I was having a read through a number of submissions on the Waterview Connection project today and came along a very interesting submission by Auckland University Associate Professor of Economics, Rema Vaithianathan, that is worthy of sharing. The useful thing that Rema’s submission does is include an article she wrote for the Road & Transport Research Journal back in September last year on the economics of urban motorways – with the Waterview Connection as a case study. You can easily access the journal article part of her submission by clicking here.
While the article is slightly out of date, in that NZTA quite radically changed its design in December last year, the points about transport economics in general still hold true.
She discusses time savings benefits, a decidedly dodgy tool that is used to estimate the benefits a particular transport project will provide:
I’ve discussed the work of David Metz in previous blog posts – and it certainly is interesting that over decades so much money can be spent on transport projects that promised to provide such huge time savings benefits – with the real result actually being no reduction in travel times, just a lengthening of trips.
I also think it’s great that Rema points out that the economic value of time savings (should they even exist in the long run) varies according to the type of trip being made. For commuting trips, really the only benefit you get from a shorter commute is being able to sleep in longer and getting home from work a bit earlier in the evening. Sure those are quality of life improvements, but are they really an economic gain? Surely if we were really interested in improving quality of life by giving people more spare time we’d instead spend money on buying every household in the country a dishwasher. Heck, it’d be cheaper than many of the motorway projects currently proposed!
Rema’s article also goes on to discuss the social costs that are generally not considered in undertaking cost-benefit analyses:
While like most people I certainly appreciate the fact that motorway projects can have significant social and environmental effects, it’s interesting to see what happens when you start trying to apply a dollar figure to those effects. I can see how Boston benefitted hugely from removing an elevated freeway from through the heart of its city – largely from increased property values around the area I imagine – so it’s interesting to think how that same process would work in reverse. How many houses have their value significantly decreased because they’re next to a noisy, ugly and polluting motorway? What is the social cost of losing nearby open space? And so forth.
I like Rema’s conclusion as well:
While I do care about the results of cost-benefit analyses, I think it’s useful to take their results with a bit of a grain of salt – because of the costs they ignore and the benefits they potentially invent. Perhaps what is particularly amusing is that a project like Puhoi-Wellsford still can’t score well in a cost-benefit analysis – even though the system is so exceedingly skewed in favour of justifying it.
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Time savings might well be negated by people moving further away from their employment but that makes cheaper housing available to people and also allows them the flexibility to change employment more easily. It likely also means that a person living a suburban lifestyle (rather than an inner city or other high density lifestyle) has more immediate access to a green space… namely their own back yard. Personally I like living in an apartment, but most NZers would consider a suburban lifestyle to be a positive thing and anything that supports that lifestyle to be beneficial.
I’m surprised that the value of people’s time is valued so low by NZTA. $6.90 an hour for non-work travel?! I recall you mentioned a few months ago that you drove to the North Shore on a regular basis to visit someone… a child perhaps? There is a busway and connecting buses and it is almost certain that you could get there and back entirely by public transport. So I assume that the extra time taken on public transport is either going to eat in to your time at your destination, or act as a disincentive to regular visits. In that case I’m guessing that you value your time a lot higher than the paltry $6.90 an hour that is used to model transport. Your regular cross-city travel might not be a measurable economic benefit, but it should be countered as a social benefit and the figure used should be higher than the one quoted.
Obi, to test that matter you would need a situation where public transport was $6.90 cheaper than driving but an hour longer. Would I still choose to drive in such a situation – I’m not sure actually.
Where cost benefit analysis does come into its own, is in comparing similar sorts of projects on a like-with-like basis, to the extent that that is possible. That alone would damn P2W – because of all the good road investment that would be crowded out, never mind anything to do with rail or other public transport.
Doesn’t this call into question the benefits of rail travel as well? Seriously though – not trolling – there must be a reason for the significant subsidies that we offer to PT. One of the main justifications is the cost-benefit analysis… most of which is driven by lowering road congestion and hence – you guessed it – travel time savings.
This is not an anti PT post – just not sure how else we can do it. Suggestions to tweak the CBA are always interesting… although there are benefits to a consistent system.
That does touch upon the fundamental question of what benefit do we derive from a better transport system. As Cam says below, perhaps the benefit comes not from faster travel times, but for having a greater number of trips options within a certain length trip.
One of the big arguments for the CBD Rail Tunnel is that a whole pile extra people are brought within a 30 minute train trip of the CBD. That has big benefits for both the CBD and those areas which have had their accessibility improved.
And to clarify, I am all for a good public transport system – the one in Auckland is truly awful and drives people into cars. For that matter, the car-centred parking policies are driving me more and more up the wall… would love to see some cost/benefit analysis on street carparks in shopping areas…
The real benefits from transport projects, for both road and rail, come from the longer term increase in employment catchment areas at one end, and the increased choice of destinations within a certain range. These benefits are much harder to quantify, however ultimately have much bigger impact on the urban form.
Those benefits don’t seem to be counted in any of the business cases. For instance, the biggest benefit of the Harbour Bridge wasn’t a time saving for the (then) few North Shore residents who wouldn’t have to take a ferry, but the opening up of the North Shore as a home for around 300,000 people. In terms of real estate value, that is (say) 150,000 homes times $500k each for a total of $75bn, plus the value of the commercial real estate. Not a bad return for a bridge with a 2010 dollar value of about a billion bucks.
Similarly, Puhoi to Wellsford only has to open up housing potential for 50,000 people to be worth $12.5bn. You might not like sprawl, but if Auckland’s population is to continue to grow then people are going to have to go somewhere and I suspect NZers will continue to prefer suburbs over high density apartment dwelling. A rail line from Puhoi to CBD via Albany would have a similar effect of opening up new residential potential… it’s just that no one is proposing to build rail lines to new areas at the moment, only to service existing suburbs or destinations.
when carrying out these cost-benefit analyses, does anybody come back after a few years and check whether any estimates / assumptions made around traffic figures and usage were actually correct? it feels to me like the traffic impact reports make claims about time improvements, then within a year or so all the predictions are miles out.
It would be interesting to review some of the claims made.
Also, do the time saving calculations also take into account the additional time added to peoples journeys by extra traffic generated by a new road.
For example, I live near Sandringham Road. Since the latest stage of SH20 opened, Sandringham Road has become significantly busier, to the point that it is hard to pull out of side streets, and it is much harder to cross the road as a pedestrian. Also the side streets have become busier with cars attempting to avoid the queues. Do all these dis-benefits to adjoining areas get factored in to the savings for people just using the new road?
Isn’t the biggest cost the promotion of economically unstainable urban development. All those lifestyle blocks in Rodney suddenly become accessible to the south- east. That is until the road chokes up and fuel prices mean the average worker can’t afford to drive. An the ratepayers have to cough up for things like sewers, rubbish collection and new roads in the new semi rural subdivisions.
Would be interesting to know what percentage of cars that will use Waterview are diverted from SH1/Harbour Bridge?
Benefits would certainly be offered by moving this traffic away from pinch points around the harbour bridge.
However I’m not convinced the volume of this traffic will be significant enough at this time.
I agree with the Waterview Connection being done in the long-term, however I’m not convinced it is urgent.
We should wait until the end of the decade for construction, so it doenst clash with the CBD loop tunnel, which is far more beneficial to the whole of Auckland.
I think the conclusion is very sound and very important. Evaluations such as these are very political, and the conclusions are political conclusions. As much as some engineers and economists like to think of BCR equations as some sort of impartial a-political evaluation, at the end of the day the are squarely based on the critera chosen, the assumptions made, and of course the way they are interpreted and valued.
The thing that BCRs are most useful for is comparing projects, especially where the projects are of a similar nature. They are a good tool for prioritising funding.
Do NZTA undertaken any form of sensitivity analysis on their BCRs, at project level?
@admin: ‘if a travel time saving allows you to sleep in a bit longer, is that really an economic gain?’
Yes, it is. That’s the definition of ‘economic’ in economic cost-benefit analysis as opposed to financial analysis. It includes the things that cannot, or usually are not quantified in dollars.
If you enjoy sleeping in, and a change to the economic system enables you to do so (other things being equal), that is an improvement to your economic welfare.
Note ‘if you enjoy sleeping in’. If you don’t care, there is no benefit. Need to note this because of analogy with other changes to the economic system, convenionally praised because they increase gross domestic product, but which may not genuinely improve welfare.
Re the argument that travel time savings are neutralised over time by longer trips, with implication that this destroys the value of the saving: Not sure that I agree with the implication. People are simply trading the travel time saving for other benefits such as better housing, greater choice of home vs workplace etc. The other benefits must have equal or higher value or they wouldn’t do it.