Engineering Economic Analysis

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I

508 ECONOMIC ANALYSIS IN THE PUBLICSECTOR

different values and views spending a commonpoolof money. As with the family decision,

the parties involved often have squabbles, form alliances, and maneuver politically.

The guideline for public decision making, as set forward in the Preamble to the United

States Constitution, is topromote the general welfare of citizens. However, it is impossible

to please everyone all the time. The term "general welfare" implies that the architects of

this document understood that the political process would produce opposition, but at the

same time they empowered decision makers to act in a representative way.

As mentioned previously, government projects tend to be large in scale. Therefore,

the time required to plan, design, fund, and construct such projects is usually several years.

However, the political process tends to produce government leaders who support short-tenn

decision making (because many government terms of office, either elected or appointed, are

relatively short). Therein lies another difference between government and nongovernment

decision making-short-term decision making, long-term projects.

Because goveriunent decision makers are in the public eye more than those in the

private sector,governmentaldecisions are generally more affectedby "politics."As such,the

decisions that public officialsmake may not always be the best from anoverallperspective.

If a particular situation exposes a public official to ridicule, he may choose an expedient

action to eliminate negative exposure (whereas a more careful analysis might have been

better). Or, such a decision maker may placate a small, but vocal, political group over

the interest of the majority of citizens by committing funds to a favored project (at the

expenseof other betterprojects).Or, a public decisionmakermay avoidcontroversyby

declining to make a decision on an important, but politically charged,issue(whereasit

would be in the overall interest of the citizenry if action were taken). Indeed, the role of

politics in government decision making is more complex and far ranging than in the private

sector.

Consider again Example 16-4, where we evaluated power plants designs. Remember that gov-

ernmentprojects are often opposed and supported by differing groups in the populace. As such,

decision makers become very aware of potential political aspects when they are considering such

projects. For the electric power plant decision, several political considerations may affect any

evaluation of funding this project.

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· The governor has been a strong advocate of workers' rights and has received abundant

campaign support from organizedlabor (which is especially important in an industrialized

state). By championing this project, the governor should be seen as pro-labor, thereby

benefiting his bid for reelection, even if the project is not funded.

·The regulated electric utility provideJ;s in the state are strongly against this project, claiming

that it would directly compete with rp.em and take away some of their biggestcustomers~

The proviClersllave a stroT1globby and key contacts with ttie stiie'siItilities corniniSsion. A

senior state senator has already protested that this project is the first step toward "rampant

socialism in this great state."

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