THE OHIO STATE UNIVERSITY Autumn Quarter 2011
City and Regional Planning Professor Philip A. Viton

City and Regional Planning 763 — Consequence Analysis in City and Regional Planning

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Credits: 4 hours
Meeting: 315 Schoenbaum Hall
Time: Monday, Wednesday 11:30 – 1:20 p.m.
Midterm Examination: Wednesday, October 26, in class. Calculator required.
Final Examination: Thursday December 8, 11:30–1:20 pm, in 315 Schoenbaum Hall. Calculator required.
Instructor’s Office: 296 Knowlton Hall
Office Hours: Monday, Wednesday 10:00 – 11:00am and 1:30 – 3:20 pm, or by appointment
E-mail: viton.1@osu.edu

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Course Description and Objectives

This course is a theoretical and practical synthesis of methodologies for evaluating large-scale public projects, such as transportation, water resources, urban infrastructure, or environmental projects. The major concern of the course is cost-benefit analysis under conditions of certainty.

A good example of cost-benefit analysis in practice is provided by the Philadelphia Center City Commuter Connection (CCCC) Environmental Impact Statement (the CCCC EIS). Individual sections of this report are available in PDF form on the 763 website (see below). The website also has links to materials on some more recent Ohio projects, such as the 3C passenger rail project (now abandoned).

Course Organization

Lectures.

The mid-term examination will count for 40% of your final grade. This is a closed-book examination; you should be sure to bring a calculator.

The final examination will count for 60% of the final grade. This is also a closed-book examination, and you should also be sure to bring a calculator. The final examination will cover all material in the course (not just the material covered since the mid-term).

We will not meet on Wednesday, November 23 (the day before Thanksgiving). This may help you make your travel plans.

Texts

To supplement the crystalline clarity of the lectures, we will rely on readings: most of these will be available for download in PDF format from the course website.

Problem Sets

A collection of problems and answers in cost-benefit analysis is available for download at http://facweb.knowlton.ohio-state.edu/pviton/courses2/crp763/psas.pdf. These are something like the questions you can expect on the exams, but are harder (in the sense of requiring more time). I strongly recommend that you work through the problems on your own.

Course Websites

The main course website is at http://facweb.knowlton.ohio-state.edu/pviton/courses2/crp763/index.html. This contains versions of the syllabus in which all links are “live”: you may wish to bookmark the location.

I’ll put general course announcements there and copies of all materials distributed in class. It’s also a source for some materials on the reading list, for copies of recent midterm and final exams, and for the CCCC EIS. The website also contains links to documents on some recent central Ohio projects, for example the 3C (Cincinnati–Columbus–Cleveland) Intercity Passenger Rail project.

There is also a restricted website, which will contain other materials, at http://facweb.knowlton.ohio-state.edu/pviton/courses/crp763/index.html. This site is restricted in that you need to log in to it, using your KSA user name and password (ie the name/password you use when logging on to the lab computers). If you are not a KSA student and are registered for the course, see me, and we will arrange for you to get access.

If you try to log in to the restricted site from outside the KSA it is possible that just entering your KSA user name in the User name field will not work. If this happens, try entering knowlton\your_user_name instead. You may be also asked for a Domain in a separate input field: the correct answer here is knowlton.

Email

As many of you know, I filter spam aggressively; the downside is that I may accidentally delete real mail. You can minimize the chances of this happening when sending me email by (1) making sure that the From field uses your osu.edu address, and (2) including CRP (or C&RP) somewhere in the subject line. If I still don’t answer in a day or two, please ask me about it.

Academic Misconduct

OSU expects that all students will understand and abide by the following standards relating to academic misconduct. In particular, solutions to any problem sets and exams should be each student’s own independent work. Any deviation from this requirement constitutes an act of academic misconduct and will be taken extremely seriously.

OSU defines academic misconduct “as any act that undermines the academic integrity of the University or subverts the educational process. It includes plagiarism and dishonest practices associated with examinations as well as any other form of misconduct associated with academic work or grading. Plagiarism is the act of taking ideas, writings, or drawings of another and offering them as one’s own. Plagiarism may be copying of someone else’s work, word-for-word, in part or in the whole without acknowledgment. Other forms of plagiarism involve paraphrasing the structure and language of another person’s work by changing the order or omitting sentences, or writing based strictly on the ideas of another.”

Standards of Behavior

The College of Engineering has requested that all syllabi carry the following statement about the standard of conduct expected of all students enrolled in its courses:

Professional Conduct

Students are expected to conduct themselves in a professional manner and to abide by the provisions in the Code of Student Conduct. Students should appreciate diversity, and they should conduct themselves professionally with members of the same or opposite gender and/or from different ethnicities and cultures.

Students should represent themselves in a professional manner in forums that have public access. This includes information posted on social networking sites such as Facebook. Information on these pages is often screened by potential employers, and unprofessional material can have a negative impact on job or graduate school prospects.

Any forms of sexual harassment or intimidation will not be tolerated. The University’s Code of Student Conduct and Sexual Harassment Policy are available on the OSU web page. Sexual harassment includes inappropriate behavior among two or more students; between students and faculty; and among faculty. The actions can take place in physical, verbal, or written forms. When a complaint is received, the situation will be investigated by the academic department and possibly by the police even if the harassment was done anonymously or possibly as a jest. Being found guilty of harassment, even if it was nominally done in jest, can be professionally damaging.

Useful Sources

Here are some additional sources (beyond those on the reading list). Most are available in the library.

General Intermediate Treatments

Fremont J. Lyden and Ernest G. Miller, editors. Public Budgeting: Program Planning and Implementation. Prentice-Hall, Englewood Cliffs, NJ, 1982.

E. J. Mishan. Cost-Benefit Analysis: A Handbook. Praeger, New York, NY, 1976.

Peter G. Sassone and William A. Schaffer. Cost-Benefit Analysis: A Handbook. Academic Press, NY, 1978.

J. Schofield. Cost-Benefit Analysis in Urban and Regional Planning. Allen and Unwin, London, UK, 1978.

Ronald D. Sylvia. Program Planning and Evaluation for the Public Manager. Brooks-Cole Publishing Co., Monterey, CA, 1985.

General Advanced Treatments

Alan Auerbach and Martin Feldstein, editors. Handbook of Public Economics. North Holland, New York, NY, 1985.

R. E. Just, D. L. Hueth, and A. Schmitz. Applied Welfare Economics and Public Policy. Prentice-Hall, Englewood Cliffs, NJ, 1982.

Specialized Topics

Hans A. Adler. Economic Appraisal of Transport Projects: A Manual With Case Studies. Johns Hopkins University Press for The World Bank, Baltimore, MD, 1987.

V. Kerry Smith. Environmental Policy Under Reagan’s Executive Order: The Role of Benefit-Cost Analysis. University of North Carolina Press, Chapel Hill, NC, 1984.

Avinash K. Dixit and Robert S. Pindyck. Investment Under Uncertainty. Princeton University Press, Princeton, N.J., 1994. (More advanced than Raiffa).

Other Materials

In June of 2000, there was a special issue of the Journal of Legal Studies discussing philosophical and legal aspects of cost-benefit analysis. We shall not be covering those aspects in the course; but if you are interested, the papers are available via links on the website.

 Course Outline and Reading List 
*: required reading; **: optional

Most of these are available on the restricted website — see above.

1 Introduction: Market Failure; Role of Government

*
Edward M. Gramlich. A Guide to Cost-Benefit Analysis. Prentice-Hall, Englewood Cliffs, NJ, 1990, Chs. 1 – 2
**
Peter O. Steiner. “The public sector and the public interest”. In The PPBS System, pages 13–45, Government Printing Office, Washignton D.C., 1969. Joint Economic Committee, 91st Congress. PDF version available

2 Principles of Cost-Benefit Analysis

*
Richard Layard and Stephen Glaister. “Introduction”. In Richard Layard and Stephen Glaister, editors, Cost-Benefit Analysis, pages 1–58. Cambridge University Press, 1994. Skim now, and come back to it as we cover the individual topics.
*
Edward M. Gramlich. A Guide to Cost-Benefit Analysis. Prentice-Hall, Englewood Cliffs, NJ, 1990, Ch. 3.
**
Kenneth A. Small. “Project evaluation”. In Jose Gomez-Ibanez, William B. Tye, and Clifford Winston, editors, Essays in Transportation Economics and Policy, pages 137–179, Washington D.C., 1999. Brookings Institution.

3 Discounting and The Problem of Time

*
Edward M. Gramlich. A Guide to Cost-Benefit Analysis. Prentice-Hall, Englewood Cliffs, NJ, 1990, Ch. 6.
*
John Broome. “Discounting the future”. Philosophy and Public Affairs, 23(2):128–156, 1994. PDF version available
**
Cass R. Sunstein and Arden Rowell. “On discounting regulatory benefits: Risk, money, and intergenerational equity”. University of Chicago Law Review, 74:171–208, Winter 2007
**
Juzhong Zhuang, Zhihong Liang, Tun Lin, and Franklin D. Guzman. “Theory and practice in the choice of social discount rate for cost-benefit analysis: A survey”. Working Paper 94, Asian Development Bank, 2007

4 Consumer Benefits and Their Measurement

*
Edward M. Gramlich. A Guide to Cost-Benefit Analysis. Prentice-Hall, Englewood Cliffs, NJ, 1990, Ch. 4, pp. 48–59.
*
Edward R. Morey. “Confuser surplus”. American Economic Review, 74(1):163–173, 1984. PDF version available
**
R. D. Willig. “Consumer’s surplus without apology”. American Economic Review, 66(4):589–97, 1976. PDF version available

5 Shadow Prices and Non-Market Goods

*
Edward M. Gramlich. Benefit-Cost Analysis of Government Programs. Prentice-Hall, Englewood Cliffs, N.J., 1981, Ch. 5, pp. 53–75.
**
M.W. Jones-Lee. “Safety and the saving of life: The economics of safety and physical risk”. In Richard Layard and Stephen Glaister, editors, Cost-Benefit Analysis, pages 290–318, Cambridge, U.K., 1994. Cambridge University Press.
**
MVA Consultancy. “Time savings: Research into the value of time”. In Richard Layard and Stephen Glaister, editors, Cost-Benefit Analysis, pages 235–271, Cambridge, U.K., 1994. Cambridge University Press.

6 Project Costs and their Finance

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Robert W. Hartman. “One thousand points of light seeking a number: A case study of CBO’s search for a discount rate policy”. Mimeo, delivered at the winter meeting of the American Economic Association, 1968. Read Appendix, pp 1–7; other parts of the Appendix optional. The paper is included in the readings for section 3.
*
Charles L. Ballard and Don Fullerton. “Distortionary taxes and the provision of public goods”. Journal of Economic Perspectives, 6(3):117–132, 1992. PDF version available
**
Don Fullerton. “Reconciling recent estimates of the marginal welfare cost of taxation”. American Economic Review, 81(1):302–308, 1991. PDF version available
**
John P. Hoen and Alan Randall. “Too many projects pass the benefit-cost test”. American Economic Review, 79(3):544–551, 1989. PDF version available

7 Income Distribution

*
Edward M. Gramlich. A Guide to Cost-Benefit Analysis. Prentice-Hall, Englewood Cliffs, NJ, 1990, Ch. 7.