Europe Government

C.B.A allows a better judgement to be made by taking a longer and wider view and therefore increase the accuracy of the projects. This can be used to assess the desirability of a project in comparison to other projects. In terms of longer views, the government usually take a period of 30 years as which the project can be used, but this vary according to different situations, and moreover, there is a risk exists, the project may not be able to last as long as we thought or any unpredictable shocks, e.g. terrorist attack or accidents, could affect it.

In northern England, the rail tracks were originally designed for 30 year, but some of the tracks were broken down just after several years due to mismanagement and environmental damage. Same situations occur in America and other parts of Europe. Government also predict the amount of money that consumers would pay for transport service and calculate the accumulated amount as which in 30 years as mentioned above. Discounting rate strategy applies here, which tells that the same amount of money would worth less than the previous year. It seems reasonable but there are drawbacks.

It is hard to put the rate of discount, which is linked to various variables, such as interest rate, economic condition etc. we also predict how much money the consumers are willing to pay but we ignore the existence of consumer surplus. Some of the consumers would be willing to pay more, which should also be registered in the private benefit. 

Private cost is more at present time and hence easy to put a value on. But engineering cost, building cost, planning design and finance would be tough to estimate, which cause inaccuracy. Moreover, it is also an estimate, sometimes it can be overrun. Apparently, 

The government is planning to build Terminal 5 at Hearrow airport, and they are struggling to agree on a fixed budget because it involves so many internal and external factor to be concerned, and moreover, private costs are difficult to predict as construction needs huge amount of materials like steel whose price is unstable and depends on the health of world economy. 

A wider view mainly concern with externalities. C.B.A takes into account of all possible external benefits and costs. As a transport infrastructure project applied to use, there would be an improvement in road congestion and less pollution; time is saved during the journey and fewer accidents would appear. But at the same time, it brings a lot of negative externalities. There would be a disruption during certain roads, accidents would possibly occur during the construction and environment would be polluted.

As mentioned all above, it seems a very good way of analyzing the full social costs and benefits. However, there are real difficulties. External costs are often hard to put a precise figure; there are some techniques or we can apply the previous project, but they are all normative. Secondly, external benefits are difficult to calculate and it could vary depending on certain situation. Thirdly, no one can guarantee all the possible externalities are included and whether a particular change should be included in this category. 

There were new rail network built between London and Manchester last year, and also an improvement in service in terms of punctuality and cleanness. Apart form private benefits; it also benefits road users. AS more people could be encouraging to travel by train other than private cars, pollution could be reduced and congestion between the two cities could b solved to some extend. Time and money have been saved along with an increase in terms of efficiency. However, this benefit is hard to evaluate and hence reduce the effectiveness of C.B.A.

Although C.B.A does have some disadvantages, it is a legitimate technique to help decision making. It is not just looking at the present costs and benefits but also in the long run; it is not only concern with private sector but also includes externalities. Precise figures can not be estimated but some appropriate techniques are really close to bring the true values. As a result, C.B.A is a very useful analysis in carrying public projects, and it has been applied for lots of transport infrastructure in resent years.