[…] Taken together, the UK and US studies both account well for existing data on cost underestimation and benefit overestimation. Both studies falsify the notion that in situations with high political and organizational pressure the underestimation of costs and overestimation of benefits is caused by non-intentional technical error or optimism bias. Both studies support the view that in such situations promoters and forecasters intentionally use the following formula in order to secure approval and funding for their projects:
underestimated costs + overestimated benefits = funding
Using this formula, and thus ‘showing the project at its best’ as one interviewee said above, results in an inverted Darwinism, i.e the survival of the unfittest. It is not the best projects that get implemented, but the projects that look best on paper. And the projects that look best on paper are the projects with the largest cost underestimates and benefit overestimates, other things being equal. But the larger the cost underestimate on paper, the greater the cost overrun in practice. And the larger the overestimate of benefits, the greater the benefit shortfall. Therefore the projects that have been made to look best on paper in this manner become the worst, or unfittest, projects in reality, in the sense that they are the very projects that will encounter most problems during construction and operations in terms of the largest cost overruns, benefit shortfalls, and risks of non-viability. They have been designed like that, as disasters waiting to happen.
The paper goes on to say, “Professional and occasionally even criminal penalties should be enforced for managers and forecasters who consistently and foreseeably produce deceptive forecasts”. Wise words yet we shall have to hope the HS2 project and all the other infrastructure projects planned by the Government are unique in not suffering from the endemic flaws described in the paper.
I’ll leave interested parties to read the paper for themselves but I will add this: while the Government has cloaked itself in the legacy of the great British railway pioneers, they were entrepreneurs risking private capital in commercial projects. The same cannot be said of HS2.
That matters and it matters for all the reasons we have historically defended free societies from the encroach of planning.