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By Andrew Herington

In its opening submission the LMA made great play of a book by American writer Edward Glaeser called Triumph of the City. It was also the main reference used by their Expert Witness on economics, Marianne Stoettrup, who argued the East West toll road will be “city shaping”.

The book tries to popularise economics; its main thesis is about the “agglomeration benefits”  that create cities. People group together to share facilities and businesses grow by forming clusters with similar business (think heavy industry in Dandenong, car industry in Geelong, biotechnology in Parkville etc).

The LMA was so pleased with the book they handed out a copy to every panel member. The EastWest Blog got our copy from the remainders table at Readings.

The only problem is the LMA don’t seem to have read the book because it does not argue that freeways are the path to agglomerations – in fact quite the opposite.  Glaeser warns that driving creates negative externalities that hamper urban economies (see page 104).

While Glaeser provides a sympathetic account of why the economics of car-centric suburbs is appealing to institutions, his text cautions against people leaving cities through public policy focused on highway building.  For example

“But I can fault a system that stacks the deck against cities and creates artificial inducements to leave urban areas.”   Page 264

“But sprawl of the sort that Houston embodies has been encouraged by mistaken public policies.”     Page 196

“We’re using our infrastructure money more to make rural America accessible than to speed the flows of people within dense urban areas.”  Page 266

Glaeser warns against highway building calling it “anti urban”.  For example –

“For decades, we’ve tried to solve the problem of too many cars on too few lanes by building more roads, but each new highway or bridge then attracts more traffic.” Page 104

“The government should not be in the business of enforcing lifestyles that we happen to find appealing….Yet today public policies strongly encourage people, including me, to sprawl.” Page 167

“We need to build in ways that make increasingly crowded cities more functional.” Page 266

“As a matter of public policy, I remain sceptical of the $15billion Big Deal (highway project), but I’d be foolish not to use it…” Page  194

This episode would be funny, if it were not so typical of a lot of the evidence that the LMA has been presenting: appearing authoritative but poorly researched and often relying on misquoted or misrepresented facts and figures.

The reason they are trying to sell the idea of “agglomeration benefits” is they know what is in the secret business case. The argument for the East West Link on traditional transport cost benefit grounds is weak. In answer to a Senate Committee, former Infrastructure Australia head Dr Michael Deegan confirmed East west Link will only return 80 cents in economic benefits and time savings for every dollar invested.

The normal benchmark for a project to be viable is a return of at least $1.50.

The business case adds somewhat spurious “wider economic benefits” based on indirect savings alleged through “agglomeration benefits” and such things as time savings for trams travelling north south (which are nonexistent).

We also know from the email recently obtained through FOI that their own economic consultant, Chris Tehan of Evans and Peck, told the Government 12 months ago that the business case had dramatically overestimated the “wider economic benefits” to get an artificial figure of $1.40 return.

It is not surprising that the government has grimly held onto the business case and resisted all efforts to release it.


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One Comment on “TRIUMPH OF THE CITY?”

  1. Anne Newton March 11, 2014 at 8:24 am #

    How do we get the Assessment Committee to read that?

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