The wages paid are a transfer from owner to worker and they net out of a societal calculation. A new mega-project may hire some unemployed workers but it will also likely increase the demand and hence the wages of those already employed. Preserving jobs is not something we should do at any cost if workers are in high demand and are not likely to be out of work for long.
Economists have been working with climate scientists to put a social cost on carbon emissions. CBA also prices people’s willingness to pay for clean air and water, it values safety improvements, it considers the environment and quality of life as well as the financial returns. It is through these direct measurements of the non-market impacts that CBA advocates for those policies and projects that are welfare producing in the broad sense of being good for the economy, the environment and society as a whole. CBA’s methodology has been standardized and the weights attached to impacts can be taken out of the political realm by using mountains of research.
As we rush headlong towards possibly environmentally damaging mega-projects or other get-someone-rich-quick schemes we need to make sure we are doing so with our eyes wide open. Transparency is key as we give away the crown jewels of, or loan the keys to, our public infrastructure, realm and ambit. CBA can add to that transparency and fight nepotism by calculating the public interest.
CBA reduces all dimensions of a decision – people, planet, profits – to one: net welfare. Are we, as a group, better off? This well-established and standardized approach needs to be used much more to guide us in our project and policy decisions. CBA values society’s best interests, the public interest.
At Autocase we strive to do good CBA to help architects, engineers, planners make good decisions. We use a brand of CBA called Triple Bottom Line Cost Benefit Analysis (TBL-CBA) that has accounts for financial (or life cycle cost analysis LCCA), community and the environmental impacts. TBL-CBA is driven by the desire to balance people, and planet with profit. Standardization and automation allows our clients to make balanced decisions about their building projects.