Friday, February 28, 2014

Cost-Benefit Anlaysis at Caltrans

Earlier this month I was in Sacramento to learn about Benefit-Cost Analysis at Caltrans.  We interviewed staff at the Department of Transportation as part of my current research project with the Mineta Transportation Institute.

Their building reminded me of the buildings on our campus at San Jose State University; it looks pretty good here with the California sunshine in the reflection:

The California transportation decision makers and staff who we met and interacted with this month provided us with full documentation of their models and decision making processes.

Therefore, I can't say my initial experience at Caltrans gives me reason to concur with the provocative title of a recent ITEA newsletter article, "Cost Benefit Analysis in crisis"  (see page 5).

Commenting on the evolution of the current use of BCA, the author Emile Quinet writes, "...decision makers became reconciled to, or even happy with, a situation where they have a tool which is both sufficiently manipulable to justify discretionary decisions, and sufficiently obscure to make it hard to criticize." 

On the contrary, I would say I'm pleasantly surprised by the degree of transparency I have observed so far in our transportation planning processes.

Even though I think it is an exaggeration to say CBA is in "crises", it is true that there is always room for improvement, and here it is useful to consider Quinet's suggestions.  One suggestion is "...the use of general equilibrium models which yield results that are sensitive to assumptions and local circumstances." ( p. 6)

My instinct is to take the opposing side, which is, that we should continue to strive to make CBA methods simpler and more transparent.  I'm not saying that, if for example certain impacts such as land use impacts are massive, then they should not be incorporated into the accounting.  And general equilibrium modeling probably does have its place, for example, in travel demand modeling. But each refinement must be traded off with the costs of additional complexity, for I do agree there is a danger posed by "obscure" and "manipulable" models.

This is a sampler of some of the issues we are currently thinking about.  We hope to offer suggestions for improvement that may only require some modest changes.  These "patches" will hopefully go a long way to addressing the concerns expressed regarding CBA.  We will revisit and exand on these ideas when we release a draft report in the months ahead.