Cost-benefit analysis of the Northern Norway line : A review and assessment of previous investigation, the cost-benefit methodology and political decision-making

• Main Author: Normann, Thomas
• Format: Bachelor Thesis
• Language: English
• Published: Umeå universitet, Nationalekonomi 2023
• Subjects: Economics; Nationalekonomi; Norway; Nord-Norge; Northern Norway
• Online Access: http://urn.kb.se/resolve?urn=urn:nbn:se:umu:diva-210125

Prior to undertaking major public infrastructure projects, various types of cost-benefit analyses are carried out. The purpose is to provide decision-makers with an objective basis upon which to determine whether a project should be completed or not, as well as to rank projects based on the net increase in aggregate societal welfare they are predicted to yield. Many real-life examples demonstrate that there is no obvious link between the conclusions of such investigations and the public opinion on the project in question. Moreover, several research articles have concluded that politicians place little emphasis on the outcome of cost-benefit analyses when deciding which projects to prioritise. Therefore, the primary research focus of this thesis is to explore potential explanations for these common discrepancies. In doing so, a case study is conducted using an example of a project that exhibits these discrepancies; a proposed railway project in northern Norway called Nord-Norge-banen. In particular, an investigation from 1992 which overall appears negative towards the project is examined in contrast to surveys indicating positive public opinion and the fact that the project has already been formally approved. The thesis explores both project-specific and more generally applicable topics by analysing the report both within the methodology it was based on and by investigating the methodology itself. It includes descriptive elements such as project and report reviews and so-called sensitivity analyses, as well as more normative aspects like methodological shortcomings and cognitive biases. As the thesis shows, there are several imprecisions, uncertainties, vulnerabilities, questionable aspects and lacks of completeness in the cost- benefit analysis methodology. It further finds that some of the aspects unaccounted for in scientific reports but emphasized by the public are arguably reasonable to consider, while others are more subjective and potentially influenced by self-interest or even subconscious irrationalities ...