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Investment appraisal: links between finance and economics

In: Handbook on Transport Pricing and Financing

Author

Listed:
  • Georgina Santos
  • Iven Stead
  • Tom Worsley

Abstract

In this chapter, we discuss the methodological developments in investment appraisal from the 1970s onwards, with a focus on Cost-Benefit Analysis and its extensions. In particular, we pay attention to direct user benefits (of which time savings have always been and continue to be the most important ones), environmental and social externalities, and wider economic impacts, and to risk allocation and optimism bias. We also explore issues to do with transport project finance, including value capture. The increased land and property prices resulting from new or enhanced transport infrastructure projects can help finance the project, if adequately captured by the government. We conclude with a discussion on the problem of public acceptance and political influence in investment appraisal. The takeaway point is that investment decisions are ultimately made within a context of the government’s strategic policy objectives, which can dominate the results of rigorous economic appraisal.

Suggested Citation

  • Georgina Santos & Iven Stead & Tom Worsley, 2023. "Investment appraisal: links between finance and economics," Chapters, in: Alejandro Tirachini & Daniel Hörcher & Erik T. Verhoef (ed.), Handbook on Transport Pricing and Financing, chapter 15, pages 295-310, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:20184_15
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