New Book "Infrastructure Economics and Policy" Offers an Essential Guide to Smart Public Investment

CAMBRIDGE, Mass., Dec. 15, 2021 /PRNewswire/ -- As governments consider major infrastructure proposals, the Lincoln Institute has published a new book that will help policy makers achieve a greater return on public investments. Edited by José A. Gómez-Ibáñez and Zhi Liu, Infrastructure Economics and Policy: International Perspectives includes contributions from 30 leading international academics and practitioners on topics such as project appraisal, financing, governance, climate change, and technology.

The book comes out at a time when governments of many countries are considering infrastructure as a policy instrument to stimulate national economies that have been adversely affected by the COVID-19 pandemic. The book offers case studies, data, and analyses that can help governments evaluate infrastructure proposals.

It includes the following six takeaways to consider in any infrastructure investment package, based on extensive research into the ingredients for success:

Think Long-Term Growth, Not Quick Stimulus. Contrary to conventional wisdom, infrastructure investment is not an effective way to provide a quick economic stimulus. It takes many years to secure the permissions and funding necessary to begin construction on a new project, and the sophisticated equipment and training required by modern construction means such projects do not offer pathways to quick employment for large numbers of unskilled workers. Infrastructure Economics and Policy explains why infrastructure investments offer few short-term impacts, even when the long-term economic impacts are clearly positive.

Shovel-Worthy Matters, Not Shovel-Ready. The impacts of infrastructure projects depend greatly on their quality. Many infrastructure agencies are required to prepare cost-benefit analyses of the major projects or policies they are considering and of the relevant alternatives to those projects. However, few governments (if any) require the agencies to adopt the alternative with the highest net benefit. This is often because of political considerations, including concerns that cost-benefit analysis might not adequately reflect the goals of fairness and equity. While cost-benefit analyses are not perfect, they are one of the best tools available for evaluating infrastructure proposals, and agencies should be cautious about departing significantly from the option with the highest net benefit without good reason.

Beware of Over-Confidence and Over-Optimism. A landmark analysis of some 2,000 infrastructure projects found that actual costs were significantly higher than forecast, while usage was significantly lower, as Bent Flyvbjerg and Dirk W. Bester explore in a chapter of the book. The authors identify several well-known behavioral limitations that lead to these outcomes, particularly overconfidence bias and optimism bias. Fighting these biases is difficult because they are so deeply ingrained in human nature, but the book describes measures that can help, such as holding forecasters legally accountable or using independent audits.

Take Equity Seriously. The costs and benefits of infrastructure projects are often distributed inequitably. On the one hand, major infrastructure facilities such as highways and power plants are often built in locations where the negative impacts are felt disproportionately by low-income residents and people of color. On the other hand, the lack of access to basic infrastructure, particularly in the developing world, impairs quality of life and contributes to inequality. Governments need to take both problems seriously and enact complementary policies to address them.

Consider Governance Challenges. State and local governments have historically been deeply involved in regulating both private and government-owned infrastructure due to important concerns including access, siting, and protecting against monopolization. However, the advent of a major new infrastructure program—particularly one focused on decarbonizing the energy system to address climate change—will increase the role of the national government. National governments are uniquely positioned to invest in new technologies that require collective action, and to mitigate the economic impact of climate change policies—for example, compensating owners of fossil fuel plants and other assets that lose their value. These and other governance challenges related to infrastructure may prove even more difficult than the financial challenges that current debates focus on.

Invest for the Future and Address Radical Uncertainties. In the face of radical uncertainties including climate change, the pandemic, automation, and the emerging sharing economy, governments must not only fix deteriorating infrastructure, but also invest in a new generation of infrastructure that is climate-resilient and takes advantage of new technologies. This transformation will require overcoming significant institutional barriers, assessing the pros and cons of the new technologies, and putting an effective change management process in place.

Sustainably built infrastructure is indispensable to resilient, equitable, and livable communities and regions worldwide. Through in-depth analysis, Infrastructure Economics and Policy questions the conventional wisdom about several issues, from the most efficient levels of congestion charges on routes into city centers to the belief that privatization greatly affects the performance of infrastructure. With chapters covering land value capture and other funding mechanisms; the role of infrastructure in urban form, economic performance, and quality of life, especially for disinvested communities; and other essential concepts, this new book offers evidence-based solutions and policy considerations for officials in government agencies and private companies that oversee infrastructure services, for students, and for policy-oriented lay readers alike.

To learn more or to order a copy of Infrastructure Economics and Policy, visit https://www.lincolninst.edu/publications/books/infrastructure-economics-policy. 

Praise for Infrastructure Economics and Policy 

"This informative, timely book offers a rich array of insight: comparisons across sectors and countries, connection between policy ideas and implementation, and appraisal of noteworthy experiences." 
— Weiping Wu, Director of the M.S. Urban Planning program, Columbia University 

"The content is highly relevant right now. As countries worldwide are designing economic recovery and stimulus programs from the COVID-19 pandemic, the question of infrastructure has come—once again—to the forefront of policy discussions. The analysis and policy recommendations and lessons will be invaluable to developed and developing countries." 
— Ede Ijjasz-Vasquez, Former Regional Director of Sustainable Development, Africa, World Bank

"A marvelous collection of essays by many of our era's leading thinkers about infrastructure investment, innovation, and regulation. At once authoritative, balanced, up to date, global in scope, and chock-full of fascinating detail, it will, I am confident, be the gold standard work in this field for years to come."
— Alan Altshuler, Ruth and Frank Stanton Professor Emeritus in Urban Policy and Planning, Harvard Kennedy School

"As the United States debates reinvesting in aging infrastructure, as China and other countries catapult ahead with next-generation domestic and international infrastructure projects, and as the changing climate reminds us that we design durable infrastructure systems for the uncertain future, not the past, there is no better resource for scholars and practitioners than this timely volume. Leading figures in infrastructure policy address challenges from measuring the economic impacts of major public works of the 20th century to the integration of today's emerging, decentralized transportation and energy technologies, all under one big, fascinating tent."
— Sheila Olmstead, Professor of Public Affairs, Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin

"Infrastructure seems to be on everyone's mind—in the United States, China, and around the world. Trillions of dollars here, trillions there. But what do we really know? The international focus helps untangle issues of economic impact, equity, financing, and innovation in a way that generates important insights. This book is an intellectual smorgasbord. It has something for everyone."
— Daniel Sperling, Founding Director, Institute of Transportation Studies, University of California, Davis; Distinguished Blue Planet Prize Professor of Engineering and Environmental Science and Policy

"The Lincoln Institute's Infrastructure Economics and Policy speaks to the once-in-a-generation opportunity our nation currently faces to invest in impactful, innovative, equitable, and sustainable infrastructure. For those of us who are practitioners in the field, the book offers a thought-provoking and insightful analysis of infrastructure policy and practice and the challenges and opportunities governments face when making major infrastructure investments."
— Polly Trottenberg, Transportation Practitioner and Policy Expert, former New York Transportation Commissioner

About the Editors 
José A. Gómez-Ibáñez is the Derek C. Bok Professor of Urban Planning and Public Policy Emeritus at Harvard University. Zhi Liu is director of the China Program at the Lincoln Institute of Land Policy.

About the Lincoln Institute of Land Policy 
The Lincoln Institute of Land Policy seeks to improve quality of life through the effective use, taxation, and stewardship of land. A nonprofit private operating foundation whose origins date to 1946, the Lincoln Institute researches and recommends creative approaches to land as a solution to economic, social, and environmental challenges. Through education, training, publications, and events, we integrate theory and practice to inform public policy decisions worldwide.
                                                               

SOURCE Lincoln Institute of Land Policy