Saturday, 31 August 2013

What would you pay for the port to go away?

Cost-benefit analysis (CBA) is the best way to make public decisions because it is focused on the right question and is flexible enough to allow all of the relevant factors to be included. Some consultants seem to disagree(pdf) with this view, but I have yet to see a convincing argument against using a CBA framework.

The main difficulty with CBA is not the framework. Its the lack of information on non-market values such as the value motorists place on their own time - a critical parameter on the benefits side of CBAs for transport infrastructure projects.

I wonder whether some kind of demand-revealing referendum process would be helpful, perhaps not universally but in some cases. This is a clever game devised by Ed Clarke and nicely explained by Chris Dillow in the context of the decision to build a trident submarine.

The basic idea is that everyone gets to vote a $ amount for clearly stated outcomes. The game is arranged so that
  • voting your actual valuation is the only sensible thing to do;
  • mostly you won't have to pay your vote valuation; and
  • you only pay if you are in a small minority that gets its desired outcome by voting more $
This might work, provided the affected group and the possible options are well defined. For example, Len Brown wants "all Aucklanders" to have a say on the future of the port.

Why not give this a go? I think the biggest barrier might be legal: how do you credibly commit to getting the ca$h out of people if necessary? Unless this is a credible threat, the truth-revealing mechanism falls to pieces.

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