infra provInfrastructures—tangible, intangible, and institutional public facilities, from bridges to health care—are a vital precondition for economic and societal wellbeing. There has been an increasing awareness that we cannot rely on market forces for infrastructure investment and maintenance. In this volume, experts from Europe, North and South America, and Asia examine the complexities of financing, installing, implementing, and regulating public infrastructures. Their contributions span a range of methodological approaches, including historical and empirical research, analytical models, theoretical analysis, and sector and regional case studies; they consider the economics of infrastructure provisioning by government, through private-public partnerships, and privatization arrangements.








Book Review: The Economics of Infrastructure Provisioning

 

 

  

Edited by Arnold Picot, Massimo Florio, Nico Grove and Johann Kranz

 

MIT Press

 

2016 | 528 Pages | ISBN 9780262029650

 

Reviewed By

Jeff Thurston

The book first treats general investment, growth, and policy issues, and then offers sector-specific analyses of transportation, energy, telecommunications, and water infrastructures. The chapters cover topics that include the evolution of historical infrastructure; the relationships between the state and private finance in funding and financing infrastructure; and the relevance of infrastructure for economic growth.

 There are several contributors to this text, each writing on a different aspect of infrastructure investment and development. Both public and private aspects of these economic activities are included. Several factors drive infrastructure activity ranging through repair, renewal and expansion of infrastructure.

Tangible infrastructure speaks to the construction of roads, bridges, waterway infrastructure, utilities and other activity. Meanwhile, intangible infrastructure relates to education, research, health relationships and the social dimension of infrastructure development. On the other hand, institutional infrastructure includes issues such as legal activity, regulations and so on. Each of these forms part of the economic considerations as infrastructure is considered. It is suggested that there are four mechanisms providing provisioning. These include: government-based, market-based, public procurement and private provisioning.

Interestingly, this book includes historical information in relation to infrastructure development. Historical trends in world GDP by country and associated infrastructure economic activity is provided. How the world developed is connected with the development of infrastructure, and details about this relationship is included. Utilties, telephone, tramways, water related infrastructure, architecture and others are presented in terms of economic dimension during periods of growth and technological innovation. These are often presented in terms of cycles and phases, although smaller cycles and innovation periods in infrastructure arise as local innovations arise.

Readers will find it interesting to see graphs showing the historic costs of lighting services decreasing through history - at a significant level. They will also learn how stock market performance, and indicators change by sectors through time as infrastructure investments rise and fall. The growth of population and fertility levels are presented in relation to economic activity surrounding infrastructure investment. This is documented historically and trends are presented.

The bundling of infrastructure building is coupled to services, thereby linking public-private connectivity. The mismatch between private and public funding and financing is shown. Generally, private investment arises during the planning and construction phases, while public finances and economic activity are provided through all phases of infrastructure lifecycle development.

A key question that arises in infrastructure provisioning is the question of 'value for money'. This points directly to the issue of measureable benefits in the creation and continued funding of infrastructure projects. Since some of those benefits are tangible, they are more easily measured. But others may arise over longer periods of time, and take on a intangible form. Public funding may be used to support periodic private funding of infrastructure, for example, thereby securing investment that is otherwise unavailable. Or, tax benefits may arise as a means to capture financing that simply will not arise otherwise in infrastructure projects planned. Different tools - tariffs, taxation or subsidies could be similarly used in this way. In all cases, economic provisioning takes on a cost-benefit analysis following various paths for investment.

The length of contracts that include private-public partnership are also evaluated and described. Topics like sub-optimal renegotiation, incomplete contracting frameworks and contractual length to under limited commitments are discussed. readers will learn a host of terminology commonly used in these projects as well as the economic terms and mechanisms for evaluating projects and funding or financing.

Social aspects of infrastructure are also described. This is explained in terms of pathways or roadways to outcomes. Different infrastructure investments can benefit more or less people, more or less regional activity and these investments can also link with strategic planning and projected future needs. Accordingly, uncertainty is part of economic consideration throughout infrastructure planning and investment, and this may vary widely at times and during specific projects. As might be expected, analytical tools and projection tools are increasingly being used as a means to understand and reduce uncertainty. The time frames over which infrastructure is considered are usually very long. This introduces several considerations that may be unforeseen, or simply not realized as time proceeds.

In summary, The Economics of Infrastructure Provisioning - The Changing Role of the State is both fascinating and informative. There is a lot of factual information included in this text from previous infrastructure observations. That is mixed with a critical analysis of potential issues and considerations for projects going forward. Both private and public considerations in terms of infrastructure development are deeply explored, explained and described from an economic perspective. 

Both students and practitioners involved in infrastructure including politicians will find this book useful. It includes information from around the globe and connects it with theory and innovations currently in use or being considered for funding and financing infrastructure. Finally, this book connects the entire infrastructure lifecycle to economics, something few books have previously done as well. 

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