Economists vs Engineers debate: Who has the better ideas for NSW infrastructure?

Speech delivered at a comedy debate in the NSW state parliament (Sydney), 1 September 2011

Ladies and gentlemen,

My colleagues and I are here tonight to convince you that when it comes to infrastructure you should shun engineers and listen to economists instead.

For a moment, however, I was wondering whether I should jump ship and join the other team.

I know, I hide it really well and you certainly wouldn’t have guessed it from my accent, but I am German.

If I had to choose between famous German engineers and German economists, I would know which side to pick. I’d prefer Daimler and Benz over Marx and Engels any day.

Economists rarely enjoy good press these days. And there is of course no lack of economists jokes, either. My favourite: “Why did the economist cross the road? Because it was the chicken’s day off.”

But economists like us are not just funny people. We actually have a lot to say. And unlike politicians and engineers, economists don’t engage in daydreaming. We don’t do free lunches.

Because we are the dirty realists of the social sciences. And that’s why our advice matters in infrastructure policy.

My colleagues and I are contending tonight that the best engineering solutions make for the worst political nightmares: For a dose of realism in infrastructure, you’ll need an economist.

In a few moments you will hear from Dr Richard Tooth who is a specialist infrastructure economist with first-hand knowledge of NSW infrastructure challenges. Richard will tell us why economists are better at dealing with our water infrastructure – and why Sydney’s water woes have been made worse by gold-plated engineering.

And later we’ll hear from Justin Di Lollo. Justin is a prominent lobbyist and government relations adviser on infrastructure who’s worked in and around most NSW infrastructure projects over the last decade. Nobody is better placed to explain what happens when you ignore economic advice and give in to politicians and engineers instead.

So why should you ask economists and not engineers and politicians?

Because economists can tell you something that others don’t see. Economists can point out whether the high-flying plans for your next road, your next bridge or your next airport will be worth it. Or whether you should rather dedicate your time and money to other projects.

An engineer cannot tell you that, and a politician will only pretend that he can.

Generally speaking, you do not have to listen to economists when they are trying to do the engineers’ job.

… and you should not listen to engineers trying to do the economists’ job.

… and you certainly cannot trust politicians pretending they could do either.

Economists cannot build roads, bridges or airports. That’s not our job and we are happy to leave this to the engineers.

But without us economists the engineers would not know whether their infrastructure projects are in the right place, whether they are really needed, and whether they actually deliver enough bang for your buck.

To give you an extreme example: If you want to transport electricity over long distances you need a good conductor. As it turns out, silver would be perfect because of all metals it has the least resistivity and the highest conductivity. In these respects, silver is much better than copper, aluminium, steel or even gold.

If you were planning the next extension of the grid, an engineer could advise that this time you should really go for silver. From an engineering perspective, it’s just so much better than all the other materials we have used in the past.

And if you find a politician who is gullible enough, he will settle for this answer. He may even proclaim that he is now “Building the Electricity Revolution”.

But in comes the economist. Before any taxpayer funds are wasted, he can point out that not every technical solution also makes economic sense.

Now you may say that no politician or engineer would be so silly to use expensive silver for overhead power lines. On the other hand, I would not want to take any bets on this.

There are enough case studies where the waste from over-engineering simple infrastructure tasks is perhaps less visible but still substantial.

Just think of the classic example San Francisco’s Golden Gate Bridge that is four times stronger than it really needs to be, even for earthquake prone California.

Or closer to home, ask yourself whether Sydney’s new Iron Cove Bridge, which incidentally cost $175 million, really delivers anything remotely resembling value for money.

I said it before and I say it again: The best engineering solutions make for the worst political nightmares: For a dose of realism in infrastructure, you’ll need an economist.

Thank you.

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