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TRANSCRIPT
Matthew Kitchen Puget Sound Regional Council
1. Dimensions of Sustainability
2. Analytic Principles and Approaches
3. A Puget Sound Transportation Case Study
4. Making Sense of a Complex Problem
1. Dimensions of Sustainability
Multi-dimensional
o Economic
o Social
o Environmental
Exchanges
o The use and substitution of resources
o Involves thinking about the future
o Stocks and flows
…necessitates some kind of accounting framework
Depreciation of resources; including non-renewable resources and environmental assets
Can we replace resources we use with something else? How do we endow the future?
This implies substitutability (we can replace some asset or amenity with something that is not exactly identical)
This also implies that we may choose not to “preserve” every single resource or asset.
Robert Solow – An Almost Practical Step Toward Sustainability, Resources For the Future; 1992
Sustainability must address inter-generational trade-offs
Monitoring sustainability: requires some kind of accounting system that tracks stocks and flows across time and dimensions of sustainability
Making judgments about individual investment or policy choices should also involve an analogous kind of accounting
2. Analytic Principles and Approaches
Key concept: “opportunity cost”
o Requires some counterfactual
o Allows judgments to be made about incremental actions
o Respects alternate uses for resources
o Makes the arguments for change explicit
o Current state of the world reflects some existing (policy) allocation of resources and rights
What we think the world looks like absent some new policy or investment
o A common basis for comparison
o Should be a realistic possibility (no straw man)
o Should not include any policy or investment that is being considered as part of the assessment process
o It is very important to “get this right”
Components of Decision Analysis
Identify Policies, Projects/Portfolios Baseline; individual projects; portfolio of related
projects Universe and subsets of all possible projects
considered for a specific decision This is the choice set
Identify Objectives and Measure Performance All relevant objectives with discrete non-overlapping
measures Measure performance against the objectives These are the important characteristics of the
choices
Weight Objectives Derive objective weights - this is still just information
to be used in the decision process These are the preferences of the choosers
Develop and Apply Decision Rules Specific rules about how the information outlined
above is applied to a discrete decision Rules can be formal and informal Rules can reflect opportunities and constraints
(political, geographic, institutional, financial, etc.) These are the choices that are made
Priorities
Ideally, every combination of policy/project would be analyzed
o Impractical
o Costly
Screen/consolidate
o Based on some objective characteristic
o Combine policies/projects with dependencies
o Respect some exogenous constraint – e.g. budget
Develop Portfolios
o With some integrating element
o To explicitly address risks
Mutually exclusive
o No double counting please
o Failure to apply discipline in this regard will be confounding
Comprehensive
o All things of importance should be reflected
Countable (if at all possible)
o Talk without measurement is “cheap”
o Sometimes things can’t be counted, but often we haven’t tried hard enough
o Trying to count things, even when we fail, imposes a logical discipline
Stems from principles of a private market-oriented economy
Individuals, seeking their own happiness, express preferences through choices in free and competitive markets
What about Public Choices…? o Revenues are finite public resources held in trust
o Public choices influence private markets and individuals
o Public investments can “displace” private investments
o Choices always represent opportunities foregone
BCA is an accounting system o Treats all benefits and costs equally
o Is interested in community preferences; not just individuals
o Accounts for inter-temporal transfers and time preferences
o In the end, BCA is a normative discipline
What might substitute for BCA, or what is BCA a substitute for?
Distributional problems o NPV does not address distributional issues
o So long as gains to the winners exceed losses to those who lose…
o Kaldor-Hicks criterion (winners could compensate losers & losers could not bribe winners)
o Much more restrictive perspective requires Pareto improvement
Someone will gain while no one loses
Is this a practical perspective on policy?
Valuing non-market goods o Intrinsic values
o Market distortions
o Poorly assigned rights and responsibilities
The purpose is to allow aggregation and explore trade-offs o Group decision-making
Aggregation problems o Integrating non-market values
o Interpersonal comparisons of utility
o Social welfare function: treats all individual preferences “as they lie” with equal weight
o Some argue this is a measure that does not comply with tenets of Utilitarianism
• What about the long-run?
– Some projects/policies have benefits and costs far into the future
– Do we jeopardize the future by discounting its preferences?
– Might we jeopardize the future by failing to discount its preferences?
– How do we best endow future generations?
• Selecting a discount rate – Marginal rate of time preference (consumption)
– Opportunity cost rate (private investment)
– Social discount rate allows for adjustments for ethical considerations
Ad hoc
o Scorecards
o Point systems
o Others…
Integrated
o Utility scores
o Benefit-cost analysis
BC ratios
Net benefits
Role of budget constraints
3. Case Study:
Transportation Project Prioritization
Evaluation Criteria
Built on VISION 2040
Mobility
Finance
Growth Management
Economic Prosperity
Environment
Quality of Life
Equity
Ideally every combination of projects would be analyzed
o Impractical
o Costly
Screen/consolidate projects
o Based on project costs
o Combine projects with dependencies
Develop Portfolios
o With some integrating element Pricing and investment policy – shapes demand
Short and long-run strategies
Outcome weights are consistent with current planning goals
Post processing of travel model results
o Travel demand models represent markets and transportation prices
o Long-run changes are partially captured in the land use models
o More tightly bound economic models are a future development
Disaggregate results
o 11 vehicle classes
o 5 time-of-day traffic assignment periods
o 1 million zone-pairs (spatial disaggregation)
o 5 consumer surplus categories
o In total 275 million consumer surplus calculations
Integrated models simulating
persons and vehicles at a parcel level
Regional Economic
Forecasts
Land Use
Forecasts
Travel
Forecasts
Economic
Appraisal
Transport
System
Geodatabase
Hybrid activity-based Urbanism
PSEF
Benefit Cost Analysis
Air Quality
Analysis
EPA Moves
Modeled Scenario
Alternative Case
Model Databanks
Modeled Scenario
Base Case
Model Databanks
Process Databanks(Python)
Alternative Schema• Base• Alternative 1• Alternative …n
BCA Database (Postgres)
Calculate Benefits(Python)
Web Interface(Django)
Output.csv
Input/Output Data Files BCA Software Modules BCA Data
Employs process used in mathematical psychology (Analytical Hierarchy Process, or AHP)
Requires pair-wise importance comparisons
o Which of the two objectives are more important?
o How important one objective is relative to another?
Mimics human decision behavior by assigning a priority to each objective
How important is Prosperous Economy relative to
Sustainable Environment?
Prosperous Economy
is more important
Sustainable Environment
is more important
1 3 7 9 3 5 9 5 7
Equal Strong Extreme Strong Extreme
Outcome weights are consistent with current planning goals
Uses well-established public & private sector market research method (Choice Based Conjoint)
Measures are compared only to other measures within the same “objective”
o Each question presents two hypothetical projects defined along a set of measures
o Decision-maker selects the preferred project
Allows us to evaluate both quantitative and qualitative measures
Example: Sustainable Environment Measures
Measure Project 1 Project 2
Water & habitat protection/ Environment
Infill/Brownfield Avoids habitat fragmentation Avoids impacts to water quality and wetlands
Greenfield Does not avoid habitat fragmentation Does not avoid impacts to water quality and wetlands
Air quality improvements
40% Reduction in Total Emissions 30% Reduction in GHG
40% Reduction in Total Emissions 30% Reduction in GHG
Overall energy use Reduction of 30% in fuel consumption
No reduction in fuel use
Which of the following projects would you prefer?
The contribution of each measure to the overall benefit score can be estimated based on
the projects included. Each new set of projects will affect this contribution.
Objective Measure Percent Contribution by Objective
Percent Contribution by Measure
Prosperous Economy
45%
Fostering Economic Growth (thousands $)
86% 39%
Benefits to Freight Employment (thousand $)
14% 6%
Community Character
55%
Center Mobility and Access (0-6 score)
44% 24%
Bicycle and Pedestrian Trips (thousand daily)
23% 13%
Injury and Fatality Reduction (thousand annual)
33% 18%
Overall Measure Importance
Weights were measured as a percent importance for each outcome
Measures were calculated given the set of projects being considered
Mode Choice (16%)
Improved Modal Connections (9%)
Passenger Vehicle VMT (34%)
Travel Time Savings (20%)
Reliability Benefits (21%)
Center Mobility and Access (32%)
Regional Geographies (21%)
Bicycle and Pedestrian Trips (32%)
Safety Improvements (15%)
Fostering Economic Growth (32%)
Benefits to Trucks (68%)
Special-Needs Accessibility (44%)
Benefits to EJ Populations (56%)
Water and Habitat Protection (38%)
Energy Use (34%)
Greenhouse Gas Emissions (27%)
Criteria Pollutant Emissions (1%)
0% 5% 10% 15%
Measures (% Importance within an Outcome) Measures - % Importance for all Outcomes
Project prioritization represents decision-makers objectives and the importance of each individual measure
Measures can be combined and evaluated
Cost can be included in the process explicitly or as part of a programing step
Final results are objective and supported by statistical analysis
Process is transparent, replicable and project sponsors can review and understand the details
However…
This is pretty, but what does it mean?
Project Net Benefit Ranking
Benefit/Cost Ranking
Score/Cost Ranking
Dot Scoring Ranking
Highway Widening 3 3 4 6
Passenger Ferry 2 1 2 3
Light Rail Extension 8 8 8 1
Peak Shoulder 4 4 3 5
Arterial Widening 6 2 1 7
Interstate Widening 1 6 7 8
Vanpool Expansion 7 7 6 4
Bus Rapid Transit 8 8 5 2
Alternate BCA Decision Rules AHP with Added Measures Judgment-Based
4. Making Sense of a Complex Problem
Do alternate decisions rules invert the preference rankings?
Are some decision rules just wrong?
How sensitive are the results to measurement “error”?
Wasn’t all this supposed to simplify the problem of having to integrate across contradictory or inconsistent measures?
Where does this go wrong?
Nesting “Measures” within “Objectives” is hard
o Reasonable theory
o In practice, too many things to keep track of
o Allows lack of discipline in the design process Is it an Objective or Measure?
Did we collapse things together when possible?
o Messy in the implementation The importance of measures is conditioned by the importance
of the objectives…?
“Do I even remember how I answered the last set of questions”?
Result - does not necessarily respect scale of Measures across Objective categories
Ideas behind a participatory weighting process
o Reveled preferences minimize gamesmanship
o Decision-makers make tradeoffs
o The math doesn’t lie - replicability
o Developing policy weights is independent from selecting projects
Ideas behind modeling performance
o The real world is complicated and models do a better job of keeping track of some kinds of complexity than the brain
o Models are a simplification of the real world – believe it or not this is an advantage
o The math doesn’t lie - replicability
Transparency is about whether you can write things down on a piece of paper
Models provide information; humans provide judgment
Some things are harder to measure than others
o Some things have values assigned through free exchange in a market, other things don’t
o Market distortions can make these prices less useful
o Little practical opportunity for social experimentation
o Tools for measurement typically lag behind the most recent focus of policy
…too often this becomes an argument for not trying to measure things objectively
Keep objectives to a minimum (just those you need) – mutually exclusive please…
Retain benefit cost accounting principles
o Perform comprehensive user benefit analysis
o Collapse other monetizable factors into an integrated measure of social utility
o Weigh non-monetizable objectives against one or more elements of the integrated measure of social utility
o Address temporal nature of benefits and costs
Present as information…
Allow complexities of network analysis and system feedbacks to be handled by models – its what they are good at
o Don’t ask models to substitute for judgment
o Don’t ask people to substitute for models
Aside from efficiency, most other objectives are distributional in nature
o Distributional questions require judgment, and probably a moral philosophy.
o Accounting can help keep things in order. But that’s about all.
Not without…
o the “right” measurements
o a more complete accounting system
o a commitment to appropriately treat complexity and uncertainty
o a moral philosophy
Matthew Kitchen Puget Sound Regional Council
&
Terry Moore, FAICP
ECONorthwest