How to model the gains from infrastructure investment?

Abstract

This paper is a reply to Metz recent book (2008), in which he pointed out, that current costbenefit practise assumes that short-term gains provide a full picture of the gains from investment. It is also an attempt to sketch the model, which is needed to give the decision makers an idea of the long term impacts of the their short term choices. This would help to avoid overly myopic decisions.<br/>The paper sketches a thought model of how and why infrastructure investment improves overall average welfare through the reduction in the generalised costs of travel. The complete model is currently impossible to implement computationally, but it is possible to test the proposition that omitting choice dimensions means omitting benefits. The test of this proposition is a small scale agent based simulation model of route, mode, departure time and destination. The test results clearly show, that one should not omit choice dimension if credible models for their inclusion exist.