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The goal should be to hit the optimum net benefit. For an example of this, see this paper on WMATA and Figure 5 on page 19. It shows that if WMATA provided more service and lost more money it would provide more net benefit.

It doesn't show any such thing. The net benefit would increase only if capital costs are ignored. Capital costs are real costs. You can't ignore them.

And why should the goal be "optimum net benefit," anyway? The word "optimum" here is used to refer to an aggregate economic effect, ignoring the distribution of costs and benefits. Warren Buffett could probably generate a higher economic return on $100 than you could. Does that mean it would be right to take $100 of your money and give it Warren Buffett?

by Bertie on Jan 7, 2012 8:42 pm • link • report

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