Maintained Hypotheses and Questions in Search of Answers

1. INTRODUCTION: FROM A PARTIAL TOWARDS A MORE GLOBAL ANALYSIS A partial analysis carried out at the margin. Traditional project analysis is built on demand modeling and the derivation of consumer surplus assumed to correctly account for social surplus if the rest of the economy functions optimally. In the case of large projects, this partial analysis, limited to the transport market, becomes insufficient to capture their consequences due to numerous sources of non-optimality. This economic analysis in fact assumes that the projects build at the margin. Limited to demand analysis, it focuses on the mode and itinerary choice stages. It deals somewhat cursively with the generation and distribution stages, often reduced to the constancy of the origin-destination matrix and concerned primarily with home-based work trips. The equivalence of consumer and social surpluses. In terms of appraisal, excepting accounting for externalities, the core of the analysis is the estimation of consumer surplus. The latter is a correct sum of transformations to the economy attributable to the project if and only if the rest of the economy is at an optimum, an hypothesis never holding strictly but positively failing in the case of large urban projects. The specifics of large urban projects. First and foremost, the non marginal nature of large urban projects realistically implies the existence of induced demand, making the assumption of the constancy of the origin-destination matrix untenable, even in the short term. Moreover, such projects imply in the middle term relocations and transformations of urban structures (Thisse, 2011). Such transformations occur very differently from expectations of perfect competition and pricing, to say nothing of the optimal management of public goods. For instance, housing markets are notoriously imperfect, with large sections determined by the redistributive preferences of public authorities. In M. Gaudry and E. Quinet — Discussion Paper 2011-29 — © OECD/ITF 2011 5 MAINTAINED HYPOTHESES AND QUESTIONS IN SEARCH OF ANSWERS addition, some positive externalities are generated in urban areas alongside the traditional negative ones: agglomeration effects bias the traditional calculus. It is also the case that large projects have a probably longer life than small ones, if only due to their greater resistance to random shocks1. Taking the distant future into account adds to these difficulties because it requires more a prospective analysis than a forecast, however well reasoned out, of current trends. In these conditions, partial analysis cannot account for the consequences of the project and traditional cost-benefit analysis breaks down (DfT, 2008). It should be added that the specifics of the decision process also have their role. It involves ― even more that for intercity projects ― numerous parties among whom the decision is collective and combines mutually agreed and random components: users, associations, pressure groups, public authorities. Governance is itself fragmented with diverging components largely configured by the institutional framework2. Under these conditions, the principles of economic appraisal have to be reconsidered, In terms of positive knowledge, demand modeling has to be reviewed and the links between transport and the economy made explicit, a job avoided when the optimality of the economy could be assumed as an approximation. At the normative level of decision making, cost-benefit analysis has to be adapted to the specifics of the decision process. To develop an analysis of the effects of the project on the economy, it is necessary to solve at least the problems listed in this kick-off document, making sure to exercise due care with respect to the specific characteristics of the “Grand Paris Express” (GPE) automatic metro. We successively discuss demand modeling, the effects on urban structure and modifications required of traditional appraisal methods.