Tuesday, March 20, 2018

Metro/trains vs hospitals vs schools: Where to Allocate Meagre Resources

[To understand the context of this post, please read At What Cost! Why Compute Economic Costs of Faulty Political Decisions]
Metro/trains vs hospitals vs schools vs dams vs energy vs other infrastructure projects?
Allocation of resources to infrastructure projects and measurement of their comparative benefits is a political decision and should be decided  by people not elites. Why?

Dictator Gen Ayub's decade of development (1958-69) constituted infrastructure projects which were political decisions executed without majority consensus. They generated massive economic deprivations that still economists are trying to evaluate. These deprivations unleashed forces leading to his exit and the verdict of 1970 elections.  Ignoring the verdict of people compelled East Pakistanis to secede,  and West Pakistanis to roll it all back through wholescale nationalization [8] . Such huge infrastructure projects have complex tradeoffs whose economic evaluations by unelected elites has no consequence and instead must be done by the cost-benefits analysis of the affectees,  i.e people themselves. Worth of such political decisions is measured, accepted or rejected by people's vote!
Hence,  our nonelected elites should let the voters decide,  or do they want another majority province to secede through political machinations of DoN godfathers? [6]
Kalabagh dam is a political decision,  and people do not want it irrespective of its economic merits [7].
Imran Khan's Peshawar metro costing Rs 62bn [2] is a political decision based on prediction of people's sentiments that are against the previous views of IK [1]. NS's infrastructure projects are being evaluated and will form the basis of upcoming elections [3].  Provided,  of course,  the DoN godfathers political engineering allow that [4]. Pakistan history suggests otherwise [5].

Projects that benefit Car-walas Elites vs Projects that benefit car-less commoners

The real comparison is between flyovers and expressway/ring-roads that only benefit the car-walas elites vs metrobus/trains that primarily benefit only the car-less commoners? From a feasibility point of view one should evaluate which has a greater multiplier impact?

Typically people try to compare clean water vs metro/train or schools vs metro/train projects. This is like comparing apples with oranges. Even hospitals vs metro/trains is also comparing apples with oranges. This is complex comparison and a hard problem but it can also be done. But we can do it later, but first we must do a more simpler comparison of flyovers/ring-roads that facilitate only car-wala elites in Islamabad and other elite areas of cities vs Metrobus/trains to facilitate car-less commoners.

What is the total investment on highways/flyovers over the last 4 years and how many people benefited and what is the total investment in metro buses/trains and how many people benefited?
Also comparison of flyovers/roads in cities' elite areas vs backward areas vs intercity roads?

Economics 101

Here we discuss ideas, not people. Economics 101 course starts by emphasizing that resources are scarce, wants n needs are unlimited. How do you allocate scarce resources to unlimited wants/needs? In a democracy, parliamentary majority decides prioritization and allocation of the resources. In Pakistan, during the greater part of our existence, either parliament did not exist, or when it exists (as today) prioritization should be discussed, costs benefits should be evaluated. This discussion is good because we are discussing whether 120+ flyovers constructed all over the country to facilitate car-walas should be prioritized over the metros constructed only for car-less commoners.

My first course in Economics was in 1985 during my MBA program. Mr Mumtaz was teaching macro economics. The very first lecture was about what is economics. He emphasized that wants are unlimited but our resources are limited. Economics is the art and science of allocating meagre resources to satisfy the insatiable demands. He would repeat this concept so many times through out the course that it became a part of my thinking. This issue of allocation of resources becomes satisfying these demands without causing political and social explosion which is most likely when votes and public opinion is not respected. This was the reason for the failure of Gen Ayub's decade of development.

Rough Outline to Design a Feasibility 

Orange Line Costs n Feasibility 
250k rides/day (from published source) 
91.2m rides/yr (250k x 365)
4.56bn rides in 50yrs (x50 life of infrastructure,  typical life is 100+years) 
Cost Rs 162bn (investment) 
Avg Cost per ride = Rs 35.4 per ride (total investment /total rides in 50yrs)
Above is a simple direct calculation. 
More detailed analysis for feasibility require
1. Yearly maintenance cost
2. Ticket Fare Receipts per year
3. Obsolescence of moving stock
4. Additional investment in tracks,  routes of traffic
5. Consequent increase in riders from 250k to 2m/day? 
6. Savings on time lost in road traffic congestion 
7. Savings on fuel costs and import bill for cars,  buses
8. Savings in pollution costs. 
9. Gain in productivity 
10. Incorporating of inflation calculations
Etc etc

Work in Progress
References :

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