Valuing the infrastructure of cities, regions and nations: a foundation for inclusive growth and integrated industrial strategy
- Start date: 1 February 2019
- End date: 31 August 2020
- Principal investigator: Professor Andrew Brown
Infrastructure refers to those systems or networks that provide goods and services that are in some sense basic or fundamental; that is, they are necessary for economic activity to take place and for people to participate in society. Infrastructure is one of the 5 ‘foundations’ of UK Industrial Strategy and, to take a local case, one of the 12 ‘bid ideas’ of Leeds City Council’s ‘inclusive growth’ strategy. Within and beyond the UK, there is a consensus on the importance of sustainablity and resilience of infrastructure in the face of climate change, terrorist threat, demographic evolution and financial fragility. Such views have helped shape arguments for both new large-scale infrastructure projects such as HS2 and Crossrail, and major upgrades to existing infrastructure such as the ‘Smart Motorways’ and ‘Superfast Broadband’ programmes. They have also influenced arguments for greater local involvement in infrastructure projects e.g. through the £840M Tranforming Cities fund. As some of the above examples illustrate, infrastructure provision remains an economically and politically sensitive matter. Even amidst austerity and financialisation, much UK infrastructure remains entirely state planned and funded (e.g. the road system) or heavily regulated (e.g. utilities), whilst the failures of old-style private finance initiatives are widely recognised. In this complex and politically charged context, new kinds of public-private infrastructure provision are sought – new infrastructure ‘business models,’ that create and capture the value of infrastructure so as to attract local, national or international finance (iBUILD 2018).
Increasing recognition of the importance of properly valuing infrastrucure has occurred in tandem with a growing consensus that the orthodox economic theory of infrastructure – for which infrastructure is essentially to be understood through the theory of ‘market failure’ – is deeply problematic (Mazzucato et al 2018, Venables et al 2014, Brown and Robertson 2014). The stress on sustainable ‘whole life valuation’ of infrastructure in UK Industrial Strategy receives no backing from orthodox economic theory – a theory for which the very idea of a ‘theory of value’ in considered obsolete (Brown and Spencer 2014). The lack of a theory of value creation means that there is no concept of ‘business models’ in orthodox economic theory, nor of the role of finance within such models (Mazzucato 2018). Orthodox cost-benefit analysis has been found unable to value the wider economic, social and environmental impacts of infrastructure provision (e.g. Venables report; MPA; Bowles report). Within academia, a series of engineer-led UK projects,have tried to develop a more adequate economic theory for valuing infrastructure, reocgnising the importance of focusing on provisioning systems and their interellations. However, there has yet to be a large-scale interdisciplinary project led by economists, social scientist and business studies academics to address the key issue of developing a more adequate approach to valuing infrastructure.
This research aims to fill the gap by systematically and programmatically developing and applying an interdisciplinary approach to valuing infrastructure, rooted in realistic economic theory. It will offer a step change in the valuation of UK infrastructure that can inform an integrated industrial strategy for inclusive growth.