Wider benefits are often invoked to justify projects that are non-viable in terms of direct benefits and costs. But what is the evidence of wider benefits?
Wider benefits are often invoked in attempts to justify projects that may not be viable in terms of direct benefits and costs.* It would be nice – and good practice – if proponents of the wider-benefits argument would provide empirical evidence that wider benefits are in fact significant and may move the needle from non-viable to viable, if included in project appraisal. The fact is that proponents rarely provide such evidence, and for good reason. The evidence does not exist.
Professor Roger Vickerman of Kent University – a leading expert on wider benefits – recently did a study of the state-of-the-art of research in this area. Choosing transportation infrastructure projects as his example, because such projects are often argued to have large wider benefits, he looked at the existing evidence and concluded:
1.Positive wider benefits, where they exist, typically account for an additional 10-20 percent of benefits. (This does not take into account negative wider impacts, like environmental and social costs, which are often substantial for large projects, and which, if included, would reduce the aggregate effect of wider benefits.)
2.Positive wider benefits are not guaranteed for every project.
3.Where positive wider benefits do exist for some geographical regions they could be negative for others, reducing the aggregate effect.
4.The common assumption is deeply problematic that wider benefits will come to the rescue of a project which is marginal on the basis of its direct benefits and costs.
5.Only in “very particular cases” are wider benefits likely to rescue a project from non-viability.
6.Wider benefits were never intended to be a cure for investment appraisals, especially marginal ones, but only a way to ensure completeness.
7.Some wider benefits, as currently measured, are argued by some to be a “mirage essentially involving double counting of direct benefits,” in the words of Vickerman.
Only in very particular cases are wider benefits likely to rescue a project from non-viability
Proponents of the wider-benefits argument may hope that such benefits will come to the rescue of non-viable projects. But hope is not a useful strategy in scholarship and policy. Evidence is. And given the available evidence on wider benefits there is no indication that their inclusion in appraisals would significantly alter the outcome and render non-viable projects viable. Wider benefits are mainly a myth.
*) For full references to this text, see: Bent Flyvbjerg, 2018, “Planning Fallacy or Hiding Hand: Which Is the Better Explanation?” World Development, vol. 103, pp. 383-386; pdf here: http://bit.ly/2DPlqNbBack to top of article