162 Methodology

benefits and costs effects accrue at different future points in time, it is necessary
to discount them in order to establish commensurability. The derived present
values of the streams of future benefits and costs provide the criterion for the
evaluation decision.

Even this succinct description of the BCA approach raises many fundamental
questions regarding the actual identification, quantitative assessment and
aggregation (into a single value) of the multidimensional effects from a given
transportation project. For example, infrastructure projects generate benefits and
costs whose distribution is non-uniform relative to different populations. As a
result, we face the problem of how to make judgements between the increase in
the welfare of those who stand to gain from the project and the decline in welfare
of those who stand to lose from it. The BCA literature on the single benefit-cost
index and similar issues is voluminous and it is beyond our scope here to review
it in any degree of detail.2 Our overall objective is to examine the potential effect
of transportation infrastructure investment on economic growth. In the following
discussion, we will focus primarily on those aspects of BCA that are relevant to
this objective.

Within the framework of BCA of transportation investment projects, we need

to determine which benefit effects should be included in the analysis. A major
argument is that only direct travel costs savings, namely, travel times and
monetary operating costs, should be regarded as benefits in the evaluation of
transportation projects (Mohring and Harwitz 1962; Mohring 1993). As a result,
the inclusion of other effects like economic growth as additional benefits amounts
to the double counting of benefits, since economic growth effects are in essence a
manifestation of the capitalized travel costs savings. Only under very special
conditions can such effects be considered as additional benefits. The production
function analysis (Chapter 6) implicitly presupposes this to be the case.

In response to this argument, it is possible to claim that infrastructure

investment is associated with myriad of scale effects and externalities which
produce more than just travel costs savings. By measuring economic growth
effects we do not necessarily double count investment benefits. Examples of scale
effects and externalities are network economies, land assembly economies,
congestion reduction effects and pollution generation or abatement. Furthermore,
as Mohring (1993) has pointed out, in cases where the economy cannot be
regarded as a closed one (e.g. regional economies), the import-export effects of
transportation costs reduction is not directly caused by the capitalization of the
primary transportation benefits. Therefore, this growth should be counted as part
of the project's stream of benefits.

As we have seen in Chapter 6, a major objective of the macro level production

and cost functions literature is to determine the marginal productivity of the
infrastructure stock in terms of economic growth and improved productivity.
What can this information tell us about a new investment project? If we can
assume that the political-economic system will continue to