Finance, Welfare and OEI: an Appraisal of Appraisals

Within financial economics, valuation is the practice of valuing entities – securities, projects, firms – generating cashflows that accrue to its owner(s). By contrast, public projects or entities, such as transport infrastructure, are evaluated based on public welfare accruing to society as a whole. The field of transport economics is in part concerned with valuing costs and benefits in lieu of cashflows. We find, however, that public cost-benefit analysis and private valuation share many methodological similarities in how these items are aggregated and adjusted for time and risk. In this paper, forays are made into private (financial) valuation and public appraisal of transport infrastructure projects, through study of both bodies of research. Subsequently, a survey is made of the standing practice of transport project appraisal by examination of the OEI Leidraad, which is then compared with best practices from both fields of theory. We conclude by identifying ‘best practices’ from both fields that may serve to improve accuracy of infrastructure appraisal in The Netherlands.