Sustainable Urban Planning

Box 4.6 Benefit-cost prognosis

Benefit-cost prognosis is a pre-investment procedure.
The main outcome criterion is usually that revenues
exceed outlays – although, inevitably, there are external
public effects (externalities) to incorporate into every
assessment. Of course some benefits (and more usually
some costs) arise well after a product has been manu-
factured or a service provided, and for these imputed
values (shadow prices, usually costs) can be attributed.
Unlike an input–outputs array (box 4.4) which can be
effective for a variety of sectors, and for a set period of
previous time, benefit-costings relate usually to a specific

project over the life of its output. This raises, for the

public sector, the application of efficiency rules, most

usually about the ‘benefits’ of shorter-term economic

gain, and the ‘costs’ of longer-term social and environ-

mental strain. It is a matter of overall importance to rec-

ognize that although pretty well every project imaginable

has benefits to some, and losses to others, the societal

need is for a project to exhibit an overall ‘Pareto

approved’ optimality, with enforced transfers from the

‘gainers’ to the ‘losers’ if this is called for.

Reduction of the 'direct'

proximity costs of landfill

pollution to neighbouring land

users as controls improve.

costs

A

X

Q

controls

B

Increasing 'indirect' costs of

landfill control provisions to

the project as neighbouring

demands are met.

Y

The construct offered here depicts the analytical basis
of an economic assessment for a commercial landfill
project. The perceived proximity costs to neighbouring
land users diminish along the curve ‘A to B’ with every
installation of controls.And the mitigation costs borne by
the landfill operators increase along the curve ‘X to Y’ as
each neighbourhood demand for more payouts and con-
trols is met.The ‘A to B’ range of damage mitigation ben-
efits are registered ‘specifically’ to affected neighbours:
the ‘X to Y’ control expenses are recovered ‘generally’
from the community at large.
The construct implies that a balance would be struck
at the crossover (Q), beyond which a left-to-right less-
ening occurs of the neighbouring land user benefits (the

Q to B section of the A–B curve), and at which crossover

point the rate of additional installation costs (the Q to Y

section of the X–Y curve) start to increase prohibitively.

There are two further features of note (1) that gross

eventual benefits (greenfield factory site, housing tract,

public open space), and gross eventual dis-benefits (prop-

erty blight), be considered contextually over the longer

term; and (2) that the shape of the curves is all impor-

tant,videa flattening, after Q, of the A–B curve, and a

steepening of the X–Y curve: Q being the point beyond

which neighbouring land-user complainants might rea-

sonably be expected to ease off, and beyond which the

landfill operator might start to consider relocation to an

alternative site as a better option.