Appendix 2: Cost-benefit analysis and accessibility and environment

The role of cost-benefit analysis

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When considering any scheme to accommodate traffic, an Authority will have in mind certain general objectives. Foremost amongst these is likely to be the establishing of adequate environmental standards and as high a level of accessibility as possible. For any particular town, there could be a wide range of technically acceptable possibilities. But among these will be some which the designers will need to ignore or reject, simply because they would expect them to fall outside the 'constraints' which may limit the Authority's choice. For example, the Authority might be prepared, or allowed by central government, to spend only a certain capital sum on the project, or it might wish to incur only a certain annual expenditure out of its rate resources. In a historic town it might not be prepared to see the demolition of particular buildings or the destruction of a certain character. It might refuse to accept schemes which implied environmental standards below a certain minimum.

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Within these constraints the designers could prepare a variety of schemes, in which maximum benefits are sought for a given cost, or costs are at a minimum for given benefits. The Authority, if it is to make a rational choice between them, will need to compare the different costs implied in the alternative schemes and the different benefits that will accrue from them*, Faced with such an analysis of the estimated costs and benefits for the different projects, the Authority will need some criterion by which to compare them. This should not necessarily point to the scheme with the lowest cost, for that might bring only derisory benefits or result in unacceptable environmental conditions. It should not necessarily select the scheme with the greatest benefits, for these might have to be bought at prohibitive cost. Instead, the criterion should be that pointing to the scheme with the maximum excess of benefits over costs. In order to use this criterion effectively, the costs and benefits should be measured in common, that is money, terms. There is generally little difficulty in measuring costs in money. But while techniques have been devised for placing money values on certain of the benefits derived from traffic proposals⁽²⁾ they are not yet available for the kind of benefits discussed in the Report. It has been possible, however, to devise a system for giving numerical values to the qualities of the various schemes. Paragraphs 12-26 below, which amplify certain of the concepts embodied in the Report itself, demonstrate that this system relies on: enumerating particular aspects of the scheme; allocating an arbitrary number of points to each and thereby weighting them for importance; and 'measuring' the quality of the scheme under each heading by the subjective allocation of points. Such a points system, it must be admitted, is open to certain objections. For example, the weights and points given to particular aspects must be debateable until enough schemes have been measured in this way to produce a consensus of opinion on them. And, furthermore, the system implies that one scheme showing twice the points of another has twice the quality, which may not necessarily be true. But however arbitrary such measurement, until more refined systems of measurement are available, the system is itself more useful than none at all, for it does enable some measure of quality and benefit to be obtained.

4. For a general account see Roland N. McKean, Efficiency in Government through Systems Analysis (New York: John Wiley & Sons, Inc. 1958).

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Under this system of measurement, the amount of benefit can be expressed as an index which can then be compared with the amount of money cost. The resulting ratio gives the ‘rate of ’. This enables alternative schemes which produce similar kinds of benefit to be ranked according to their rate of return. The process is demonstrated in paras. 29-34 below.

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Before proceeding to this, we describe the costs and benefits of three of the Newbury alternatives described in Chapter III, paras. 161–171, and illustrated in Figures 96, 97 and 100. The restricted network scheme (Fig. 100) is referred to here as Scheme A; the minimum redevelopment Scheme (Fig. 96) as Scheme B; and the partial redevelopment Scheme (Fig. 97) is referred to as Scheme C. In each case, our concern is with the central area only, and with only the portion of the primary distributor abutting the east side of the centre, for the rest of the primary is assumed to be common to all the schemes. Each of these three schemes is assumed to be the most efficient, at its own particular level of accessibility and environment; and each is assumed to be achieved over the same time span.