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Explain why government uses C.B.A in considering transport infrastructure project proceed?

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Explain why government uses C.B.A in considering transport infrastructure project proceed? C.B.A is a technique for assessing the desirability of a particular project, taking into accounts all of the respective costs and benefits. This is a well-planned strategy for analyzing both of the private and external factors before preceding any public projects e.g. transport infrastructure. Different from private companies only considering private costs and benefits, government use C.B.A to assess externalities as well. This is a better judgement which take a wider view and therefore more accurate. With respect to transport, private costs always contain engineering costs, building costs, planning design and finance. It is relatively easy to calculate through present values or it could be estimated by borrowing the data from previous projects. On the other hand, private benefits could be obtained by the amount of money that people are able and willing to pay. It could also be exaggerated if we want to take into account of consumer surplus. In terms of externalities, disruption costs, accidents while construction and environment pollution could be registered as negative externalities. Although it is hard to put a precise figure on each category, certain techniques could be adopted to tackle the problem. ...read more.


Specifically for transport, which involves huge investment and later bring significant benefits for society, needs an accurate and well-planned C.B.A before carrying on real projects. During the last a couple of years, government has adopted C.B.A when they were planning to improve underground services and extension of rail way services. C.B.A allows a better judgement to be made by taking a longer and wider view and therefore increase the accuracy of the projects. This can be used to assess the desirability of a project in comparison to other projects. In terms of longer views, the government usually take a period of 30 years as which the project can be used, but this vary according to different situations, and moreover, there is a risk exists, the project may not be able to last as long as we thought or any unpredictable shocks, e.g. terrorist attack or accidents, could affect it. In northern England, the rail tracks were originally designed for 30 year, but some of the tracks were broken down just after several years due to mismanagement and environmental damage. Same situations occur in America and other parts of Europe. Government also predict the amount of money that consumers would pay for transport service and calculate the accumulated amount as which in 30 years as mentioned above. ...read more.


Secondly, external benefits are difficult to calculate and it could vary depending on certain situation. Thirdly, no one can guarantee all the possible externalities are included and whether a particular change should be included in this category. There were new rail network built between London and Manchester last year, and also an improvement in service in terms of punctuality and cleanness. Apart form private benefits; it also benefits road users. AS more people could be encouraging to travel by train other than private cars, pollution could be reduced and congestion between the two cities could b solved to some extend. Time and money have been saved along with an increase in terms of efficiency. However, this benefit is hard to evaluate and hence reduce the effectiveness of C.B.A. Although C.B.A does have some disadvantages, it is a legitimate technique to help decision making. It is not just looking at the present costs and benefits but also in the long run; it is not only concern with private sector but also includes externalities. Precise figures can not be estimated but some appropriate techniques are really close to bring the true values. As a result, C.B.A is a very useful analysis in carrying public projects, and it has been applied for lots of transport infrastructure in resent years. ...read more.

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