A new organisation called NEKS (for “New Economic Knowledge Services”, see www.neks.ltd) is holding its inaugural conference on the economics of infrastructure In Westminster on Tuesday January 24th, and you should attend.
Why NEKS, and why Infrastructure? The economic importance of infrastructure is obvious, but the actual performance of infrastructure often differs radically from what is predicted when it is being planned. Three forms of delusion make many infrastructure projects far less beneficial than expected by their proponents: the complexity of execution is underestimated, the benefits are overestimated, and benefits are also calculated poorly using dodgy economic theory.
These are precisely the sort of issues that NEKS was formed to address. NEKS’s objective with this conference is to provide a real understanding of how complexity and uncertainty—including the impact of actual human behaviour and institutions—affect large public infrastructure projects. These issues are simply not adequately considered by the current “cost-benefit” method of evaluating projects, which relies heavily on mainstream economic concepts of marginal cost and marginal utility.
For example, HM Treasury’s supplement to The Green Book (the bible for evaluating government projects) talks about the need to consider ‘non-marginal economic impacts’ (which is almost the whole point of infrastructure investment), and to take into account ‘endogenous preferences’ (the fact that people change their micro behaviour when the macro world changes around them). This supplement followed the debacle over HS2, when the purported strategic case based on transforming northern economies was totally divorced from the evaluation of economic benefits, which were based mainly on trying to quantify the increased utility experienced by lots of people saving bits of time travelling.
Both Trump and May are portraying themselves as “infrastructure leaders”, but they will only prove to be so if their projects work and deliver on time. The chances that they will instead be White Elephants, delivered too late with inadequate or even negative returns, are high unless the real-world complexities of developing and delivering infrastructure are properly considered.
NEKS’s conference at the premium County Hall venue in Westminster will take a real-world look at the UK’s infrastructure plans. Vince Cable, the lead minister for industrial strategy in the Coalition Government and an advocate for new economic thinking, will kick off the conference. A Minister should speak about infrastructure and the Government’s freshly minted industrial strategy Green Paper. Ann Pettifor, who successfully led the Jubilee 2000 campaign to forgive the debts of the world’s poorest countries, will speak about the financing implications of infrastructure. Bridget Rosewell, a National Infrastructure Commissioner and definitely a new economic thinker, will be giving a keynote. The ever controversial hedge fund manager and Hayek fan, Crispin Odey, will add contrarian spice to proceedings (he was one of the few people who saw the Crash coming….. and shorted it).
There will be an interesting combination of creative, strategic and analytical thinkers attending from many areas of life to discuss these issues with.
If you’ll pardon the pun, I am keen that as many of you that follow this blog and understand the need for new economic thinking, are there and I’ve persuaded NEKS to offer a 50% discount on the cost of the conference. Go here to get more information. I will definitely be there from 2pm onwards (teaching responsibilities prevent me attending for the whole day). I hope to see you there.