A critical assessment of discounting policies for transport Cost-Benefit Analysis in five European practices

Cost-Benefit Analysis (CBA) has a long tradition as a broadly-used instrument for assessing transport infrastructure investments. In a CBA, the discount rate often determines whether a project passes the benefit-cost test. One concern is that literature on the subject offers widely differing recommendations regarding which discount rate should be used. What has not yet been studied is the way practitioners translate these (inconclusive) recommendations into the discounting policies applied to transport CBA. This paper aims to bridge this gap by analyzing how the rationales and arguments for underpinning discounting policies provided in literature are translated into five practices: the Netherlands, the United Kingdom, Norway, Sweden and Denmark. It does so by studying the countries’ transport appraisal guidelines and interviewing experts. This study observes that the five practices attempt to fully substantiate the discount rate in empirical results from (academic) studies. However, apart from empirical evidence, discounting policies in the five countries are based on practical arguments, politicaladministrative arguments and judgmental arguments. In some cases these judgments are inevitable because the empirical evidence is inconclusive, but in other cases discretionary decisions are made without any references to empirical evidence. The most important conclusion of this study is that both the political-administrative arguments and judgmental arguments are not – or are poorly – communicated in the guidelines of the five countries. This makes it difficult for the user of the CBA to decide whether s/he agrees with the reasonableness of the judgments. Finally, this study discusses solutions to improve the transparency of discounting policies

Taboo trade-off aversion: a discrete choice model and empirical analysis

An influential body of literature in moral psychology suggests that decision makers consider trade-offs morally problematic, or taboo, when the attributes traded off against each other belong to different ‘spheres’, such as friendship versus market transactions. This study is the first to model and empirically explore taboo trade-off aversion in a discrete choice context. To capture possible taboo trade-off aversion, we propose to extend the conventional linear in parameters logit model by including penalties for taboo trade-offs. Using this model, we then explore the presence (and size) of taboo trade-off aversion in a data set specifically collected for this purpose. Results, based on estimation of a variety of (Mixed) Logit models with and without taboo trade-off penalties, suggest that there is indeed a significant and sizeable taboo trade-off aversion underlying choice behaviour of respondents

Public-Private Partnerships in Port Areas:Lessons Learned from Case Studies in Antwerp and Rotterdam

The cost-benefit analysis (CBA) is a widely used approach for the appraisal of transport projects, but criticisms on it have led to the development of alternatives such as the BENEFIT approach. This book chapter analyzes three cases of infrastructure investments in port areas in Belgium and the Netherlands, by application of the BENEFIT approach. We find inter alia that differences in country performance on internationally accepted indicators can influence differences in infrastructure investments between countries. Moreover, infrastructure projects with larger revenue-generating possibilities will influence the PPP (public-private partnership) potential of this type of projects in a positive way. Applying different appraisal methods to the same infrastructure project might help to arrive at infrastructure project investment approvals that are well-documented.</p

Towards improved handling of uncertainty in cost-benefit analysis: addressing the ‘price-quality’ and ‘communication’ dilemmas

An important limitation of Cost-Benefit Analysis (CBA) is the inherent uncertainty in estimations of future welfare effects. In this paper, we argue that consideration of the ‘pricequality’ dilemma and the ‘communication’ dilemma is useful to explain and improve the handling of uncertainty in CBA. The ‘price-quality’ dilemma refers to the trade-off between the quality of welfare effect estimations and the costs of providing these estimations. Instruments to produce good quality effect estimates (including uncertainties) can be expensive both in monetary terms and time. We discuss the application of probabilistic traffic models as a promising example of how the ‘price-quality’ dilemma can be solved. The ‘communication’ dilemma refers to the observation that both a poor communication and a too prominent communication of uncertainties can cause problems for decision-makers. We argue that cognitive psychological theory provides useful perspectives to solve this dilemma, by providing a psychological framework which might help to explain why different types of people process CBA information differently. The results of this research may enhance first insights into the questions how the two dilemmas can be solved

Dutch people disagree on the desirability of the corona app:Policy report on the main results of a choice experiment about the corona app

Nederlanders hebben sterk verschillende meningen als het gaat over de wenselijkheid van de track-and-tracing corona app. Sommige Nederlanders zouden de app liever vandaag dan morgen installeren, terwijl andere Nederlanders de app onder geen beding zouden installeren en het een kwalijke zaak vinden dat de overheid nadenkt over de introductie van de app. Daarnaast is er een groep Nederlanders die een genuanceerde mening heeft. Zij zouden de app installeren als deze naar hun beoordeling meer voordelen heeft dan nadelen. Het hangt van de voorwaarden en eigenschappen van de app af of zij overgaan tot installatie. Deze groep twijfelaars is essentieel voor het Kabinet om de gewenste dekkingsgraad van 60% te halen. Dit blijkt uit het onderzoek dat is uitgevoerd door onderzoekers van de Universiteit Maastricht, de Vrije Universiteit Amsterdam, de TU Delft en het RIVM. Een random getrokken steekproef van 926 Nederlanders deed mee aan een keuze-experiment waarin verschillende varianten van de app werden voorgelegd. Deelnemers werd vervolgens gevraagd welke app zij liever zouden installeren en of zij de app waar hun voorkeur naar uitging daadwerkelijk zouden installeren. Op deze pagina komt u meer te weten over dit onderzoek en de resultaten

Diabolical dilemmas of COVID-19: An empirical study into Dutch society's trade-offs between health impacts and other effects of the lockdown

We report and interpret preferences of a sample of the Dutch adult population for different strategies to end the so-called ‘intelligent lockdown’ which their government had put in place in response to the COVID-19 pandemic. Using a discrete choice experiment, we invited participants to make a series of choices between policy scenarios aimed at relaxing the lockdown, which were specified not in terms of their nature (e.g. whether or not to allow schools to re-open) but in terms of their effects along seven dimensions. These included health-related effects, but also impacts on the economy, education, and personal income. From the observed choices, we were able to infer the implicit trade-offs made by the Dutch between these policy effects. For example, we find that the average citizen, in order to avoid one fatality directly or indirectly related to COVID-19, is willing to accept a lasting lag in the educational performance of 18 children, or a lasting (>3 years) and substantial (>15%) reduction in net income of 77 households. We explore heterogeneity across individuals in terms of these trade-offs by means of latent class analysis. Our results suggest that most citizens are willing to trade-off health-related and other effects of the lockdown, implying a consequentialist ethical perspective. Somewhat surprisingly, we find that the elderly, known to be at relatively high risk of being affected by the virus, are relatively reluctant to sacrifice economic pain and educational disadvantages for the younger generation, to avoid fatalities. We also identify a so-called taboo trade-off aversion amongst a substantial share of our sample, being an aversion to accept morally problematic policies that simultaneously imply higher fatality numbers and lower taxes. We explain various ways in which our results can be of value to policy makers in the context of the COVID-19 and future pandemics

Experts and expertise in practices of citizen engagement in climate policy: a comparative analysis of two contrasting cases

The need for engaging citizens in climate policymaking is increasingly recognised. Despite indications that the form of expert involvement can strongly influence participatory processes, this remains scarcely researched. We analysed two unique and contrasting cases of citizen engagement in national climate mitigation policy: (1) the Irish Citizens’ Assembly (ICA), the first national climate assembly involving live expert presentations and face-to-face deliberations; and (2) the Participatory Value Evaluation (PVE) on Dutch climate policymaking, where more than 10,000 citizens compared policy options in an online environment based on expert-based information on policy effects. Taking a dramaturgical approach, we found that the opening up and closing down of policy options and perspectives was influenced by the setting, staging and scripting of expertise. Apart from providing information on policy options, experts had significant roles in design choices and formulating recommendations, which shaped citizens’ deliberations and policy advice. In deliberative processes, citizens’ deliberations can be further influenced by putting experts in a privileged spot and emphasising their authority, whereas in the setting of an online tool, experts’ design choices may be masked by the fact-like presentation of expertise. Future research should further investigate the role of experts and expertise across a wider range of practices. Nevertheless, we conclude that the high degree of required technical knowledge in climate mitigation policy naturally implies strong expert involvement, which concomitantly steers the results. Alternatively, we may search to enhance citizens’ engagement in guiding climate policymakers by focusing on citizens’ normative perspectives

Public preferences for the allocation of societal resources over different healthcare purposes

Objective:Increasing healthcare expenditures require governments to make difficult prioritization decisions. Considering public preferences can help raise citizens’ support. Previous research has predominantly elicited preferences for the allocation of public resources towards specific treatments or patient groups and principles for resource allocation. This study contributes by examining public preferences for budget allocation over various healthcare purposes in the Netherlands.Methods:We conducted a Participatory Value Evaluation (PVE) choice experiment in which 1408 respondents were asked to allocate a hypothetical budget over eight healthcare purposes: general practice and other easily accessible healthcare, hospital care, elderly care, disability care, mental healthcare, preventive care by encouragement, preventive care by discouragement, and new and better medicines. A default expenditure was set for each healthcare purpose, based on current expenditures. Respondents could adjust these default expenditures using sliders and were presented with the implications of their adjustments on health and well-being outcomes, the economy, and the healthcare premium. As a constraint, the maximum increase in the mandatory healthcare premium for adult citizens was €600 per year. The data were analysed using descriptive statistics and a Latent Class Cluster Analysis (LCCA).Results:On average, respondents preferred to increase total expenditures on all healthcare purposes, but especially on elderly care, new and better medicines, and mental healthcare. Three preference clusters were identified. The largest cluster preferred modest increases in expenditures, the second a much higher increase of expenditures, and the smallest favouring a substantial reduction of the healthcare premium by decreasing the expenditure on all healthcare purposes. The analyses also demonstrated substantial preference heterogeneity between clusters for budget allocation over different healthcare purposes.Conclusions:The results of this choice experiment show that most citizens in the Netherlands support increasing healthcare expenditures. However, substantial heterogeneity was identified in preferences for healthcare purposes to prioritize. Considering these preferences may increase public support for prioritization decisions