tag:blogger.com,1999:blog-3471471289744825428.post3442291315256398788..comments2024-03-11T00:31:41.186-07:00Comments on The Oregon Economics Blog: Opportunity Cost, CBA and the CRCPatrick Emersonhttp://www.blogger.com/profile/17242234148546323374noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-3471471289744825428.post-9542533608125391122011-10-16T04:02:07.331-07:002011-10-16T04:02:07.331-07:00"Is this the best use of the resources we nee..."Is this the best use of the resources we need to devote to the project?"<br /><br />I really get this question...but what I don't get is how planners could ever answer "yes" to this question. Planners are a few puzzle pieces short of a perfect picture. <br /><br />How many puzzle pieces are planners missing? Well...they are missing each and every taxpayers' individual opportunity cost decisions. That's 99.99% of the puzzle.<br /><br />But you already knew that. Yet, despite missing nearly all of the puzzle, you seem to be under the impression that it's possible for planners to have enough pieces to accurately describe the picture. <br /><br />If you really want to know whether a project is truly the best use of limited public resources then you'll support donations to government organizations being 100% tax deductible...aka pragmatarianism.Xerographicahttps://www.blogger.com/profile/14978832439622230018noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-72594612089281684672011-04-21T17:08:32.477-07:002011-04-21T17:08:32.477-07:00One small addendum on the federal funding: There ...One small addendum on the federal funding: There is a widespread belief--propagated by CRC proponents--that there are essentially no opportunity costs associated with federal funding for the CRC. They claim -- inaccurately in my view -- that the CRC is a special project that would somehow qualify for federal funding in a way that no other project in Oregon might not.<br /><br />But I think this is belied by the political realities. Project proponents also claim that Oregon and Washington's clout (Patty Murray, Earl Blumenauer, Peter DeFazio, all sit on key committees) could help Oregon and Washington win an earmark for this project. But these three leaders could equally easily use this same clout for other projects.<br /><br />In reality, when Congress allocates funds, every legislator argues for projects in their home district, and just like your frequent flier miles example, using our federal "chit" for CRC means that we can't use it for something else--like say the Sellwood.<br /><br />The key lesson here is that pretending that there are no opportunity costs is a central part of the "selling" of the CRC.<br /><br />One other comment on CBA. The CBA conducted for CRC is a kind of global take-it-or-leave-it excercise. The CRC didn't look at the CBA of any of the alternatives to the CRC (aside from a contrived do-nothing scenario). It could well be that other projects (seismic retrofit of the existing bridge, bus-rapid transit, tolling only, commuter rail or a third bridge) would have a higher B/C ratio. Saying that B>C for a single alternative at the end of the process is using CBA as a sales tool, not an analytical one.<br /><br />In addition, a really useful CBA would attempt to disaggregate the major components of the project to see which pieces have the highest ratio of B to C. While I doubt it, the overall B/C ratio may exceed 1 for the grand total. But a thoughtful analyst would ask, "which pieces of the project generate the greatest benefits". According to the Independent Review Panel, the project will likely have to be broken up into phases. A disaggregated CBA might lead you to prioritize different elements of the project, and focus on doing the most valuable ones first.Joe Cortrighthttps://www.blogger.com/profile/09923624828969441828noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-15147367199618235122011-04-21T15:16:24.712-07:002011-04-21T15:16:24.712-07:00I disagree with your assertion that the existing b...I disagree with your assertion that the existing bridge is "perfectly good." My understanding is there are several safety issues with the existing bridge, which is not expected to do well in a major earthquake. A bridge of a different design would perform better, be anchored in the bedrock, not have a tall tower with a counterweight, etc. Additionally, the drawbridge component and lack of shoulders has made the bridge a frequent source of rear-end and sideswipe collisions. So it seems like a thorough CBA would consider these safety issues as well and the economic benefits of fewer accidents, lives saved, potential disruption to the economy if there is a major quake that knocks the link out, and so forth. <br /><br />Also, I think it is worth considering the source of funds along with opportunity costs. While it is theoretically possible that we could toll the existing bridge and use the funds for projects elsewhere, it is unlikely that there would be political support for tolling for any project other than improvements to the bridge and CRC project area. So it seems like this would in some ways limit the practical relevance of opportunity cost to project alternatives within the area.<br /><br />On another note, thanks for writing about the new Student Legacy Park yesterday. I and many others spent a lot of time collecting signatures and getting out the vote for it!MPPBrianhttps://www.blogger.com/profile/09349552296333385953noreply@blogger.com