If you want to believe

Dr Eric Crampton
Insights Newsletter
19 April, 2024

There’s a weird art to commissioned cost-benefit assessments. Even when it seems like a report’s funder really wanted a particular result and even if the final number seems absurd, the report can still be valuable.

It can make clear just what you have to believe if you want to believe that an implausible project is worthwhile.

Suppose you really wanted to believe that the government was right when it stopped the Anglican Bishop of Christchurch from running a bulldozer through the ruined Cathedral a decade ago and instead forced a path to reinstatement.

You’d have to believe figures a lot like those in NZIER’s report on the merits of that rebuilding.

You’d have to believe that every person in the country, regardless of whether they ever visit the Cathedral, would enjoy $1 to $5 in benefits just from knowing the Cathedral is there and that they have the option to visit – $2 to $20 if you live in Christchurch.

You’d have to believe that a lot of international visitors will spend an extra night in New Zealand, and spend more money on that longer visit, because of the glories of the Cathedral. People travel to see the Sistine Chapel, after all.

You’d have to believe that the Cathedral will earn 5 to 15 times as much selling tickets to climb the tower than they ever did before the earthquake – despite better views from the new nearby library.

And you’d have to believe there were no risk of cost overruns.

If you’re prepared to believe a series of implausible things, well, many projects become eminently feasible and reasonable.

A few weeks ago, my esteemed colleague made the case for the Cook Strait Bridge. I think he understated its benefits. Surely we each would receive at least $1000 in benefits just from knowing the thing was being brought into existence and that we might someday drive upon it. Those benefits would start immediately, even if construction took decades. That’s $5 billion!

Millions of tourists would arrive every year to gaze upon the construction, each spending thousands of dollars at the bridge’s gift shop on miniature bridges, t-shirts, and toy excavators.

The bridge would have paid for itself even before construction was complete.

And if you believe all that, please drop me a line. I’d love to sell you a tunnel under Wellington – the bargain of the century!

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