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Association for Public Policy Analysis and Management

Costs and Benefits through Bureaucratic Lenses: Example of a Highway Project


Author(s): Anthony Boardman, Aidan Vining, W. G. Waters and II
Source: Journal of Policy Analysis and Management, Vol. 12, No. 3 (Summer, 1993), pp.
532-555
Published by: Wiley on behalf of Association for Public Policy Analysis and Management
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Costs and Benefits
through
Bureaucratic Anthony Boardman
Aidan Vining
Lenses: Example W. G. Waters, H
of a Highway
Project

Abstract

This article characterizes the perceptions of government bureaucrats about


cost-benefit analysis (CBA). The observations arise after working with govern-
ment officials on various projects and leading many executive seminars for
government employees over the last decade on the principles and practice of
CBA. Government employees tend to adopt one of three conceptual lenses:
Guardians, Spenders, and Analysts. These perspectives differ sharply from one
another, resulting in completely different meanings to the words benefits and
costs. The orientation of Guardians is to "revenue-expenditure" analysis,
while Spenders are oriented to "constituency-support" analysis. Analysts are
oriented to standard CBA. The differences in perspectives are illustrated using
an ex ante CBA of a proposed toll highway project.

INTRODUCTION

This article identifies three distinct bureaucratic perspectives (lenses) and


analyzes the relationship between these lenses and cost-benefit analysis
(CBA). The characterizations are based on our experience working with gov-
ernment and in leading executive seminars for government bureaucrats.'
Most of these bureaucrats have an inaccurate sense of what CBA actually
consists of. This is perhaps not surprising given that they have enrolled in
an executive program on CBA. What has been surprising, at least to us, is
that they have a strong ex ante sense of what they think CBA is about and,
specifically, about how to interpret the meaning of benefits and costs. This
has implications beyond academic interest.
We find that bureaucrats' perceptions of what constitutes benefits and costs
appear to be based primarily on their bureaucratic role; specifically, whether

1 The audience typically consists of middle to lower-senior level public sector employees-mostly
from Canadian provincial and federal governments, but also from municipal governments, crown
corporations (state-owned enterprises), and nonprofit organizations.

Journal of Policy Analysis and Management, Vol. 12, No. 3, 532-555 (1993)
C 1993 by the Association for Public Policy Analysis and Management
Published by John Wiley & Sons, Inc. CCC 0276-8739/93/030532-24

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Costs and Benefits through Bureaucratic Lenses / 533

they are Analysts, Spenders, or Guardians.2 These labels are indicative of the
perspective they bring to project evaluation in government. The Analysts'
perspective can be represented by standard CBA. Guardians and Spenders
have quite different lenses, which violate the microeconomic principles em-
bodied in CBA.
These differences in perspective have been most clearly revealed to us by
discussions and analysis in the seminar of a toll highway project that most
of the participants are familiar with. In this article we use a CBA of the
highway [Waters and Meyers, 1987] as the focal point for our characteriza-
tions, but also draw upon a CBA of Expo 86 [Blackorby et al., 1986] and other
examples.
The major point of this article is that bureaucratic role has a strong influ-
ence on what government employees think CBA is, and should be, about.
Most bureaucrats have not taken and will not take formal courses in CBA
analysis; therefore, they will go on believing that what they think is CBA
CBA. Even for those who have learned standard CBA, their views may change
toward those of Guardians or Spenders as a consequence of their daily bureau-
cratic roles and with time since their training. Their perceptions have im
portant impacts on policy outcomes.
Appreciation of these different perspectives leads to better understandi
of the "games" played by different bureaucrats-and where the othe
"players" are coming from. Furthermore, our analysis should help bureau
crats understand what are legitimate costs and benefits in a CBA, thus giving
Spenders confidence that Guardians will be less likely "to pull the wool ov
their eyes," and vice versa. More important, resultant policy outcomes ar
likely to be more consistent with the criterion of economic efficiency th
they would otherwise be.

RELATED LITERATURE: POLITICIANS AND BUREAUCRATS

In formalizing our characterizations we draw upon two literatures; one co


cerns the strategic use of CBA by politicians, another concerns the distin
roles of bureaucrats. Scholars have long recognized that politicians may u
CBA differently than economists [Nelson, 1987]. As Aaron Wildavsky [196
p. 298] put it, "because the cost-benefit formula does not always jibe wi
political realities-that is, it omits political costs and benefits-we can expe
it to be twisted out of shape from time to time." Robert Behn [1981] discusse
the difference between policy analysts and policy politicians in some deta
Analysts focus on allocative efficiency; some also care about equity, but te
to prefer to achieve this objective through more direct means, such as
negative income tax. In contrast, politicians focus on the distribution o
benefits and costs; primarily the importance of concentrated "benefits" a
dispersed "costs," thus biasing policy outcomes toward inefficient pork-barrel
projects.3 The distinction between analysts and politicians is useful becau
it explains why CBA studies are often disregarded or manipulated by pol

2 This terminology was introduced by Borins and Good [1989].


For models or empirical analyses pertaining to pork-barrel politics see, for example, Munro
[1975]; McFadden [1975, 1976]; Kau and Rubin [1979], Weingast, Shepsle, and Johnsen [198
Weingast and Moran [1983]; Gist and Hill [1984]; Shepsle and Weingast [1984]; Bender [198
Hartle [1989]; and Hird [1990].

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534 / Costs and Benefits through Bureaucratic Lenses

cymakers and helps analysts understand the perspectives and concerns of


politicians.
The other literature we draw upon focuses on the importance of the goals
and roles of bureaucrats. Economists, such as Bill Niskanen [1971], have
emphasized the importance of distinct bureaucratic utility functions, al-
though they have tended to ignore differences among bureaucrats.4 In con-
trast, political scientists, such as Philip Selznick [1949] and Graham Allison
[1971], have focused on these differences. For example, Arnold Metsner [1976]
has distinguished among three bureaucratic types: technicians, entrepre-
neurs, and politicians. Patrick Dunleavy [1992] argues that there is consider-
able variation among bureaucrats concerning goals; senior bureaucrats, for
example, are likely to be more interested in "budget shaping" than other
bureaucrats.
Most Analysts we observe are similar to Allison's and Behn's policy analysts
and Meltsner's technicians. These Analysts are primarily concerned with
allocative efficiency and perform CBA correctly. Guardians tend to have a
controllership orientation. Their natural tendency is to equate benefits with
revenue inflows and costs with revenue outflows-"revenue-expenditure"
analysis. Spenders are oriented toward their "constituents." They have a
natural tendency to regard expenditures on constituents as benefits, and
expenditures by constituents as costs-"constituency-support" analysis.
While Spenders share some similarities with politicians, there are major
differences, including a quite different interpretation of "constituents." Natu-
rally, our three perspectives are archetypes. As we will show in specific in-
stances, individual bureaucrats may have characteristics of more than one
type.
The contribution of this article is to draw on the literature on politicians
and bureaucrats to elucidate how bureaucrats with different perspectives use
and interpret CBA, and to illustrate the differences with a specific example.5
The extant literature has not explicitly addressed this issue. Nonetheless,
analysts, unlike most economists, are not virgins. In-house public policy
analysts, especially, understand the necessity of acknowledging the goals of
politicians and the realities of bureaucratic life [Nelson, 1987]. Thus, in addi-
tion to standard CBA, one finds cost-effectiveness analysis; "constrained
CBA," where efficiency is subject to revenue-expenditure constraints; "distri-
butional CBA," where one is concerned about the distribution of costs and
benefits,6 as well as "multi-goal analysis," which usually includes some nod
to allocative efficiency.7 Lee Friedman [1977], for example, examined the
supported work experiment from the standard CBA perspective and various
distributional perspectives: taxpayers, a governmental agency (welfare de-
partment), and the participants.

4 See also Migue and Belanger [1974], Lindsay [1976], Breton and Wintrobe [1982], and Mueller
[1989] on public bureaucrats. More generally, on managerial principal-agent problems, see
Williamson [1964], Leibenstein [1966], Baumol [1967], and Marris [1974].
s There is also a related literature on the practical use and applicability of social science research.
See, for example, Boardman and Horowitz [1978, p. 364] who distinguish between researchers
and practitioners who "face different constraints and different objectives and, in short, operate
within different frameworks and use different models."
6 For a clear example of distributional CBA see Long, Mallar, and Thornton [1981].
7 See Weimer and Vining [1992] for an extensive discussion of these variations.

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Costs and Benefits through Bureaucratic Lenses / 535

There are a variety of explanations for the differences among bureaucrats,


including "political pull," training and other personal aptitudes and charac-
teristics, rent-seeking, responsibility, and organizational culture. As Herbert
Kaufman [1981, p. 194] noted, "[bureaucrats'] roles and values are shaped by
the organizational situation in which they are immersed." Similarly, Patrick
Dunleavy [1992] emphasizes role and level as differentiating causes. While
the why is not the primary focus of this article, we draw upon this literature
both to characterize our bureaucratic lenses and to offer some thoughts about
the incentives and mindsets of bureaucrats that lead to the formation of
distinct lenses.
We should emphasize that our interpretations of the lenses and the whys,
but especially the whys, are based partially on relatively inchoate "gut-feel-
ings" expressed to us by bureaucrats over more than a decade of seminars and
other contacts. We have melded these interpretations with the appropriate
literature. The result, we believe, is a more sharply and comprehensively
defined representation of how bureaucrats with different perspectives classify
costs and benefits.
This article is organized as follows: We next briefly describe the Coquihalla
highway project to provide some contextual background. We then discuss
Analysts and summarize an ex ante CBA of the Coquihalla highway [Waters
and Meyers, 1987]. This serves as a benchmark for comparison with Guard-
ians and Spenders. We then describe Guardians and Spenders, and illustrate
how they treat benefits and costs of the highway project in quite different
ways. We also consider how bureaucrats from each perspective would treat
issues that might be important in other CBAs but which are not illustrated
specifically by the Coquihalla CBA. For example, we describe how bureaucrats
with different perspectives view multipliers, interest rates, sunk costs, and
asset-specific investments. Although we begin with a specific illustration, we
offer a full characterization of how the different bureaucratic perspectives
pertain to CBA, which has wide applicability.

THE COQUIHALLA HIGHWAY PROJECT

For illustrative purposes we utilize an ex ante CBA of the Coquihalla highway


project. In fact the highway went ahead, with tolls. It was constructed in
three phases. Phase I, which connects Hope to Merritt, was completed in
early 1986. Phase II, connecting Merritt and Kamloops, was completed in
September 1987. Phase III, which connects eastward toward Kelowna and
the Okanagan area, was completed in October 1990. In this article we focus
on the first two phases only, denoted by the single dashed line in Figure 1.
These two phases involved the construction of 189 kilometers of four-lane
divided highway through the Cascade Mountains in southeastern British
Columbia. The alternate routes are generally two-lane highways with occa-
sional passing lanes. Thus, the new highway saves considerable time for
travelers destined for holiday resort areas in the Okanagen and points north,
and for those traveling on the Trans-Canada Highway to or from Vancouver
on the Pacific Ocean.
Waters and Meyers [1987] present an ex ante study: It was conducted prior
to completion of phase I of the highway and was based on the best estimates
at that time. As it turned out, there were major cost overruns so that an ex
post analysis would obtain quite different net benefit estimates. These cost
overruns caused a political scandal and gave rise to a Commission of Inquiry,
chaired by Douglas MacKay [1987].

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536 / Costs and Benefits through Bureaucratic Lenses

Cariboo to Jasper,
and NorNh Edmonton

97

East

Cache Kamloops
North Creek I almon
97-5 Trans-Canada
1 P Phase II I
I

MerrVerno

9 PhasIII
Phase Phase ,Kelow

B lSu rland
N.Van. P Prin tn Penticton
ope 3

10 Va3 r 9 - Canada so o

Be I iU.S.A.
Bellingham

Figure 1. Map of Coquihalla highway and nearby routes.

We should emphasize that this article is not intended to describe how this
specific CBA analysis became twisted out of shape. Indeed, there was no
Provincial CBA of the Coquihalla highway project. The Waters and Meyers
study was conducted independently. We use this example to demonstrate
how Guardians and Spenders typically treat benefits and costs when pre-
sented with a CBA, and how this differs from an Analyst's perspective.

ANALYSTS AND THE COQUIHALLA CBA

This section presents the Analysts' perspective. Since the approach is well
known, we do not discuss it at length.8 But it is worth describing briefly some

8 For simplicity we will act as if all Analysts are advocates of economic efficiency. In fact, this
is an oversimplification. There are some policy analysts who have some general conception and
concern for "the greater good," but do not have a coherent tool kit. Only a subset of social
scientists have immediate sympathy for, and receptivity to, proper CBA techniques. Analysts
with humanities, planning, or social work backgrounds, for example, tend to align themselves
with Spenders, while those with business school background have a tendency to approach policy
alternatives from a revenue-expenditure perspective.

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Costs and Benefits through Bureaucratic Lenses / 537

Table 1. Coquihalla highway from a provincial Analyst's perspective ($ 1986


Million).
No tolls With tolls

A B C D
Global Provincial Global Provincial
perspective perspective perspective perspective

Project benefits:
Coquihalla traffic 389.8 29.3 290.4 217.8
Terminal value 53.3 53.3 53.3 53.3
Safety benefits 36.0 27.0 25.2 18.8
Traffic decongestion 14.6 10.9 9.4 7.1
Toll revenues - - - 37.4
Generated traffic 0.8 0.6 0.3 0.2

Total benefits 494.5 384.1 378.6 334.7

Project costs:
Construction 338.1 338.1 338.1 338.1
Maintenance 7.6 7.6 7.6 7.6
Toll collection - - 8.4 8.4
Toll booth construction - - 0.3 0.3

Total costs 345.7 345.7 354.4 354.4

Net social benefits 148.8 38.4 24.2 - 19.7

characteristics of Analysts. Analysts ca


or sprinkled through departments and
either Guardian or Spender. In British
small population, the former types are r
alone policy shops.
Analysts tend to have staff rather than
and more junior. Some exhibit "cognit
texts [Baum, 1980]. Over time as Analy
ment, thus taking on line responsibilitie
or Spenders according to the culture o
Kaufman [1981] and Dunleavy [1992].9
is hard to establish. The observed beha
the desire of the organization to reprodu
"right" lens are hired and/or promote
We use the standard CBA framework to
which is summarized in Table 1. In th

9 Our observations that old analysts tend to fa


jurisdictions there tend to be "policy pyramides
without changing their stripes. It should be no
these "organizations" may be less permanent t
Canada recently announced the abolition of the
on policy shops see, for example, Pugliaresi an

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538 / Costs and Benefits through Bureaucratic Lenses

few externalities and secondary impacts were explicitly included. Also, there
was no explicit consideration of environmental impacts, although some ex-
penditures to minimize environmental impacts were included in construction
costs. Leaving these impacts implicit at this point simplifies the CBA and
allows us to focus more quickly on the bureaucratic lens issues.
Two alternatives were analyzed-the highway with tolls and without. The
toll alternative assumed a toll charge of $8.00 for cars and $40.00 (maximum)
for trucks. Additionally, the alternatives were evaluated from two different
perspectives (or standing) [Whittingdon and MacCrae, 1986]. The global per-
spective included benefits and costs accruing to both residents of the province
and nonresident travelers, while the provincial perspective considered only
benefits and costs accruing to provincial residents. While these two different
regional perspectives technically are not alternatives, they can usefully be
treated as such for the purposes of this article. Therefore, we consider four
alternative projects, labeled A, B, C, and D. Table 1 summarizes the benefits
and costs in millions of 1986 dollars, utilizing a 7.5 percent real discount
rate for each of these four alternatives, relative to no project at all (the status
quo).
Several features of Table 1 are worth highlighting briefly. First, global net
social benefits are greater than provincial net social benefits because their
costs are the same but more people benefit under the global perspective.
Second, imposition of tolls decreases estimated net social benefits. Indeed,
from a provincial perspective, imposition of tolls generates a project with
negative net benefits (column D). The major reason for the finding of lower
net benefits is that tolls reduce demand for the highway, which reduces the
value of most of the benefits (time saved, the value of safety benefits, and the
value of decongestion on alternative highways).l0 Also, of course, toll booth
construction and collection raises costs. Third, toll revenues from out-of-
province residents count toward (gross) benefits only in column D. From a
global perspective, all toll revenues are merely transfers. Thus, the table
nicely illustrates the interaction between "standing" issues and transfer is-
sues. As we will see, bureaucrats are intensely aware of these issues, but see
them variously through their own particular "bureaucratic lens."

GUARDIANS

Guardians can be found in three places: in agencies such as Treasury Board


and Finance, in state-owned enterprises, and in controllership or accounting
functions within line agencies. They all tend to have a bottom-line budgetary
and controllership orientation. Their natural tendency is to equate benefits
with revenue inflows to their agency or other governmental coffers, and costs
with revenue outflows from their spending agency or other governmental
coffers.11 Thus, they engage in"revenue-expenditure" analysis. A major rea-
son, as Thompson and Jones [1986, p. 563] point out, is "controllers are
rewarded for their success in matching revenues and outlays." Guardians

10 It is perhaps important to point out that congestion was not anticipated for many years. Of
course, if congestion were a problem, tolls could raise aggregate social welfare; see Boardman
and Lave [1977] for determination of the optimal congestion toll.
I This characterization of Guardians is similar to Friedman's [1977, p. 168] Welfare Department.

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Costs and Benefits through Bureaucratic Lenses / 539

Table 2. Coquihalla highway from a provincial Guardian's perspective ($ 1986


million).
No tolls With tolls

Revenues ("benefits"):
Revenue from B.C. residents 0 112.1
Revenue from non-B.C. residents 0 37.4

0 149.5

Expenditures ("costs")
Construction, etc. 345.7 354.4

Net revenue-expenditure "benefits" - 345.7 - 204.9

have a natural tendency to regard CBA as naive, impractical


all in their eyes, a tool whereby Spenders can justify whatev
spend.
For Guardians within line agencies, the picture is more complex because
they have dual allegiances. Many are prone to cognitive dissonance (in some
cases with schizophrenic tendencies!); they are most likely to describe them-
selves as being unsure whether they are Guardians, Spenders, or both.
The conceptual lens of "pure" Guardians can be illustrated by the way
they tend to look at the Coquihalla CBA. Table 2 summarizes how a provin-
cially based Guardian would evaluate the no-toll highway alternative (col-
umn B of Table 1) and the corresponding toll alternative (column D of Table
1). To Guardians, all toll revenues are benefits, whether paid by provincial
residents or by nonresidents. Construction costs are a cost, because they are
an outlay by provincial government. Since Guardians seek to minimize net
budgetary expenditures, their preferences, not surprisingly, is for the toll
alternative. Indeed, their gut reaction is to consider raising tolls, irrespective
of the price elasticity of demand or its impact on social benefits.
How does the Guardians' perspective differ from CBA? Most importantly,
Guardians ignore nonfinancial social benefits, in this case $384.1 million for
the no-toll alternative and $297.3 million for the toll alternative. In general,
time saved, lives saved, producer surplus, consumer surplus, option value,
and existence value are ignored by Guardians.12 When Guardians control the
post office, it is easy to understand why one has to wait so long to buy a
stamp and post a letter. Your time or my time is not part of their calculations.
In this particular example, all social costs happen to represent governmen-
tal budgeting costs, so there is no difference between the cost figures in CBA
and for Guardians. However, in other situations there might be considerable
difference between social costs and Guardians' "costs." Since costs to Guard-
ians equal expenditures, they neither set cost equal to opportunity cost nor
include producer surplus as a benefit. One issue that causes much controversy
is the treatment of the cost of labor in job-creating programs. Guardians

12 There is, however, some disagreement over whether existence value should be included in
CBA; see Rosenthal and Nelson [1992], and Kopp [1992].

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540 / Costs and Benefits through Bureaucratic Lenses

consider financial remuneration to labor as the cost, while Analysts would


consider only the opportunity cost.
Another manifestation of this point concerns the treatment of resources,
such as land or buildings, that are currently owned or leased very cheaply
by the government. Guardians tend to treat them as free to government itself
because they do not require additional budgetary outlay. Over the years we
have encountered many examples of this. One version is the argument that
provincial offices are free because the government owns the building. Walter
Hettich [1983] provides another example: He notes that Transport Canada's
CBA of a limited short takeoff and landing air service did not include any
cost for the use of the airport site which it already owned. The former Auditor-
General of Canada, Kenneth Dye, annually identified many instances when
agencies made this type of incorrect assumption.
Where the provincial government owns an asset that someone else (foreign-
ers or provincial residents, but not part of the provincial government) wants
to use, the position of Guardians is usually different. Here Guardians will
want to charge, but they prefer to use average cost rather than opportunity
cost. If, for example, a project draws electricity from a system with vast
excess capacity, Guardians will price electricity to a provincial resident at
average cost or higher, rather than at a much lower marginal cost.13
Guardians ignore costs not borne by the provincial government (e.g., costs
borne by users or by local authorities), whether financial or nonfinancial.
Thus, Guardians ignore the loss suffered by British Columbian residents from
paying tolls. In aggregate, Guardians treat these tolls as a benefit, while in
CBA they would be a transfer. Furthermore, Guardians would tend to ignore
nonfinancial social costs, if there were any, in the same way that they ignore
nonbudgetary social benefits. To them, congestion and pollution are not rele-
vant costs.

However, Guardians are increasingly being forced to recognize th


cuniary costs and benefits are real and must be included somew
reaction is inevitably, "But not in my account!" If pushed, some w
budget-constrained CBA, which incorporates nonpecuniary costs an
but with an explicit budget constraint. This is different from stan
specifically, in budget-constrained CBA large projects with large n
ary benefits will, because of the budget constraint, rarely be chos
Guardians treat subsidies from other governments (e.g., the fede
ment) as a benefit because they reduce provincial expenditures; that
ians ignore issues of transfer substitutability. CBA from the prov
spective often does the same. For example, federal funds for Canad
convention center) are generally treated as a benefit in a pro
[Blackorby et al., 1986]. However, there may be an opportunity cos
federal funds had not been earmarked for Canada Place, the provin
have received monies for other projects. In a provincial CBA,
include as a benefit (or cost) only incremental federal subsidies. If
government has a fixed transfer budget, then none of these funds
treated as a benefit.
In general, Guardians believe markets are efficient. If a "market" price for

13 Some Guardians argue for a price higher than average cost on the grounds that, due to existing
long-term contracts, the distributor can sell some power to foreigners at this price, even though
they cannot sell any more power to the foreigner at that price.

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Costs and Benefits through Bureaucratic Lenses / 541

a good exists, they will want to use it; they resist using shadow prices to
correct for market failures. Also, they tend to under-weight externalities and
secondary impacts.
Finally, Guardians generally want to use a high discount rate. One reason
stems from their distrust of Spenders who, in their view, overestimate
benefits, underestimate costs, and generally use money less efficiently than
the private sector. Guardians know that using a high discount rate will make
it more difficult to justify most projects.'14 A second reason is that they want
to use a financial discount rate. They may not be aware of, or cannot relate
to, the concept of society's marginal rate of time preference. In any case, even
if they could understand this concept, their belief in markets would shift
them immediately to a financial discount rate. Guardians understand the
concepts of the opportunity cost of private investment and believe that at
the margin, government projects crowd out private investment or are funded
by issuing more provincial bonds to foreigners.iS In many jurisdictions,
Guardians set the discount rate. Both the Office of Management and the
Budget in the U.S. and the Treasury Board in Canada prescribe the use of
10% real interest rate for many applications of CBA.'6

SPENDERS

Spenders tend to come from service departments. Some service departments,


such as transportation, may be involved with large physical projects, while
social service departaments, such as health, welfare, or recreation, make
large human capital investments. Some, such as housing, make both types
of expenditures. The views of Spenders are somewhat more variegated than
Guardians because the constituencies of particular agencies are highly varied,
although there are major commonalities. Most important, Spenders have a
natural tendency to regard expenditures on "constituents" as benefits rather
than as costs. Thus, for example, expenditures that generate jobs are regarded
as benefits rather than costs, regardless of opportunity cost. These officials
do not necessarily think of themselves as Spenders, but rather as "builders"
or professional deliverers of government-mandated services. Nonetheless, the
characterization as Spenders fits. As Spenders focus on providing projects
or services to particular groups in society, we characterize their behavior as
constituency-support. Table 3 summarizes how Spenders in the provincial
highways department view the no-tolls and with-tolls alternatives.
Spenders view pecuniary and nonpecuniary benefits received by constit-
uents (residents of British Columbia in this example) as benefits; thus, they
think of both project benefits and project costs as benefits. Similarly, they
view monetary outlays by constituents as costs; for example, they treat tolls
paid by British Columbian residents as costs. With this method of accounting,
both the toll and no-toll highway alternatives generate huge net constituency
benefits. In general, Spenders tend to support any alternative rather than

14 This is because in most projects advocated by Spenders, benefits and costs are reasonably
well matched, or costs occur early and benefits occur late.
15 For support for this position, see Lind [1990].
'6 For U.S. practices, see Lind [1990] and Lyon [1990]. For Canadian practices, see Jenkins [1973]
and Treasury Board, Canada [1976].

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542 / Costs and Benefits through Bureaucratic Lenses

Table 3. Coquihalla highway from a provincial Spender's perspective ($ 1986


million).

No tolls With tolls

Constituency "benefits":
Project costs (from CBA) 345.7 354.4
Project benefits (from CBA) 384.1 334.7
729.8 689.1

Constituency "costs":
Revenue from B.C. residents 112.1

Net constituency "benefits" 729.8 577.0

the (no project) status quo. Thus, the mistrust


perfectly understandable. Guardians and Spend
another.
While tolls paid by British Columbian drivers to the government are trans-
fers from a CBA perspective, they are generally "costs" from a Spender per-
spective. Table 3 shows that the spending department tends to favor the no-
toll road, primarily because a toll involves charging some of their constit-
uents. Indeed, spending departments normally do not favor "user pay," unless
the agency keeps the toll revenue within its own budget envelope or the
payers are nonconstituents.
If Spenders could keep the tolls, they would face a dilemma: Tolls would
reduce constituency benefits, but they would increase the agency's budget.
Generally, Spenders' behavior is consistent with the classic budget-maximiz-
ing bureaucrats of the literature." When part of an agency's budget flows from
clients (i.e., "user fees"), it faces a trade-off between budget-maximization and
constituency-support maximization. Since the agency is obviously dependent
on constituency-support to maximize its budget over the long term-
especially the nonuser fee component of revenue-its Spenders will tend to
forego short-term budget maximization to increase constituency-support.
An important way in which the Spender perspective differs from CBA is
that Spenders treat inputs as the appropriate measure of benefits. Analysts
would either treat the opportunity cost of these resources as a cost or treat
the full expenditure as a cost and the producer surplus as a benefit. This
applies whether the expenditure goes to a firm or to employees. Spenders
treat the total expenditure as a benefit. Thus, Spenders and Analysts would
agree only when opportunity costs were zero.
There are a variety of explanations why Spenders treat the full cost of
inputs as a benefit. Spenders have commonalities with politicians [Behn,
1981]. Although this is not the full story, Spenders propose and implement
projects and policies consistent with the wishes of their political masters,

7 See, for example, Niskanen [1971], and Migue and Belanger [1974]. For various reasons senior
spenders may be more interested in "budget shaping" rather than budget maximizing [see
Dunleavy, 1992]. They may, therefore, be willing to support projects that involve considerable
contracting out and other activities that are not budget maximizing per se.

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Costs and Benefits through Bureaucratic Lenses / 543

and success in these endeavors will lead to career advancement, larger bud-
gets, and all the trappings of the classic career-optimizing model. Thus,
Spenders can be characterized as partially corresponding to a derived constit-
uency-support model-a "pull-through" effect.
In general, as Robert Haveman [1976] and others have pointed out, politi-
cians prefer projects that concentrate benefits on particular interest groups,
and camouflage costs or diffuse them widely over the population. In practice,
politicians and Spenders weight each "impact category" by the strength of
the connection that constituents are expected to make between an impact
and the particular spending department. If the spending agency perceives
that it will receive no credit for expenditure on particular benefits, it will
tend to ignore them.'" Because people almost always notice expenditures on
themselves, such benefits are invariably treated as important and are heavily
weighted.19 Thus, for example, construction jobs are heavily weighted. The
net result is that for many projects, "expenditure benefits" are weighted more
strongly than "social benefits."
However, there are often major differences between the weights politicians
attach to interest groups and how Spenders weigh their constituents. To
politicians, geographic distribution tends to dominate because this is the
basic unit of analysis for elections.20 Thus, for example, Weingast, Shepsle,
and Johnsen [1981, p. 644] do not consider "programs targeted to the mal-
nourished (food stamps), the unhealthy (Medicare), the poor (welfare), the
retired (social security), the injured worker (workmen's compensation), or the
automobile driver (automotive product safety)" in their model of distributive
(pork-barrel) politics. In contrast, a Spender would treat such expenditures
on their constituents as benefits. Recipients of "entitlements" are constituents
of some specific department. Why? Organizational culture appears to matter.
Another, more mundane reason why Spenders and politicians focus on
inputs is because it is easier to identify, quantify (measure), predict, and
monetize (value) inputs than outputs. James Schlesinger [1968, pp. 285-286],
as an analyst, observed that although the orientation of analysis is toward
outputs, "in the real world of political decision it is immensely difficult to
concentrate on outputs rather than inputs." Later, as a Spender, he fell into
the same trap and attempted to justify proposed increases in defense spending
by comparing U.S. input levels with Soviet input levels [see Behn, 1981,
p. 207]. Of course, when outputs are hard to measure, cost-effectiveness analy-
sis is often used.
Spenders treat some inputs as neither benefits nor costs. In particular,
assets that are currently owned by the provincial government are simply
ignored. In support of the Tellico Dam, for example, the Tennessee Valley
Authority (TVA) argued that "since the farm land behind the dam had already
been purchased, the value of this land should be considered a sunk cost, even

18 This is not necessarily true of highway projects, because road users do tend to attribute
improvements in infrastructure to the providing Ministry.
19 Weingast, Shepsle, and Johnsen [1981, p. 648] refer to this phenomenon as the "Robert Moses
effect" after the "famous New Yorker who appreciated it and exploited it so effectively."
20 It is significant in this regard that in British Columbia, the Ministry of Transportation annual
reports show their expenditures by Electoral Districts rather than by projects or programs.
Munro [1975] analyzed highway expenditures among electroal districts and found that politics
is important in explaining the allocation of highway expenditures in British Columbia.

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544 / Costs and Benefits through Bureaucratic Lenses

though the land has yet to be flooded and could be resold as farm land if the
project was not completed" [Behn, 1981,p. 213, n. 27]. In the Coquihalla
highway example, Spenders do not include any cost for the land on which
the highway was built because it is already owned by the provincial govern-
ment and obtaining the land is not seen as part of the current project.21
Spenders treat the cost of assets already owned by the provincial government
and acquired independently of the project under evaluation in a way similar
to Guardians, although their reasons are different.
The foregoing discussion pertains to the use of government-owned assets
for what can reasonably be regarded as an additional, new project. Spenders
treat the cost of these assets as sunk. However, where expenditures have been
made to acquire assets that are an essential part of an ongoing project, they
may be treated quite differently. To Spenders, prior government expenditures
that are directly related to their current project are rarely sunk. Furthermore,
once initiated, Spenders will want to continue a project even though it should
be terminated on allocative efficiency grounds.
There are a number of reasons why Spenders do not treat past expenditures
on an ongoing project as sunk. The most important, direct reason is that
Spenders view such past expenditure as a sunk investment that provided
(and may continue to provide) marginal constituency benefits. For the same
reason, they believe completion of the project is worthwhile. Having made
the decision to proceed with the project in the first place on the grounds that
net constituency benefits are positive, they are unlikely to be deterred by
arguments by Analysts or Guardians about negative marginal financial or
social benefits. Spenders have heard these arguments before and find them
no more applicable when a project is underway than at the beginning when
the decision to proceed was made. In short, from a constituency-support
perspective, further expenditures are investments that will provide marginal
net constituency benefits, like the previous expenditures (investments). This
phenomenon has been demonstrated to us repeatedly in our seminar pro-
grams. Negative ex post information about real economic costs has negligible
impact on the support Spenders manifest for the Coquihalla highway, or
other provincial projects.
Spenders might also want to continue an existing project to satisfy personal
objectives. If their department has been committed to a project, they may
want it to continue because they do not want their department or themselves
personally to lose credibility, even if they believe it is not desirable for their
constituents or society in general.
Another set of reasons is indirect, stemming from the "pull-through" effect
by their politician-masters. There may be strong political support for continu-
ation of a venture even though it may not be justifiable on efficiency grounds.
Politicians do not treat sunk costs as sunk because the political net benefits
of completion are generally positive [Behn 1981, pp. 211-214]. The classic
example is the Tellico Dam in Tennessee where, even though it was 90 percent
completed, the social costs of completion still exceeded the social benefits
[Davis, 1988]. Nonetheless, Congress decided to complete the project. Why?
There are two main reasons. First, politicians may believe that the project
is beneficial in the sense that it is an investment which continues to buy

21 Neither did Waters and Meyers [1987].

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Costs and Benefits through Bureaucratic Lenses / 545

ongoing support. Second, continuation avoids what would otherwise be sig-


nificant marginal costs. In general, unless politicians can put forward some
credible argument to segue around the problem, they would have to admit
they made a mistake. Furthermore, as an added impetus for completion, Ross
and Staw [1986, p. 278] note that "not only may those directly involved with
a project work to maintain it, but other units interdependent or politically
aligned with a threatened project can be expected to provide support."
The immediately preceding discussion focuses on ex post views of "sunk-
ness." Significantly, Spenders have an ex ante view of "sunkness" that leads
them to favor projects that involve large, irreversible, capital-intensive invest-
ments. For example, Spenders tend to favor urban rail systems over buses.
Such projects generally have both site-specific and dedicated asset-specific
characteristics [Williamson, 1983].22 Once in place, these assets cannot be
easily redeployed to other uses or markets. At the same time the lower mar-
ginal costs normally associated with such projects allow for lower prices. In
turn this fosters relatively high usage levels, which provide increased poli-
ticial support. As we discussed above, these characteristics mean that such
projects cannot easily be reversed. Thus, people responsible for managing
the project are more secure in their jobs.23 For Spenders, larger "sunk" invest-
ments are preferable to smaller "sunk" investments.
The view of Spenders concerning market efficiency has a bearing on the
way they view many aspects in CBA. To Spenders, markets are almost always
inefficient.24 We have found that this point is manifested most often in the
analysis of labor impacts. Spenders act as if they believe unemployment is
high and most project expenditures on labor will go to the unemployed. If
one could show that a direct recipient was, in fact, previously employed, then
Spenders like to believe that this worker's vacated job would be filled by
an unemployed worker. Thus, even if the money did not go directly to an
unemployed workers, there would eventually be a job "created" for an unem-
ployed worker. In a way, Spenders implicitly treat all their expenditures as
producer surplus-they do not accept that project resources are diverted
from other potentially productive uses.
Spenders are somewhat more familiar with stimulative fiscal policy and
multiplier models than with basic but subtle microeconomic principles such
as opportunity costs. Spenders regard their expenditures as inherently bene-
ficial to the community: Creating jobs stimulates the economy directly and
indirectly through multiplier (secondary) effects.25 In the extreme it gives
22 There are two other reasons why Spenders like major capital-intensive projects. One is that
federal (or foreign) grants may be more likely to be available for such projects than for other
projects. Another reason is that local politicians may favor them for political and ego-boosting
reasons: They can name the rail cars (or whatever) after themselves or their favorite political
predecessors, and they can paint them in the political colors of their choice. There was a long
debate after the federal government subsidized a light rapid rail system in British Columbia
about whether the Canadian or the provincial flag should appear on the railcars. The province
won!

23 Their funds and jobs are more secure because of reduced "contestability" in the market for
bureau funds [Gilbert, 1989].
24 They also think market outcomes are inequitable, but that is another issue.
25 One reason why some Spenders attach so much importance to multipliers is because they
have a basic grounding in input-output analysis and regional impact analysis, but they do not
clearly understand the fundamental distinction between economic and social impact analyses,
and evaluation studies [Waters, 1976].

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546 / Costs and Benefits through Bureaucratic Lenses

rise to a "Midas touch" of project evaluation: Declare the expenditures (costs)


to be a benefit, times a multiplier, and any government project is self-
evidently justified as producing benefits greater than costs. Spenders react
skeptically to an evaluation methodology (like CBA) which treats some expen-
ditures, especially labor, as a cost rather than a benefit, and which excludes
multiplier effects on the grounds that they are transfers or involve double-
counting.
On discount rates, Spenders generally favor a low discount rate. They prefer
a low discount rate because most impacts are benefits and, while a low
discount rate does not tremendously affect near-term benefits, it raises the
present value of further-off benefits.26 A low rate is also consistent with their
own perception that the interest rate they get on their own savings accounts
is an appropriate social discount rate.
How does this jibe with the generally accepted idea that politicians have
a high discount rate? Politicians have some political costs that spenders do
not have. While, like spenders, politicians treat project costs and benefits as
benefits, they view these political costs as costs. Project benefits are always
early (remember that all other project costs are benefits!). As long as the
project is completed, these additional political costs are generally down the
road (the deficit eventually catches up with them). Since their benefits are
early and their costs are late, politicians typically prefer a high discount rate.
While there is a tendency to lump Spenders and politicians together, this
difference on discount rates demonstrates that Spenders and politicians do
not always have the same incentives.
Given that Guardians are looking over Spenders' shoulders, how can Spend-
ers generate ex ante political support for such projects? One way is to overesti-
mate usage levels (therefore benefits). Kain [1990] has provided a recent
spectacular case study of this phenomenon, based on the Dallas DART. In
addition to straight overestimation, Spenders want to use aforementioned
multipliers to boost benefits. Parenthetically, their treatment of multipliers
is asymmetric: they do not accept the idea that one should attach a multiplier
to funds that have been obtained from taxes.27 This sounds like a double
whammy to them. The other obvious way Spenders generate political support
is to underestimate expenditures (costs). All of these efforts are attempts to
reduce Guardian opposition and increase political feasibility. We now discuss
the cost underestimation issue in more depth.

COST ESTIMATES AND THE COQUIHALLA HIGHWAY PROJECT

A desire by Spenders to implement their project provides incentives to under-


estimate costs. The Coquihalla project illustrates what amounts to almost

26 Spenders may not favor low discount rates in those circumstances where Analysts or Guardians
force spenders to treat costs as costs. Their view will depend on the timing of cost and benefit
flows. In the typical situation where costs occur early and benefits late, Spenders will still push
for a low discount rate. But with different timing of costs and benefits they may prefer a high
discount rate.
27 Here, multipliers refers to weights that should be used to adjust discount rates or particular
types of benefits and costs. Examples of multipliers are the shadow price of capital, the marginal
excess tax burden, and the shadow price of tax dollars. Further discussion of these points is
beyond the scope of this article.

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Costs and Benefits through Bureaucratic Lenses / 547

pathological underestimation. After completion of the first two phases of


the Coquihalla highway, growing public awareness of apparent major cost
overruns gave rise to a Commission of Inquiry to determine the exact costs
of the Coquihalla project. The MacKay Commission [1987] revealed just how
eager the government had been to low-ball expenditure estimates; indeed,
they did so to the point of recklessness.28 To say that no government CBA
was conducted is an understatement. Almost no attempt was even made
to estimate Transportation Ministry expenditures. Although work began on
phase I in 1984, the only real attempt to estimate costs was made in 1973. Even
then the 1973 estimate of $60 million was only a "reconnaissance estimate" of
construction costs for a four-lane, 60-mph rural highway. This was updated
to $194 million in 1978 and, it seems, $250 million in 1979. But the comments
of consultants to the Commission on this update suggest how slapdash these
updates were:

1. All three estimates only dealt with the highway proper and did not take
into account other works necessary to make the highway a complete
system. Associated costs such as land and engineering were not evalu-
ated .
2. The estimates prepared in 1973 and 1978 were very incomplete, espe-
cially in the evaluation of most probable costs. The estimates did not
take into proper consideration the quality of the information and the
relative risks. The direct costs were, for the most part, derived using
estimated quantities times unit rates. In order to establish the estimated
actual cost an estimated allowance for the unknown, in the form of a
contingency, was added to the direct costs. Unfortunately, it would
appear the contingency estimate lacked any proper evaluation and failed
to cover such a basic item as known historical growth of contracts.
3. Because there was no formal basis of preparing and recording estimates,
the comparison of the 1973 estimate with the 1978 estimate and the
estimate prepared in 1979 lacked any document trail to indicate how
the estimates were reevaluated and reconciled against one another. None
of the estimates indicated how the $250 million was derived. In fact,
other than public information releases, there is no record of an estimate
or any basis of rationale of an estimate accounting for the $250 million
figure .
4. There was no definitive scope statement associated with any of the
estimates. Without a scope statement there was no relevant basis for
comparison of actual costs to budget; i.e., comparison of the $250 million
to actual costs was not meaningful as the actual costs were not for the
same scope. To state it in simple, concise terms, what was estimated
was not what was built.29

28 The Commission of Inquiry did not have access to cabinet discussions. Since the Coquihalla
highway was of considerable importance to the government at the time, there is no doubt
highway officials were under immense pressure to expedite construction. It is not possible to
allocate blame for understatement between political and bureaucratic groups, but whichever
may have been the most important in this instance, the general point remains that those advocat-
ing particular projects in government have incentives to understate the costs.
29 Trimac Consulting Services Ltd., Report to the MacKay Commission, Appendix C of the
Commission Report, p. A9.

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548 / Costs and Benefits through Bureaucratic Lenses

The basis of the cost estimates for the second phase of the highway ($125
million) were virtually nonexistent.
Given the haphazard nature of the cost estimates, it is not surprising that
they had nothing to do with reality. As the MacKay Commission Report
[1987, Summary X] pointed out, "the discrepancy between estimates and
costs is heightened because estimates were never updated to reflect either
the additional costs of accelerated construction or the very large changes
in scope . . . [which] included higher design speeds, additional lanes and
interchanges." Additionally, the Ministry had a history of giving contractors
the benefit of the doubt, sometimes by huge orders of magnitude.30 For exam-
ple, although contracts were putatively tendered, the Ministry routinely cov-
ered cost overruns. Of course, it was often impossible to isolate the overrun
component because the Ministry was continuously altering its specifications
(perhaps not surprisingly, given that these specifications were not based on
analysis or research). The result was that only 60% of the total spent was
even covered by competitive bidding; the rest were essentially negotiated
contracts.

SYSTEMATIZING, COMPARING, AND SUMMARIZING THE LENSES

Table 4 presents a comprehensive and systematic comparison of how


bureaucrats regard a range of issues pertaining to CBA. We bre
issues into four categories: benefits, costs, transfers, and other
table highlights the main differences among the different lenses.
in the table are basically self-explanatory: "+ " indicates that the le
views the item as a benefit, " - " indicates a cost, and "0" indicates
lens holder ignores or does not value the item.
All three perspectives count taxes paid by foreigners as a benefit
perspectives differ on most other benefit categories. Guardians
revenues that accrue to government as benefits, whereas Spend
count all revenues as benefits whether they accrue to government
dents and the private sector, as long as they accrue to their co
Only Analysts would count both option benefits and existence bene
Guardians tend to ignore nonpecuniary costs borne by residents,
Spenders and Analysts would include them. Only Analysts woul
opportunity costs of government-held assets, option losses, and
losses.
Revenue transfers from residents to government are regarded as a benefit
from the Guardians' perspective, and as a cost to constituents by Spenders,
while Analysts would recognize transfers for what they are and exclude them
from calculating the net benefits (unless distributional impacts were to be
incorporated explicitly, in which case there are balancing entries, except for
differential weights associated with different groups).
Table 4 summarizes a few other differences in perspectives. Guardians
favor high discount rates (to discourage Spenders from spending), whereas
Spenders prefer low discount rates to boost the NPV of their projects. The
optimal discount rate can be characterized as "unresolved" from an analyti-

30 We do not take a normative position on the appropriate contract form. Thompson and Jones
[1986] discuss ex ante versus ex post contract control mechanisms.

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Costs and Benefits through Bureaucratic Lenses / 549

Table 4. Cost-benefit analysis through different bureaucratic lenses at the


provincial level.
Bureaucratic lenses

Analyst Guardian Spender

CBA benefits
Revenues (e.g., taxes, tolls) to provincial + + +
government from foreigners (people,
companies, or governments)
Revenues (e.g., matching grants) to +, unless + +
provincial government from "higher" (more there is an
aggregate) level of government (e.g., federal opportunity
government) cost
Revenues (e.g., economic profits, rents) to Include 0 +
provincially resident employers producer
surplus if
applicable
Pecuniary benefits (e.g., salaries) to Include 0 +
provincially resident employees (job producer
benefits) surplus if
unemployed
Nonpecuniary benefits to provincial + 0 +
residents (governments, companies, people)
Option benefits + 0 0
Existence value benefits + 0 0
Secondary benefits Include if 0 Use a
applicable multiplier
CAB costs
Project expenditures received by provincial Use +
residents (people, companies, or opportunity
governments) cost
Project expenditures received by foreigners -
Nonpecuniary costs to provincial residents - 0 -
(governments, companies, people)
Option loss - 0 0
Existence value loss - 0 0
Secondary costs Include if 0 0
applicable
Assets currently owned by provincial Include 0 0
government that are used by provincial opportunity
government cost
Assets currently owned by provincial Include Average cost 0
government that are used by other opportunity
provincial residents cost
Sunk ongoing project expenditures received Sunk cost Sunk cost Sunk
earlier by residents investment

CBA transfers
Revenue benefits (e.g., taxes, tolls) to 0 +
provincial government from provincial
residents (people or companies)
Pecuniary benefits to provincial government 0 + - if from a
from "lower" level of government (e.g., constituency,
municipality) otherwise 0

Other issues
Interest rates Not fully High; often Low
resolved 10% real
Private sector market efficiency (ignoring Generally
"traditional" market failures such as public efficient, but efficient inefficient,
goods, externalities, etc.) markets do fail much
unemployment
Ex ante view of future sunk expenditures Neutral; no Dislike Like
bias

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550 / Costs and Benefits through Bureaucratic Lenses

cal perspective. Spenders tend to ignore sunk costs or consider them advanta-
geous because they warrant further spending. Guardians and Analysts recog-
nize sunk costs.
The three lenses reflect different attitudes or beliefs about the functioning
of the private sector. Guardians tend to be confident about market perfor-
mance and pessimistic about expanding government spending. Spenders are
more convinced of the need for government spending to stimulate employ-
ment and to compensate for believed shortcomings of the private sector.
Analysts recognize the prospects for market failure but, subject to this, gener-
ally regard markets as efficient.

IMPLICATIONS FOR MORE EFFICIENT DECISIONMAKING

Advocates of efficiency might be reassured by the presence of both Spenders


and Guardians in the bureaucracy. These types often start with diametrically
opposed positions, and one might expect that they will slug it out in a civilized
and democratic way, such that the resultant outcome will be reasonably
efficient. At first glance such a position seems preferable to simply having
politicians "twist CBA out of shape." However, Guardians and Spenders
sometimes hold similar but incorrect views. For example, as Table 4 indicates,
both would ignore costs associated with assets, often land, owned by the
government that were to be used on government projects. Problems also
arise when departments can generate and keep their own revenues. In these
circumstances, Guardians may be satisfied because the department meets
minimal revenue-expenditure objectives and is not a drain. As long as Spend-
ers are not making a loss, there is likely to be minimal pressure from Guard-
ians to be more efficient. Organizations, such as airport and port authorities
or state-owned enterprises, that generate their own income are likely to be
poorly monitored with expected inefficiency consequences.31 Of course, shift-
ing the technical responsibility for monitoring directly to the politicians is
unlikely to result in any improvement.
Does clarification of the various bureaucratic conceptual lenses offer hope
that we can improve the usage of CBA? Our experience suggests that illustra-
tion of the various "accounting" procedures that each bureaucratic type uses
does help government employees see what CBA really is about, particularly
the meaning and importance of economic efficiency. In the course of the
seminar we also introduce constrained CBA, distributional CBA, and
multigoal analysis. Guardians see the merit of constrained CBA and Spenders
lean toward distributional CBA. While there are still differences between
Guardians and Spenders, they begin to recognize and incorporate the crite-
rion of economic efficiency into their evaluation schemes.
Perhaps more important, we have found that our archetypes help Guard-
ians, Spenders, and Analysts understand where each type is coming from.
They appreciate that their own initial view is not universal. They understand
better what each group tends to do and why: why Spenders think it is right
to spend and Guardians frequently resist. At the same time, Guardians and
Spenders have a better idea of the analytical mistakes that the "other" player

31 Indeed, there is a large literature on the inefficiency of state-owned enterprises [see, for exam-
ple, Vining and Boardman, 1992].

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Costs and Benefits through Bureaucratic Lenses / 551

is likely to make; they know the "tricks" and are less likely to have their
position defeated by an incorrect analytical perspective. Thus, they move
incrementally toward a more economically efficient outcome, which rein-
forces the point just made.
Analysts recognise that economic efficiency does not necessarily dominate
decisionmaking, and that consideration of revenue-expenditure and distribu-
tional criteria are necessary in government. Thus, they become more effective
at implementing the more allocatively efficient alternative: They move be-
yond being "partisan efficiency advocates" toward being "partisan efficiency
obtainers."
Of course, knowledge can be two-edged. We have also found that some
bureaucratic reaction to the "light" on CBA is strategic and asymmetric.32
Spenders focus on the fact that they can more strongly buttress their spending
arguments by more strongly emphasizing nonbudgetary benefits of projects,
such as avoided travel time or avoided fatalities. Guardians realize that they
can buttress their case by focusing more on the nonbudgetary costs of projects,
such as the opportunity cost of land or time. Thus, for example, if an "edu-
cated" Spender encounters a narrow-focused Guardian who is not moderately
familiar with economic efficiency arguments, the Spender may "snow" the
Guardian (and vice versa). Trying to avoid being on the receiving end of an
incorrect argument is, as we mentioned above, one reason why bureaucrats
come to our programs.
One major lesson for bureaucrats is that correct and accurate CBA analysis
is difficult to do. Some, including those in Crown Corporations, respond by
taking the view that their organization will never be able to do it correctly
and that their best solution is to hire external consultants whenever necessary.
The British Columbian Ministry of Highways has responded quite differently;
they have engaged upon a major task of training their managers in CBA. This
initiative has been in the planning stages for about two years, and the first
in-house classes have taken place. Their implementation experiences may
serve as a model for other branches of the provincial government and perhaps
to other government agencies in Canada and the U.S.
This article exemplifies the role of bureaucratic lenses in a specific CBA
context. However, our experience suggests that these lenses are endemic
in other, broader governmental decisionmaking contexts where CBA is not
explicitly present.
We end with a final note of caution. Our analysis identifies and analyzes
three bureaucratic roles. In our experience, bureaucrats naturally fall into our
archetypical roles when discussing an abstract project (that is, a completed
project which is no longer a bureaucratic issue) in an academic setting. In
actual practice we readily acknowledge that bureaucratic incentives and
beliefs can be more complex and idiosyncratic.

An earlier version of this article was presented at the Public Choice Society Meetings in New
Orleans, February 1992. We appreciate helpful suggestions from Murray Frank, Lee Friedman,
Ted Miller, Susan Smart, Bill Stanbury, Fred Thompson and two anonymous referees. The
authors would like to thank Betty Chung and Jean Last for valuable secretarial assistance.

32 On the strategic use of information by bureaucrats and politicians, see Austen-Smith [1990]
and Bender, Taylor, and Van Galen [1985].

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552 / Costs and Benefits through Bureaucratic Lenses

ANTHONY BOARDMAN is Professor of Policy Analysis and Business Strategy


in the Faculty of Commerce, University of British Columbia.

AIDAN VINING is Professor of Policy Analysis and Business Strategy, Faculty


of Business Administration, Simon Fraser University.
W. G. WATERS II is Associate Professor of Transportation in the Faculty of
Commerce, University of British Columbia.

REFERENCES

Allison, Graham T. (1971), The Essence of Decision (Boston: Little, Brown).


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