In “The hidden costs of cost-benefit analysis” (Life & Arts, FT Weekend, October 9) Tim Harford asserts that costs always overrun. He overlooks that the opposite has often been true for programmes supporting emerging technologies, including their deployment.
Many economists lambasted German support for solar photovoltaics as “one of the most expensive ways [to cut emissions] known (The Economist, 2014). Yet given those investments, in just a few years it became “the cheapest electricity in history” (International Energy Agency, 2020), confounding all forecasts. Policies promoting energy-efficient lighting at scale also yielded huge cost reductions.
The UK’s offshore wind energy programme was castigated by many economists for its costs, which have likewise tumbled — indeed with rising gas prices, the most recent fixed-price “contracts-for-difference” are paying millions back to the taxpayer.
These are not accidents. There is well-documented evidence that such strategic investment in replicable technologies, which offer economies of scale and iterative learning, have yielded systematic cost reductions often way beyond those generally predicted.
Stripped of the pretence that we can ever forecast accurately, cost-benefit would be better recast in terms of risks and opportunities. It could then embody what we already know about the kinds of projects and programmes where risks exceed the likely opportunities — and those which offer the opposite.
Michael Grubb
Professor of Energy and Climate Change
Deputy Director, Institute for Sustainable Resources, University College, London London WC1, UK
Letter: Cost-benefit analysis is better recast as risks and opportunities
Pinoy Variant