Category: Economics

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development Economics Infrastructure Local Government Transport

Boston Infrastructure

When Lytton Advisory was in the US last month we visited Boston. Moving around the old parts of the city, a number of infrastructure challenges were evident.

Boston’s infrastructure is aging, with many of its roads, bridges, and transit systems in need of repairs and upgrades. This can lead to increased maintenance costs and disruptions to transportation and other services, which can impact the city’s economic competitiveness.

A significant part of the old city is on reclaimed land. The city is practically the Venice of the US. It is vulnerable to the impacts of climate change, including sea level rise, which could have significant impacts on the city’s infrastructure. This can lead to flooding and damage to critical infrastructure, such as roads, bridges, and buildings, which could be costly to repair and disrupt economic activity.

Like many other cities, Boston is facing a housing affordability crisis, with high housing costs and a limited supply of affordable housing options. The city has some of the highest rents in the nation. This can make it difficult for low- and middle-income families to find suitable housing, which can limit economic opportunities for those who cannot afford to live in the city.

Boston also experiences significant traffic congestion, which can impact the city’s economic competitiveness by increasing commuting times and reducing productivity. According to the Global Traffic Scorecard, Boston drivers lost about 134 hours of their lives sitting in traffic in 2022. That’s a jump up of 56 hours from 2021 as more workers head back to the office, though still 10% less than pre-pandemic levels. This can also have negative environmental impacts, such as increased air pollution.

Finally, some locals mentioned to me that Boston is also facing challenges related to digital infrastructure, such as access to high-speed internet and other digital technologies. This can impact economic growth and innovation, as well as limit access to important services and resources for residents. Nearly 15% of households in Boston do not have a subscription to Internet service at home, and more than 32,000 households have no Internet access at all. However, I am not as sure how significant the digital divide is in Boston.

These challenges are all known and potentially solvable. Focus and resources are needed to resolve them. The city has huge potential to address these issues given its role in Massachusetts and the nation’s life, as well as its long history of development and adaptation.

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Cost Benefit Analysis Economics Lytton Advisory Waste Management

Why is cost benefit analysis important in waste management?

Cost-benefit analysis is a tool that can be used to evaluate the costs and benefits of different options for managing waste. It helps decision makers understand the trade-offs involved in different approaches to waste management and make informed choices about how to allocate resources.

There are many factors that can be considered when conducting a cost-benefit analysis of waste management options. These may include the upfront costs of implementing a particular solution, such as the cost of purchasing equipment or constructing a new facility. Other costs to consider might include ongoing operating costs, such as the cost of fuel or labor, as well as the potential costs of environmental impacts or regulatory fines.

On the other hand, the benefits of a particular waste management approach can include reduced environmental impacts, improved public health, and economic benefits such as the creation of jobs or the generation of income through the sale of recycled materials.

By comparing the costs and benefits of different options, decision makers can choose the solution that offers the greatest net benefit, or the greatest benefit after accounting for the costs. This can help them make informed decisions about how to allocate resources and achieve their waste management goals in the most effective and efficient way possible.

How often does your organisation undertake cost-benefit analysis?

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Economics Infrastructure Local Government

New York City Infrastructure

In February Lytton Advisory spent a week in New York City, mainly in Manhattan. It is hard to comprehend the scale and scope of this metropolis and the infrastructure challenges that the City and its residents face. We believe there are three key infrastructure challenges that NYC faces:

  1. Aging Infrastructure: New York City’s infrastructure is aging, with many of its bridges, tunnels, and other transportation facilities built over 50 years ago. This has led to increased maintenance costs and disruptions to transportation and other services, which can impact the city’s economic competitiveness.
  2. Affordable Housing: New York City has one of the highest housing costs in the country, which is a major challenge for many of its residents. The lack of affordable housing options can make it difficult for low- and middle-income families to find suitable housing, which can limit economic opportunities for those who cannot afford to live in the city.
  3. Economic Inequality: Despite being a global economic hub, New York City has one of the highest levels of income inequality in the country. This can create a variety of economic challenges, including limiting access to quality education, healthcare, and other services, as well as limiting economic mobility for those at the lower end of the income spectrum.

In a heavily built urban form solutions are never easy, but there are some possible answers:

  1. Aging Infrastructure: To address the aging infrastructure in New York City, the city could invest in a comprehensive infrastructure renewal plan, which would prioritize repairs and upgrades to critical transportation, water, and energy systems. The plan could also include public-private partnerships to help fund infrastructure improvements and ensure they are completed in a timely and efficient manner.
  2. Affordable Housing: To address the lack of affordable housing options in New York City, the city could invest in new housing construction and rehabilitation of existing properties. The city could also create incentives for developers to build affordable housing units, such as tax breaks or streamlined permitting processes. Additionally, the city could explore policies like inclusionary zoning, which requires a certain percentage of new developments to be affordable for low- and middle-income residents.
  3. Economic Inequality: To address economic inequality, the city could invest in education and workforce development programs that provide training and support to residents from disadvantaged backgrounds. The city could also work to promote small business development and entrepreneurship, which can help create jobs and economic opportunities in underserved communities. Finally, the city could implement policies like minimum wage increases, paid sick leave, and other labor protections that help ensure workers are able to earn a livable wage and have access to essential benefits.

All of these require money and a critical challenge is how NYC could fund the investments needed to address its economic infrastructure needs:

  1. Government Funding: One possible funding source is government funding, such as federal or state grants, which could be used to support infrastructure improvements or affordable housing projects. The city could also allocate funds from its own budget to support these initiatives.
  2. Public-Private Partnerships: Another potential funding source is public-private partnerships, which could help finance infrastructure projects and affordable housing developments. Under this model, private investors or companies would provide financing in exchange for a return on their investment.
  3. Tax Credits: The city could also offer tax credits to incentivize private investment in infrastructure and affordable housing projects. These tax credits could be structured in a way that encourages long-term investment and helps ensure that projects are completed in a timely and efficient manner.
  4. Municipal Bonds: Another option is for the city to issue municipal bonds, which would allow it to borrow money from investors to fund infrastructure improvements or affordable housing developments. These bonds would be repaid over time, typically with interest.
  5. Impact Investing: Impact investing is a relatively new form of investment that aims to generate social and environmental benefits in addition to financial returns. The city could explore opportunities to attract impact investors who are interested in supporting infrastructure improvements and affordable housing projects.

The matrix of need and funding needs to be carefully assessed to make sure the right incentives are generated to do the right projects with the right funding. The problems are not particularly unique, but the scale and scope of work of a key node of the global economy means the investigation is definitely worth the effort.

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Circular Economy Economics Local Government Waste Management

Incentivising Recycling

All too often it is too easy to simply offer financial incentives to encourage greater recycling to households. Municipal waste management often considers that education of households can lead to improvements in recycling outcomes. While this is intuitively appealing, there is often little genuine analysis.

Behavioural economics offers an approach driven by empirical analysis and fieldwork, rather than theory or ‘gut feel’, to develop tailored approaches to achieve better recycling outcomes. Large numbers of household units offer the opportunity to experiment with the recycling incentive architecture before a full roll out across a municipal area.

Behavioral economics is important in recycling because it can help understand why people do or don’t recycle, and how to design policies and programs that encourage more recycling. Here are a few specific reasons why behavioral economics is important in recycling:

  1. People’s behavior is influenced by more than just economic incentives. Traditional economics assumes that people make decisions based on rational self-interest, but behavioral economics recognizes that people’s decisions are also influenced by factors such as social norms, emotions, and cognitive biases. By understanding these other factors, behavioral economics can help design policies and programs that are more effective in encouraging recycling.
  2. People’s behavior is influenced by the design of the recycling system. The way recycling is presented to people, such as the location of recycling bins and the clarity of recycling instructions, can have a big impact on whether or not people recycle. Behavioral economics can help identify ways to make recycling more convenient and understandable, increasing the likelihood that people will recycle.
  3. People’s behavior is influenced by their perception of the benefits and costs of recycling. Behavioral economics can help identify ways to communicate the benefits of recycling more effectively, such as highlighting the environmental and economic benefits of recycling, and can help identify ways to increase the perceived costs of not recycling, such as highlighting the environmental damage caused by waste.
  4. People’s behavior is influenced by the way decisions are framed. Behavioral economics can help identify how to frame decisions in ways that encourage more recycling, such as by highlighting the social norm of recycling or using loss aversion to encourage recycling.

Overall, behavioral economics can help design more effective policies and programs that encourage more recycling by understanding the factors that influence people’s behavior, and by designing the recycling system in ways that take these factors into account.

To what extent are the incentives in your organisation grounded in analysis, recognise bias factors, presented to encourage action, framed to encourage positive decision making by households?

Categories
Climate Change Cost Benefit Analysis development Economics Infrastructure

Infrastructure Planning in the Pacific

Infrastructure investment planning in the context of Pacific Island nations requires a tailored approach that takes into account the unique characteristics and challenges of these countries. This is because Pacific Island nations have small populations, are geographically dispersed, and have limited resources. Therefore, infrastructure planning must be done in a manner that reflects their unique needs and priorities.

One of the best techniques for infrastructure investment planning in the context of Pacific Island nations is conducting a comprehensive needs assessment. This involves engaging with local communities and stakeholders to better understand their needs and priorities. This process is critical for identifying infrastructure gaps and prioritizing investment projects. Lytton Advisory considers this is best done at agency or infrastructure sector level.

Another important technique for infrastructure investment planning is taking a multi-sectoral approach. Infrastructure planning must take into account the interdependence of different sectors such as transportation, energy, water and sanitation, and telecommunications. A holistic approach is essential to ensure that infrastructure investments are aligned with the overall development goals of the country. In our view it also help more effective conversations with donors and private investors, helping countries retain greater sovereignty over national priorities.

Climate resilience is also a critical consideration in infrastructure investment planning in Pacific Island nations. These countries are particularly vulnerable to the impacts of climate change, and any infrastructure investment planning must take this into account. Projects should be designed to withstand extreme weather events and rising sea levels. Risk identification and mitigation are critical factors here.

Engaging the private sector can help to leverage additional resources and expertise for infrastructure development. Public-private partnerships can be a viable option for financing and delivering infrastructure projects. Private sector engagement can also help to promote innovation and efficiency in infrastructure development. However, the ability to engage the private sector also depends on national government capacity to see the commercial interests and incentives with great clarity.

Capacity building is critical to ensure that Pacific Island nations have the skills and expertise necessary to plan and implement infrastructure projects. This includes training in project management, procurement, and technical skills. By investing in capacity building, Pacific Island nations can become more self-reliant in planning and implementing infrastructure projects.

Sustainable financing mechanisms, such as green bonds and climate funds, can be used to finance infrastructure projects that have positive environmental and social impacts. This is important for ensuring that infrastructure investments are aligned with the overall sustainable development goals of Pacific Island nations. This also means identifying and avoiding some predatory financing practices as well, particularly where there might impose difficult burdens on the national treasury.

Finally, it is important to monitor and evaluate infrastructure projects to ensure that they are delivering the intended benefits and to identify areas for improvement. This includes tracking project performance against key indicators and engaging with stakeholders to gather feedback. By monitoring and evaluating infrastructure projects, Pacific Island nations can continuously improve their infrastructure planning and delivery processes. This is one of the hardest things to do, but has the potential to delivery greater informational value for future projects.

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Economics Infrastructure Lytton Advisory

Is multi-criteria analysis a valid tool in infrastructure planning?

Multi-criteria Decision Analysis – Participedia

Multi-criteria analysis (MCA) is a valid tool in national infrastructure planning because it allows decision-makers to consider a wide range of factors and objectives in their decision-making process. MCA is a systematic approach that helps to identify, evaluate, and compare alternative options based on a set of predetermined criteria.

There are many factors that can impact the planning and development of national infrastructure, including economic, social, environmental, and technical considerations. MCA allows decision-makers to take these factors into account and weigh them against each other in order to make informed and balanced decisions. This can help to ensure that infrastructure projects are not only economically viable, but also socially and environmentally sustainable.

MCA can also be used to identify trade-offs between different criteria and to prioritise certain objectives over others. For example, a decision-maker might prioritise the economic benefits of a project over its environmental impact, or vice versa. This can help to ensure that infrastructure projects align with the values and priorities of the community and stakeholders involved.

Overall, MCA is a valuable tool because it allows decision-makers to consider a wide range of factors and objectives in a structured and systematic way, which can ultimately lead to better outcomes for all stakeholders involved.

If you use MCA in your organisation, feel free to share your approach in the comments.

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Economics Infrastructure Lytton Advisory

What are the infrastructure priorities in the Pacific?

Infrastructure: Definition, Meaning, and Examples

A significant challenge in developing infrastructure plans is prioritising the pattern of infrastructure investment.  In the Pacific, the infrastructure priorities of island nations are likely to vary depending on the specific needs and resources of each individual country. However, there are some common priorities that may be considered.

Transportation: Many Pacific Island nations rely on air and sea transportation for the movement of goods and people. Improving and expanding transportation infrastructure, such as airports, ports, and roads, can help facilitate economic development and improve connectivity within and between islands.

Energy: Many Pacific Island nations rely heavily on fossil fuels for energy, which can be expensive and environmentally harmful. Prioritising the development of renewable energy sources, such as solar and wind power, can help reduce reliance on fossil fuels and improve energy security.

Water and sanitation: Access to clean water and proper sanitation facilities is essential for public health. Improving water and sanitation infrastructure can help reduce the incidence of waterborne diseases and improve overall health outcomes.

Communications: Improving telecommunications infrastructure, such as internet connectivity and mobile phone networks, can help connect remote communities and facilitate economic development.

Healthcare: Access to healthcare is often limited in Pacific Island nations due to limited infrastructure and resources. Improving healthcare infrastructure, such as hospitals and clinics, can help ensure that people have access to essential healthcare services.

In addition to sectoral-focussed opportunities, there may also be individual, specific large scale projects that are part of a broader pattern of planned national development.  

Context is King in formulating priorities, but it does require an underlying framework of agreed infrastructure classification as well as a set of priority values which potential projects can be examined.

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Economics

A Canada – America Comparison

Lytton Advisory is travelling in Canada and the United States during February. It presents an opportunity to compare and contrast two dynamic economic systems, as well as look at the underlying structure of these economies and how some of the cities operate (or don’t).

The economy of Canada is closely tied to that of the United States, as the two countries have a highly integrated trading relationship. However, there are some key differences between the two economies.

In terms of size, the United States has a larger economy than Canada. The GDP of the United States at around US$24 trillion is around 10 times larger than that of Canada.

In terms of composition, the economies of the two countries are similar, with both relying heavily on services and manufacturing. However, the United States has a larger agricultural sector, while Canada has a larger natural resources sector, particularly in oil and gas.

Both countries are heavily oriented towards external trade, with the United States and Canada being each other’s largest trading partners. However, the United States has a more diversified trade portfolio, with significant trade relationships with countries all over the world, while Canada’s trade is more heavily concentrated with the United States.

In terms of investment, the United States is generally considered to be a more attractive destination for foreign investment than Canada. The United States has a larger and more developed economy, as well as a more business-friendly environment. However, Canada is also a popular destination for foreign investment, particularly in the natural resources sector.

In terms of ease of doing business, the United States generally ranks higher than Canada. The World Bank’s Ease of Doing Business Index, the United States is ranked 7th while Canada is ranked 18th. However, there are some specific areas in which Canada is considered to be more business-friendly, such as labor laws and regulations.

Such a broad brush consideration of two large economies masks significant regional variations in each economy. It does identify some major themes however.

As a starting point, are these kinds of comparisons relevant, valid or useful? Let us know in the comments below.

Categories
Circular Economy Economics Policy Waste Management

Takeaways the key to a circular economy?

Following the NSW Government’s released of an independent review of its resource recovery framework and implications for the circular economy, three key takeaways struck me:

  • The review identified friction between the environment and safety objectives of the existing NSW waste and resource recovery framework and the need for flexibility to support innovation and a smooth transition to a circular economy.
  • A key criticism of the EPA was their handling of the revocation of the mixed waste organic material (MWOO) exemption in 2018. This led to recommendations for the resource recovery regime to be put on a similar footing to environmental and planning approval regimes.
  • The debate over the definition of waste continues, as the broad interpretation in the case of EPA v Grafil has potentially slowed the advancement of the circular economy.

The Review made a recommendation that the EPA should investigate a pathway to enable an “end-of-waste” outcome for suitable common, low-risk recovered materials to better enable reuse and promote circularity.

There were many other matters raised in the review, highlighting the challenges of both resource recovery and closing the loop between waste and input to future production processes.

You can read the full report here.

The balance between environmental protection, regulation to achieve that and innovation to drive the emergence of the circular economy is still being worked out.

How do you think this is being played out in other jurisdictions? What tradeoffs have to be made between effective environmental regulation and commercial innovation to achieve the circular economy?

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Economics Local Government Lytton Advisory Waste Management

How do local governments manage waste costs?

Staying on top of municipal waste costs is a significant challenge for many local councils.  There are several ways local governments can manage these costs.

Implementing recycling programs: By promoting and facilitating recycling, local governments can reduce the amount of waste going to landfills, which can help lower disposal costs.

Negotiating contracts with waste management companies: Local governments can negotiate contracts with waste management companies to secure lower prices for waste disposal.

Implementing pay-as-you-throw programs: These programs charge residents based on the amount of waste they generate, encouraging them to reduce their waste and lower their costs.

Promoting waste reduction: Local governments can promote waste reduction initiatives, such as composting, to reduce the overall amount of waste generated in the community.

Partnering with private sector companies: Local governments can partner with private sector companies to create new waste management technologies or recycle more materials.

Implementing waste-to-energy programs: Some local governments have implemented waste-to-energy programs, which use waste as a fuel source to generate electricity, reducing the need for traditional fossil fuels and lowering energy costs.

To what extent is your local government doing some, all or even more than this?