Cost-effectiveness

Streetcar tracks, H St NE - CC image from flickr

Streetcar tracks, H St NE - CC image from flickr

Over the past couple of days, there have been lots of reactions to the DOT’s decision to lessen the importance of their cost-effectiveness measures in decisions on new transit starts funding (TTP, Yglesias, TNR, TOW, Streetsblog), almost all of them positive. There are, however, some key points to consider.  With the emphasis on livability as opposed to cost-effectiveness, the question will now be about measuring that livability.  Jarrett Walker notes:

Great news, perhaps, but I look forward to seeing how FTA is going to turn something as subjective as livability into a quantifiable measure that can be used to score projects, particularly since the payoffs lie in development that a proposed transit line might be expected to trigger, but that usually isn’t a sure thing at the point when you’re deciding to fund the line.  And of course, travel time does still matter.

Measurement is indeed the key.  Part of the problem of the Bush Administration’s emphasis on the CEI was an expansive definition of costs and a rather narrow definition of ‘effectiveness.’

The other problem is one that Donald Shoup talks about extensively in his book, The High Cost of Free Parking.  Namely, often imprecise data points are given undue precision in a bias towards quantifiable results and numbers – precision and accuracy are two different things, and it is important not to conflate them:

HOW FAR IS IT from San Diego to San Francisco? An estimate of 632.125 miles is precise—but not accurate. An estimate of somewhere between 400 and 500 miles is less precise but more accurate because the correct answer is 460 miles. Nevertheless, if you had no idea how far it is from San Diego to San Francisco, whom would you believe: someone who confidently says 632.125 miles, or someone who tentatively says somewhere between 400 and 500 miles? Probably the first, because precision implies certainty.

This doesn’t disprove Jarrett’s point – there are still metrics that can be used for more qualitative factors – but the larger issue here is a move away from false precision and towards outcomes that are more accurate – outcomes that better reflect the true (qualitative and quantitative) nature of cities.

With that in mind, it’s interesting to read some reactions published in the National Journal (h/t Planetizen).

Anthony Shorris: The new approach laid out by Secretary Lahood should force a re-thinking of all of our evaluative tools — cost-benefit analysis, alternatives analysis, environmental impact statements — with an eye toward re-balancing them away from an excessive reliance on only those measures that can be readily quantified.  This re-thinking should be inter-departmental (including other agencies and OMB) and inter-disciplinary (including the perspectives of urban planners and designers as well as economists).  One thing the financial crash should have taught us is that there are limitations to even the most seemingly sophisticated financial models, and that apparently crisp spreadsheets are no substitute for the prudent exercise of judgment that the American people have a right to expect of their leaders.

William Millar, APTA: With the action taken by DOT to consider all the factors required by law, transit projects can now be looked at from a holistic perspective. By judging a project on the multiple benefits it offers (i.e. mobility, economic development, environmental impact, land use improvements etc.), a well-rounded and more informed decision can be made. By removing the barrier that the Bush Administration implemented, the process is now in alignment with how it was originally intended to be.

Projects must still be cost effective and meet at least an overall medium rating in project justification and local financing. However, now, instead of a narrow prism through which to judge a project, a wider lens will offer a larger perspective. It should encourage innovative projects to be proposed and funded.

2 comments to Cost-effectiveness

Leave a Reply

 

 

 

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Recent Comments

Twitter