This report comprises two separate but related reports. The first identifies three systematic failures with respect to infrastructure decisions. The second report elaborates on possible explanations to the fact that many investment projects with a negative social rate of return are implemented. The first report was commissioned by the Swedish Fiscal Policy Council and is that the price charged for using roads and railways is too low. The second failure concerns the large number of investments which are undertaken in spite of not delivering a social net value. And a third problem is that there is no tradition and indeed no possibilities to compare the outcome of projects and maintenance activities to the ex ante budgets and predictions. Four policy suggestions are formulated. The first is that the responsibility for undertaking ex ante cost benefit analyses of investments and maintenance strategies is switched form the agency in charge of these activities to a central agency or to a ministry. The second proposal is to mandate an external review of all “large” projects before they may be initiated. Third, the results of all Cost Benefit Analyses of policy proposals shall be made available to the public in order to enhance transparency. And the fourth suggestion is that all agencies tendering investment and maintenance on a commercial basis shall be obliged to report the ex ante and ex post figures with respect to costs in their annual reports. The second report, commissioned by the Expert Group for Public Economics under the Finance Ministry, summarizes these observations. It thereafter elaborates on possible explanations to the fact that many investment projects with a negative social rate of return are implemented. One aspect is given by the nature of infrastructure as being a public good, and the implications of this for decision making. A second dimension is provided by the way in which responsibility for infrastructure, in particular roads, is separated between Sweden’s local, regional and national tiers of the public sector. And a third aspect is provided by what has come to be known as political economy. This line of thought makes the thinking and objectives of the decision makers themselves part of the overall process to understand the decisions made relative to transport infrastructure. (Author/publisher)
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