Survival of the Un-fittest: Why the Worst Infrastructure Gets Built - and What We Can Do about It

Oxford Review of Economic Policy, vol. 25, no. 3, pp. 344–367, DOI: 10.1093/oxrep/grp024

24 Pages Posted: 8 Mar 2013 Last revised: 6 Jan 2016

See all articles by Bent Flyvbjerg

Bent Flyvbjerg

University of Oxford - Said Business School

Date Written: December 1, 2009

Abstract

The article first describes characteristics of major infrastructure projects. Second, it documents a much neglected topic in economics: that ex ante estimates of costs and benefits are often very different from actual ex post costs and benefits. For large infrastructure projects the consequences are cost overruns, benefit shortfalls, and the systematic underestimation of risks. Third, implications for cost–benefit analysis are described, including that such analysis is not to be trusted for major infrastructure projects. Fourth, the article uncovers the causes of this state of affairs in terms of perverse incentives that encourage promoters to underestimate costs and overestimate benefits in the business cases for their projects. But the projects that are made to look best on paper are the projects that amass the highest cost overruns and benefit shortfalls in reality. The article depicts this situation as ‘survival of the unfittest’. Fifth, the article sets out to explain how the problem may be solved, with a view to arriving at more efficient and more democratic projects, and avoiding the scandals that often accompany major infrastructure investments. Finally, the article identifies current trends in major infrastructure development. It is argued that a rapid increase in stimulus spending, combined with more investments in emerging economies, combined with more spending on information technology is catapulting infrastructure investment from the frying pan into the fire.

Listed as "Most Read" article on the journal's home page. Listed on SSRN's Top Ten Download List for Construction

Keywords: infrastructure, cost overruns, benefit shortfalls, cost–benefit analysis, optimism bias, agency issues, reference class forecasting

JEL Classification: H43, H54, R42

Suggested Citation

Flyvbjerg, Bent, Survival of the Un-fittest: Why the Worst Infrastructure Gets Built - and What We Can Do about It (December 1, 2009). Oxford Review of Economic Policy, vol. 25, no. 3, pp. 344–367, DOI: 10.1093/oxrep/grp024. Available at SSRN: https://ssrn.com/abstract=2229768 or http://dx.doi.org/10.2139/ssrn.2229768

Bent Flyvbjerg (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Register to save articles to
your library

Register

Paper statistics

Downloads
936
rank
22,119
Abstract Views
5,319
PlumX