Monday, February 18, 2013

When Do Economists Oppose Shovel Ready Infrastructure?

Matt Turner and Giles Duranton wrote a nice AER paper arguing that in the absence of road pricing that new urban infrastructure (such as highways and bridges) does not reduce traffic congestion.  In today's NY Times,  Turner has a smart quote focused on his pessimism that a billion dollar investment linking Kentucky and Indiana will have a key quality of life impact. This is a nice example of "trickle down" economics.  Turner's nerdy AER paper has real world policy implications.   Too many cynics seem to think that economists focus on abstract issues.  In reality, our work is highly policy relevant but it is often the case that policy makers have already made up their minds about which ribbon cutting events they want to participate in and they are looking for fancy Ph.D. economists to rubber stamp their dogmatic vision.   Simple common sense suggests that irreversible costly infrastructure is most valuable in growing areas.  I'm not convinced that this part of the U.S is growing slowly because it doesn't have infrastructure.      Even in this age of Keynes, we still need to double check that the expected PDV of Benefits of a given project > Expected PDV of costs