(p. A4) A new paper by a pair of economists says the gains from infrastructure spending aren’t always clear-cut and recommends that policy makers examine the costs and benefits of each project.
“If we are going to commit a significant amount of resources to new infrastructure projects or to maintain our existing infrastructure, bringing some discipline to the way we decide what we’re spending on is an important element of this,” said James Poterba, an economist at the Massachusetts Institute of Technology, who co-wrote the paper with Edward Glaeser of Harvard University.
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In some cases, the authors write, the best solution doesn’t involve construction at all. Rather than building new lanes to ease traffic in a dense urban area, it might make sense to consider congestion pricing, which charges drivers a variable fee depending on time of day, they write.
Mr. Poterba recommended a voucher or tax-rebate system for lower-income households to ensure they aren’t disproportionately hurt by the fees.
The cost of repairing an unsafe bridge in a remote area with very little traffic may exceed the benefits, they write. In that case, the most economically efficient solution might be to close or demolish it. It might also make more sense to link cities with rapid buses on dedicated lanes rather than build new rail lines. Satellite broadband or 5G network access might be a good alternative to laying fiber optic cables to provide high-speed internet access to rural areas, they write.
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Identifying the benefits of a project also is complicated, because measuring benefits depends on how much it will be used, which is difficult to predict in advance.
“You have to be careful you’re not being highballed with rosy projections about what the demand for utilization will be,” said Mr. Poterba.
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Officials sometimes prefer spending on new projects over maintenance because of a “ribbon-cutting bias,” Mr. Poterba said, “where you can point to the thing and say it wasn’t there before my time and now it’s there.”
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(Note: the online version of the story has the date July 14, 2021, and has the title “Not All Infrastructure Projects Are Worth It, Paper Finds.”)