Cost–Benefit Analysis (CBA) is used worldwide to support decision-making on government projects. An underlying assumption in CBA is that the valuation of effects accruing from a government project can be derived from preferences individuals reveal through their willingness to pay in (hypothetical) markets. The postulation that an individual’s preferences are restricted by the willingness to pay in (hypothetical) markets is also called ‘consumer sovereignty’.
Two new methods for the economic evaluation of government projects
Various scholars criticize the use of this postulation for the evaluation of government projects through arguing that the way individuals trade-off personal after tax income and effects of public projects as consumer may be a poor proxy for how the same individuals in their role as citizen believe that government should trade-off tax money and effects of public projects. However, no systematic empirical research has been conducted that tests the claim that individuals have different preferences as consumer and citizen when trading off impacts of government projects
Citizen Stated Choice Experiments
The purpose of the paper “Do individuals have different preferences as consumer and citizen? The trade-off between travel time and safety” was to ameliorate this gap in the scientific literature. In this paper several experiments were conducted in which respondents were asked to choose as consumer between two routes which differed in terms of travel time, accident risk and impact on their after tax income. For instance, in one consumer experiment respondents were asked to choose as a car driver between routes which differed in travel time, safety and toll costs. Apart from consumer experiments, so-called ‘Citizen Stated Choice Experiments’ were administrated in which individuals were informed that the government decided to allocate non-specific taxes to the construction of a new road and considered two routes that differ in terms of travel time and accident risk. Subsequently, the respondents were asked to recommend one of the routes to the government. Our results suggest that individuals in their role as citizen assign substantially more value to safety than travel time when compared to their consumer choices. This result raises the question whether willingness to pay based valuation metrics inferred from individuals’ consumer choices, such as the Value of Time and the Value of Statistical Life, are the single most relevant metrics for the valuation of impacts of government projects.
Participatory Value Evaluation
One limitation of Citizen Stated Choice Experiments involves that governmental constraints (e.g. budget/ sustainability targets) are not explicitly recognized. A new methodology – Participatory Value Evaluation (PVE) – aims to circumvent this limitation. PVE is a novel web-based economic assessment model which is recently developed in the context of the assessment of a transport investment plan for the Transport Authority of Amsterdam. A demo version of this PVE can be found online: http://www.participatie-begroting.nl. In this PVE, citizens are instructed that a government will allocate a fixed budget on transport projects. The citizens are presented with several policies which, for budgetary reasons, cannot all be implemented. The policies are characterised by several impacts (e.g. changes in travel times, safety and noise pollution). The citizens are asked to choose those policies that best match their preferences within the governmental budget constraint. Subsequently, the data are analysed using behavioural choice models where the possible portfolios are the alternatives. Presently, researcher of TU Delft, VU Amsterdam and ITS Leeds are conducting a new PVE for the Dutch Ministry of Infrastructure and the Environment to evaluate impacts of flood protection measures on safety, recreation and biodiversity.