Friday, October 08, 2010

More on CBA

Phil Dobbie on his Twisted Wire has joined the calls for an NBN Cost Benefit Analysis. He has compiled a pastiche of talk-back commentary trying to suggest a mounting wave of opposition.

That commentary covers the usual list of alternatives; (1) my internet is already fast enough (2) everyone will use wireless instead (3) there are other things (hospitals etc) that the money should be spent on. He unfortunately tags the CEDA front man Michael Porter as the other Michael Porter (he of competitive strategy fame). The Porter analysis is so ridiculous as to be laughable - it is a carry-over from Phil Burgess attempt to convert Australia's think tanks into mirrors of their neo-liberal/neo-conservative US counterparts. Dobbie gets that a lot of this is crap, but argues we need to dispel the crap with facts.

Elsewhere Alan Kohler has repeated that three Australian business leaders have called for a Cost Benefit Analysis. Unfortunately these dudes like many others confuse a CBA with a financial plan or business case for the investment.

Dobbie reports that the Institute for the Broadband Enabled Society is researching how to measure the benefits with work by Richard Hayes. He waffles a lot about how to value the NBN benefits. Ho confuses measuring economy wide benefits with the consumer benefit as measured by willingness to pay. (Though he rightly points out that a CBA values the consumer surplus not just the amount they pay).

But one of the biggest benefit measuring issues is the impact of ubiquity and the fact there are common costs. Let's envision an application relevant to only 100 households. We don't know which they are but know the benefit accrues if broadband is available. That benefit is then only available by ubiquity. If there are thousands of these then their combined effect justifies ubiquity.

But in common with all technology, what benefit can be assessed is constrained by both the inability to envision the future innovations and the over-optimistic transformative scenarios.

As I've previously written it is time to undertake CBA work not to rule the project in or out but to assist in risk and uncertainty management.

NB Can I repeat that Malcolm Turnbull's $10B water plan was never subject to a Cost Benefit Analysis.

And as a further aside. The business leaders interviewed suggested it was time for business to "stand up" to the Government. It is distressing to think business can still run an agenda that suggests it is anything other than complicit in the process of Government - not separate from it. The morphing of political parties from mass movements to what theorists call "cartel parties" has been accompanied by both being captured by the interests of the big end of town.

Novae Meridianae Demetae Dexter delenda est

1 comment:

ian said...

There is no point wasting time and resources doing a CBA, because no one cares about the result, and wouldn't believe the results anyway.

The Costs have been well studied, and are as well known as is possible for any project of this nature.

The Benefits, on the other hand, are harder (impossible?) to quantify, and there are genuine philosophical differences between the parties as to the merit of the Benefits.

This is just a political exercise in government bashing.

Maybe the coalition should start by listing all the projects it ran with a CBA.

Two, which immediately spring to mind, and the sale of Telstra and the "war" in Afghanistan, both of which are opposed by a large section of the community.