tag:theconversation.com,2011:/global/topics/costbenefit-analysis-2633/articlesCostbenefit analysis – The Conversation2013-01-24T02:21:06Ztag:theconversation.com,2011:article/117112013-01-24T02:21:06Z2013-01-24T02:21:06ZUnderstanding the true costs of managing fire<figure><img src="https://images.theconversation.com/files/19520/original/jgb7sd79-1358982743.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">We assume the trade-offs between fire prevention and impacts can be measured in terms of dollars, but it's not that simple.</span> <span class="attribution"><span class="source">AAP Image/Tracey Nearmy</span></span></figcaption></figure><p>Fires are an inescapable part of life in Australia; they have been occurring for millennia, and regardless of our actions, they will continue. </p>
<p>Much of the vegetation in Australia has evolved to be tolerant of fire, so much so that many species now <a href="http://www.parks.tas.gov.au/file.aspx?id=6525">need it to flourish</a>. In fact, the traits of many Australian plants actively <a href="http://www.csiro.au/en/Organisation-Structure/Divisions/Ecosystem-Sciences/BushfireInAustralia.aspx">encourage the spread of fire</a>.</p>
<p>As a result, in many parts of the country it is not a matter of <em>if</em> a fire will occur, it is a matter of <em>when</em>. This inevitability results in a complex problem for Australian society. Some fire impacts can be resolved through active management. However society must decide on the level of management intervention and expenditure that it is prepared to bear. Likewise, not all negative outcomes can be prevented, so society must decide on the level of impact that it is prepared to accept.</p>
<p>Recent research has questioned current levels of <a href="http://epress.anu.edu.au/apps/bookworm/view/Agenda+-+Volume+19,+Number+2,+2012/10161/ashe.html">expenditure on fire management</a>. In theory, finding the ideal level of expenditure is simply a matter of weighing up all the costs and benefits. Increased spending on preparedness (such as education, firefighting and fuel management) is assumed to result in a net reduction in impact (including losses of property, productivity, lives and suppression expenditure and ecological costs and benefits). </p>
<p>The <a href="http://www.fs.fed.us/rm/pubs_int/int_gtr053.pdf">optimal preparedness expenditure</a> is simply that in which preparedness expenditures plus expected fire losses results in the lowest cost for society.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/19496/original/gm3wt5th-1358905446.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/19496/original/gm3wt5th-1358905446.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/19496/original/gm3wt5th-1358905446.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=420&fit=crop&dpr=1 600w, https://images.theconversation.com/files/19496/original/gm3wt5th-1358905446.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=420&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/19496/original/gm3wt5th-1358905446.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=420&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/19496/original/gm3wt5th-1358905446.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=527&fit=crop&dpr=1 754w, https://images.theconversation.com/files/19496/original/gm3wt5th-1358905446.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=527&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/19496/original/gm3wt5th-1358905446.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=527&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>In the real world, fires burn under changing weather conditions through a complex physical environment. They also have impacts on a wide variety of things humans value. Consequently, finding the true cost of a fire is not necessarily a straightforward process. </p>
<p>An expenditure-impact approach assumes that the trade-offs between fire prevention and impacts are known and can be measured in terms of dollars. It also assumes that each fire protection dollar is invested in such a way that it can yield no greater benefit. However, in practice determining the ideal investment is highly complex. </p>
<p>While the potential for fire to affect human society can be easily understood, the true cost of fire is far more difficult to measure. Some effects can be quite tangible, such as the loss of dwellings, assets, livestock and agricultural productivity. Others are not so, such as the value of human lives, perceived “naturalness” and security, air quality, carbon, water quality, ecological values and ecosystem services. Preparedness measures that involve prescribed fire can also have inadvertent impacts on these values. </p>
<p>It also needs to be recognised that impacts are not all negative, some, particularly ecological, can be positive. For example, since the Victorian Black Saturday bushfires, some rare plant species such as the Lake Mountain grevillia and the alpine wattle <a href="http://www.dse.vic.gov.au/__data/assets/pdf_file/0009/137817/VBRRA-P9-web.pdf">have flourished</a>. Understanding the impacts on society of a single fire, let alone the trade-offs involved in long term fire planning, is no simple matter; it is a complex potpourri of economics, ecology and sociology.</p>
<p>Likewise, investment in fire prevention can take a wide variety of forms. Education, regulation and enforcement can <a href="https://theconversation.com/bushfire-arson-prevention-is-the-cure-11506">help reduce ignitions</a>, help make dwellings more defensible and guide decision-making. Investment in firefighting resources can help detect and curtail the growth of existing fires. Investment in prescribed burning <a href="http://www.griffith.edu.au/conference/bushfire2006/pdf/the-ecology-of-fire.pdf">can have ecological benefits</a> and assist with fire control.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/19505/original/n3j3fcrk-1358919759.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/19505/original/n3j3fcrk-1358919759.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=470&fit=crop&dpr=1 600w, https://images.theconversation.com/files/19505/original/n3j3fcrk-1358919759.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=470&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/19505/original/n3j3fcrk-1358919759.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=470&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/19505/original/n3j3fcrk-1358919759.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=591&fit=crop&dpr=1 754w, https://images.theconversation.com/files/19505/original/n3j3fcrk-1358919759.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=591&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/19505/original/n3j3fcrk-1358919759.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=591&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"><em>Pyrochis nigricans</em>, an Australian orchid that flowers in response to fire.</span>
<span class="attribution"><span class="source">Thomas Duff</span></span>
</figcaption>
</figure>
<p>The complex interface between the natural, fire-prone world and the human environment means that it is no simple task to tease apart the importance of various fire preparedness measures. The effectiveness of strategies may vary under different conditions; under some conditions prescribed burning may be an <a href="http://www.dse.vic.gov.au/__data/assets/pdf_file/0016/101284/Research_Report_51.pdf">effective way</a> of reducing fire ferocity to manageable levels, in others it may be <a href="https://theconversation.com/does-fuel-reduction-burning-help-prevent-damage-from-fires-11600">less so</a>. </p>
<p>The intrinsic uncertainty of natural systems contribute to this; for example, the efficacy of a prescribed burn may vary based on the season of burning, the length of time since burning and the size and position of the burnt area in the landscape. Likewise, different preparedness strategies contribute to managing fire in different ways and with different costs. No method is likely to be ideal in isolation. It is likely that the best strategy will be a combination of approaches, however finding the ideal mix is no simple task.</p>
<p>So how do we resolve the conundrum of fire management? How do we our invest limited resources to get the best outcome possible? </p>
<p>First we need to <a href="https://theconversation.com/adapting-to-bushfires-means-accepting-their-place-in-australia-11474">accept fire</a> as an intrinsic part of the landscape; it will remain a regular (albeit sometimes unwelcome) visitor. It cannot be considered an <a href="http://griffithreview.com/edition-35-surviving/the-language-of-catastrophe">adversary that can be defeated</a>. </p>
<p>Second, we need to define goals in a clear, and measurable manner, and design strategies to achieve those goals. Included in this must be recognition of the values that we may have to sacrifice. We need to monitor the results so that we can more clearly understand our approaches and the <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1755-263X.2010.00115.x/abstract">trade-offs</a> we are making and respond accordingly. We also need to understand that our natural environment is complex and can be unpredictable, and that things may not always behave as we expect. </p>
<p>Above all, we need to move towards a more comprehensive understanding of fire and what it means to the things that we, as a society, value. </p><img src="https://counter.theconversation.com/content/11711/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Thomas Duff receives funding from the Bushfire CRC.</span></em></p>Fires are an inescapable part of life in Australia; they have been occurring for millennia, and regardless of our actions, they will continue. Much of the vegetation in Australia has evolved to be tolerant…Thomas Duff, Postdoctoral Fellow, Forest and Ecosystem Science, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/60812012-04-09T20:28:19Z2012-04-09T20:28:19ZBike lanes’ economic benefits go beyond jobs<figure><img src="https://images.theconversation.com/files/9254/original/hkqnc44v-1333433895.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Cycling infrastructure gets people on their bikes, and the economic benefits are legion.</span> <span class="attribution"><span class="source">Janet Lackey</span></span></figcaption></figure><p>You might have heard that bike lanes are a waste of money. The Australian National Audit Office <a href="http://www.anao.gov.au/Publications/Audit-Reports/2011-2012/Bike-Paths-Component-of-the-Local-Jobs-Stream-of-the-Jobs-Fund/Audit-brochure">recently investigated</a> the $40 million bike path scheme, announced in 2009 as part of the Federal Government’s stimulus package, and found the scheme “fell significantly short” of hitting its aims.</p>
<p>The Australian newspaper article “<a href="http://www.theaustralian.com.au/national-affairs/treasury/more-stimulus-questions-as-cycle-of-waste-rolls-on/story-fn59nsif-1226306680154">More stimulus questions as cycle of waste rolls on</a>” took up the story, describing the auditor’s “major concerns”.</p>
<p>According to the Australian, the Australian National Audit Office said the construction of the bike paths didn’t create as large a number of jobs as the scheme had envisaged.</p>
<p>What this perspective fails to grasp, however, is that the economic benefits of bike paths are not simply limited to jobs created during path construction. Long after the bike path concrete has dried the economic benefits can keep rolling, so long as the bike path is well planned and integrated into a broader cycle network.</p>
<p>The ongoing benefits of bike infrastructure were illustrated in a recent media report which showed that new Sydney cycleways have had a <a href="http://media.drive.com.au/property/domain/sydneys-grand-new-bike-boulevard-2275272.html">positive effect</a> on property prices. This account indicated that having a bike path right outside your front door increases the value of your house. One owner in the area said that the combination of a garage at the rear and the bike path out the front had added a premium of $100,000 to his house.</p>
<p>The rise in real estate prices from bike lanes is not limited to Australia. Across the other side of the world, a study in Pittsburgh found that bike paths led to increases in business and property selling prices. Realtors in North Carolina reportedly added US$5,000 to the prices of 40 homes adjacent to the <a href="http://thisbigcity.net/how-bike-lanes-can-boost-the-economy/">Shepherd’s Vineyard Bikeway</a>. Similarly results from the City of Vancouver indicated that 65% of realtors would use the bikeway as a selling feature of a home. The University of Delaware study showed that on average properties within 50m of a bike path could be expected to <a href="http://128.175.63.72/projects/DOCUMENTS/bikepathfinal.pdf">increase property values</a> by at least US$8,800.</p>
<p>Going beyond house prices, a <a href="http://www.cityofsydney.nsw.gov.au/aboutsydney/parkingandtransport/cycling/EcononmicResearchCycling.asp">study done</a> for the City of Sydney shows the city’s planned 200 km cycleway network would deliver $506 million in net economic benefits over 30 years. This is roughly equivalent to a $4 return on every dollar spent, compared with just $2 for motorway projects.</p>
<p>Evidence of the broader economic benefits of bike lanes is not limited to Australia. In Copenhagen the bicycle, with a modal share of 36%, is already the most used form of transport for trips to work or educational institutions. A study commissioned by <a href="http://www.cycling-embassy.dk/wp-content/uploads/2011/05/Bicycle-account-2010-Copenhagen.pdf">Copenhagen’s mayor</a> showed that driving cars offers up a $0.20 net loss for each mile driven, due to congestion, health, accidents and environmental impacts. This is in contrast to the bicycle which offers a $0.35 net <a href="http://sustainablecitiescollective.com/pmlydon/38206/copenhagen-economics-cars-are-net-loss-bikes-benefit?ref=headline_rotator">benefit to the economy</a> per mile ridden.</p>
<p>In a similar manner in Portland, Oregon, increased cycling as result of sustained bike lane investment is generating more than $100 million of economic activity each year and <a href="http://www.shareable.net/blog/Portland-Finds-Bike-Friendly-Policies-Boost-Local-Economy">creating 1000 jobs</a>.</p>
<p>The success of raising cycling rates in Copenhagen and Portland illustrates the benefits of strong and sustained investment in a network of bike lanes. As these integrated networks expand and connect the places people want to go to and from, this creates greater use, better network efficiencies and better returns on investment. </p>
<p>Or as <a href="http://economicsintelligence.com/2011/03/11/the-economics-of-bike-lanes-%E2%80%93-how-can-john-cassidy-get-it-so-wrong/">Greg Ip puts it</a>: “Just as you are more likely to buy an iPad the more applications it has, you are more likely to switch from car to bicycle the more bicycle lanes (and therefore destinations reachable by bicycle) are available. Doubling the number of bike lanes more than doubles the number of cyclists likely to use them.” </p>
<p>And of course there are the positive long-term economic benefits of bike infrastructure such as the savings to the health system, and the impact a greater percentage of people cycling has on lowering the cost of road infrastructure. </p>
<p>Cycling infrastructure is a low cost urban transport option that has the potential to have greater overall economic, environmental and social benefits, compared to mainstream urban transport investment. But it is also clear that much of the evidence available is anecdotal and somewhat thin. </p>
<p>If cycling is to be a central part of our cities more research and data is needed to better illustrate the correlation between a healthy investment in a city’s cycling infrastructure and a healthy city economy.</p>
<p>Not only does better bike infrastructure help create a more liveable and sustainable cities, but the early evidence is that it improves local economies as well. The next step is for cities to both step up this level of investment and back it up with high quality research along the way.</p><img src="https://counter.theconversation.com/content/6081/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Brad Pettitt does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>You might have heard that bike lanes are a waste of money. The Australian National Audit Office recently investigated the $40 million bike path scheme, announced in 2009 as part of the Federal Government’s…Brad Pettitt, Senior Lecturer, Institute for Social Sustainability, Murdoch UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/59932012-03-23T00:43:47Z2012-03-23T00:43:47ZIt’s time to weigh the cost and benefits when it comes to the car industry<figure><img src="https://images.theconversation.com/files/8891/original/4sd26v48-1332396360.jpg?ixlib=rb-1.1.0&rect=14%2C9%2C959%2C635&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Driving technology: Prime Minister Julia Gillard has outlined a $275 million package to keep Holden in Australia.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Carmaker Holden will receive <a href="http://www.abc.net.au/news/2012-03-22/unions-industry-groups-welcome-holden-funding/3906430?section=business">a $275 million government package</a>, in return for committing to stay in Australia until 2022 and promising it will invest $1 billion. </p>
<p>Phillip Toner, senior research fellow, Centre for Industry and Innovation Studies at University of Western Sydney explains why this move is about technology, not jobs - and why it’s so hard to quantify the benefits.</p>
<h2>Why should taxpayers be supporting an industry if it’s not internationally competitive?</h2>
<p>That’s the central issue in this. There’s no simple answer, but one of the key responses is that every country that has a car industry supports it directly and indirectly - either through cash payments or by maintaining publicly-supported R&D facilities - for example advanced machining, metallurgy, ceramics - all the inputs that go into motor vehicles. That information is available for free or at a reduced cost for downstream users.</p>
<p>It’s simply not the case that there is, in the real world, a non-government supported car industry that stands on its own two feet and competes internationally on its own. For people to claim that’s the way the car industry should be simply ignores reality.</p>
<h2>So why do governments support the car industry and other manufacturing sectors?</h2>
<p>Fundamentally, it’s not the jobs argument - it’s technology. We can’t talk about this abstractly - to have a technological capability means having a local industry that uses those technologies. </p>
<p>For instance, for a country to maintain technology - say within its universities, with people studying engineering and science degrees and for the government to continue supporting those universities - there must be industries that directly employ those people. That’s the nub of it.</p>
<h2>It’s the flow-on effect that’s important?</h2>
<p>Exactly. Technological capacity on a national level doesn’t exist in a vacuum. Traditional orthodox economics has always had a difficulty in getting to grips with technology, partly because they deal with technology in a very abstract way. They deal with capital and labour as abstract quantities and technological change is just a variable in equations of economic growth. They are not really concerned with the mechanisms of knowledge generation and diffusion. Technological change is treated as a “black box” by orthodox economists because it leads to outcomes such as increasing returns to scale, temporary monopolies and a variety of market failures that upset their equilibrium models. </p>
<p>To overcome this major deficiency, a new academic discipline of innovation studies has been developed. Many of the leading figures in this field themselves have a science or engineering background. They have shown that to retain and develop a technological capacity means maintaining to some extent a variety of industries that use, make and embody those technologies. Broad-based technological capacity requires a complex of industries and supporting institutions that operate almost as a ecological system. </p>
<p>No particular industry can embody all technologies, but the car industry is considered strategic because it does range across an extraordinarily wide range of technologies - electronics, plastics, advanced machining, metallurgy, chemical engineering in paints and lubricants and supercomputing in design- all this has lots of ongoing R&D. The sort of technology needed to design and manufacture a seven speed automatic gear box, for instance, is really high-level stuff.</p>
<h2>But how can taxpayers know they are getting the value of money, especially when car companies routinely threaten to go elsewhere unless they receive subsidies?</h2>
<p>Yes, how can one quantify the benefits? Really, what you’re asking for is how one can set up a cost-benefit analysis. It is extraordinarily difficult to quantify the flows of technology and place a dollar figure on their current and potential value.</p>
<p>The first problem is calculating current “spillover benefits” to other industries that use these or similar technologies. Second, estimating future potential uses. One of the problems you’ve got is: what time-frame? </p>
<p>Any cost-benefit analysis relies on some sort of distant future benefits - but what sort of duration should we be looking at? You are talking about potential uses of technology into the future - and we simply don’t know what they will be. Technological forecasting is an imprecise activity. Third, then you have to construct other alternative mechanisms that can achieve the same result of retaining and diffusing that technology and then compare the costs of each different approach. People have been struggling with this problem for a long time!</p>
<p>And there is no doubt that car makers engage in inter-country arbitrage. They are quite open about it. But the thing for governments to do is to try and screw as much as possible, in the way of inward technology flows from the big car companies and to make them do the maximum R&D locally. For example, making sure Australia is not left just with internal combustion production and R&D but gets centrally involved in designing and making alternative car power plants. </p>
<p>Australia really is at the crossroads in this. It’s a first-world country but confronting a diminishing technology base. The critical thing about the mining industry is that most of the technology is imported. </p>
<p>The total output of local mining related services and innovative manufacturers is about $9 billion a year - peanuts. It’s 2.2% of total manufacturing sales. Is it possible to maintain first world living standards with a declining technological base? That’s the big experiment Australia is embarking on. </p><img src="https://counter.theconversation.com/content/5993/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Phillip Toner does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Carmaker Holden will receive a $275 million government package, in return for committing to stay in Australia until 2022 and promising it will invest $1 billion. Phillip Toner, senior research fellow…Phillip Toner, Honorary Senior Research Fellow Department of Political Economy, University of SydneyLicensed as Creative Commons – attribution, no derivatives.