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EE1. Principles and Techniques Click to edit Master title style
EE1. Principles and Techniques
Click to edit Master title style
EE1. Principles and Techniques
Click to edit Master title styleLearning Objectives
• Understand the role of economicevaluation in road safety and key factors like efficiency, effectiveness, effects
• Identify the main techniques usedfor economic evaluation in road safety
• Recognise the differences in the EATs used and the type of data required to undertake evaluations.
EE1. Principles and Techniques
Click to edit Master title styleReferences
• Boardman, A. E.; Greenberg, D. H.; Vining, A. R.; Weimer, D. L. (2011). Cost-benefit analysis. Concepts and practice. Fourth edition. Prentice Hall, Upper Saddle River.
• Guide to Cost-Benefit Analysis of Investment Projects (2014), European Commission
• Victoria Transport Policy Institute. Transportation Cost and Benefit Analysis II – Economic Evaluation
• ROSEBUD. Examples of assessed road safety measures - a short handbook - July 2006 (European Commission).
EE1. Principles and Techniques
Click to edit Master title styleDefinitions
EE1. Principles and Techniques
Click to edit Master title styleWhy Economic Evaluation?
• Elvik developed a Benefit-Cost model for evaluating several dozen traffic safety strategies. (Elvik, 2003)
• He concludes that implementation of all cost-effective safety strategies would reduce crash fatalities by 50-60%, far more than the safety gains that occurwith current planning and evaluation practices.
EE1. Principles and Techniques
Click to edit Master title styleHow much do road accidents cost the national economy?
• Elvik (2000) claimed that he total costs of road accidents (in 12 countries that he studied), including an economic valuation of lost quality of life, were estimated to about 2.5% of the Gross National Product (GNP).
• Excluding the valuation of lost quality of life, road accident costs on the average 1.3% of the GNP.
• When valuation of lost quality of life is included, costs ranged from 0.5 to 5.7% of GNP.
• When valuation of lost quality of life is disregarded, costs ranged from 0.3 to 2.8% of GNP.
EE1. Principles and Techniques
Click to edit Master title styleWhy Economic Evaluation?• Budget available for road safety is
limited• There is a large potential for
improving road safety• Only a part of this potential will be
realised if current policies are continued
• If priorities for road safety measures were based on cost-benefit analyses, large gains in safety could be realised
EE1. Principles and Techniques
Click to edit Master title styleObjectives of Economic Evaluation1. Identifying benefits, costs and impacts2. Establishing a beneficial safety outcome3. Comparing alternatives4. Assisting in prioritizing of projects
EE1. Principles and Techniques
Click to edit Master title styleRoad Safety measuresRoad Safety measures
User
1-Education
2-Legislation
3-Incentive and Enforcement
Vehicle
4-Active safety
5-Passive safety
6-Telematics and e-safety
Infrastructure
7-Road design
8-Road construction
9-Maintennance
Governance
10-Planning
11-Financing
12-Monitoring and analisys
Emergency system
13-Emergency
services
14-First aid
EE1. Principles and Techniques
Click to edit Master title styleEfficiency not just Effectiveness
• Economic Evaluation concerned with EFFICIENCY not just EFFECTIVENESS
• The aim of the evaluation is to identify the most efficient measures. This will enable the society to allocate the resources to the most beneficial use.• EFFECTIVENESS: measure of the effect of a treatment under ‘real life’
conditions.• EFFICIENCY: relationship between costs and benefits. (EFFECTIVENESS
does not imply EFFICIENCY)
EE1. Principles and Techniques
Click to edit Master title styleMain elements of efficiency assessment
• A list of road safety measures
• An estimate of the effects of these measures on accidents or injuries
• An estimate of the costs of the measures
• For cost-benefit analysis, monetary valuation of impacts is needed
EE1. Principles and Techniques
Click to edit Master title styleEffects of measures• ‘Effects’ include all changes
(against the reference situation) as the result of a project
• The effects that are a direct result of the implementation of a project are known as the ‘direct effects’.
• There are also ‘indirect effects’ which, in principle, must also be included in the evaluation of the project.
EE1. Principles and Techniques
Click to edit Master title styleMarket and non market impacts
• Economic evaluation is not limited to market (measured in monetary units) impacts.
• It can also incorporate non-market resources such as personal time, health and environmental quality
EE1. Principles and Techniques
Click to edit Master title styleAn example – Winter maintenance
•When coming to roads significant economic effect is due to winter maintenance, i.e. clearing roads of snow and the processing of their anti-icing materials.
• In the winter period, which averages 115 days, due to adverse weather conditions, in the non-implementation of the above work, speed decline from 80-90 to 36 km/h, and in some cases stop the movement altogether.
EE1. Principles and Techniques
Click to edit Master title style
As a result, this will increase the number of road accidents, the costs will increase as a
carrier of passengers and cargo (approximately 30%), and owners of private vehicles (more
than 2-fold) due to greater consumption of fuel and lubricants, wear and tear of machinery,
needs parts and service
EE1. Principles and Techniques
Click to edit Master title styleReducing average speeds from 80 to 36 km / hour increases fuel consumption by 60%, or 5.8 liters per
100 km for passenger cars, 17% (5.9 liters) for medium trucks and 26% (14.8 liters) for the train;
the consumption of spare parts increased by 28% for cars, 13% - for medium trucks and 22% - for the train, the total depreciation (amortization) to grow by more
than 3 times for the car, and more than 2 times the average for the truck and train.
EE1. Principles and Techniques
Click to edit Master title styleDue to the delay of cargo both passenger businesses and organizations will have to increase stocks of raw materials and finished goods in warehouses, which
entails the need for additional working capital, and in some cases, a complete shutdown of production late
for jobs and fatigue on the road will reduce productivity.
The costs increase and the quality of the goods and services reduces
EE1. Principles and Techniques
Click to edit Master title styleEfficiency Assessment Tools
The main tool for efficiency assessment:Cost-benefit analysis (CBA)
Less informative tool: Cost-effectiveness analysis (CEA)
•There are also other methods (e.g. multi criteria analysis), but CEA and CBA are most commonly used, since they have the best relation between necessary efforts and usability of results.
EE1. Principles and Techniques
Click to edit Master title styleNeo classical theoretical principles
• CBA and CEA base on neo-classical economic theory (economic values = individual preferences)
• The economic value of private goods is given by the perfect (free) market price
• Market price given by the point where marginal demand (marginal willingness to pay) = marginal supply
EE1. Principles and Techniques
Click to edit Master title styleNeo classical theoretical principles (2)• Individual rationality and utility
maximization: individuals know their own best and, if informed about the options and being able to choose, they generally choose the best for them
• Consumer sovereignty: individual’s choices are not morally judged
• Consumer’s surplus (consumer benefit): difference between consumer willingness to pay for a given quantity and the actual expenditure
EE1. Principles and Techniques
Click to edit Master title stylePublic goods
• “Non rival”: available to everyone to consume
• “Non – exclusive”: the consumption by one individual does not actually or potentially reduce the amount available to be consumed by another individual
EE1. Principles and Techniques
Click to edit Master title stylePublic goods in Road Safety
•Road safety is a mix of private and public aspects(e.g safety of the infrastructure)
•The safety of the infrastructure can be considered a non-exclusive good (it cannot be denied or sold to road users)
• It can also be considered a non rival good (the consumption of the safety standards by one user does not prevent the others from consuming them)
EE1. Principles and Techniques
Click to edit Master title stylePublic goods valuation• If economic value cannot be
derived directly from market prices two main methods can be applied: Revealed Preferences (RP) and Stated Preferences (SP)
• RP - Individuals reveal their valuation of the public goods through their demand for the market goods
• SP - Individuals are asked to state directly the value or to choose between options with different costs
EE1. Principles and Techniques
Click to edit Master title styleCost Benefit Analysis
• CBA considers the choices of society comparing benefits based on willingness to pay and consumer surplus with costs
• The existing distribution of income is taken as given
• CBA is based on the principle of social efficiency.
EE1. Principles and Techniques
Click to edit Master title styleSocial efficiency
• An intervention is considered efficient if it improves the welfare of at least one person without reducing it for anybody else (Pareto optimality). Very stringent criterion!
• From Pareto optimality to Pareto improvement (less demanding)
• Pareto improvement: increase of the welfare if monetary value of the benefits (estimated according to the WTP principle) exceed the monetary value of the costs (estimated according to the opportunity cost principle)
EE1. Principles and Techniques
Click to edit Master title styleOpportunity cost•The opportunity cost of a good or service is the potential gain from the best alternative forgone, when a choice needs to be made between several mutually exclusive alternatives
• In production, the opportunity cost of a good represents the value of the alternatives goods that could have been produced with the same resources
• In not perfect markets the value of the resources does not correspond to the opportunity cost (market distortions) > necessity to estimate “shadow prices”
EE1. Principles and Techniques
Click to edit Master title styleCBA – Cost Benefit ratio
•Necessary data• Implementation costs• Estimate of the number of accidents prevented• Other quantified effects (environmental, travel time,
vehicle operation etc.)• Monetary values (benefits)
EE1. Principles and Techniques
Click to edit Master title styleParticularly useful if…
•Multiple policy objectives exist
•Policy objectives are conflicting
•Objectives refer to goods without market prices (safety, environment, mobility)
EE1. Principles and Techniques
Click to edit Master title styleCBA - Pros and Cons
•Pros•Considers all relevant policy impacts•Enables a direct comparison of costs and benefits
•Cons•Monetary valuation e.g. of human life and quality is controversial and difficult, but inevitable
•Not all effects can be assessed (e.g. distributional effects)
EE1. Principles and Techniques
Click to edit Master title styleCost Effectiveness Analysis
•Necessary data• Implementation costs• Estimate of the number of accidents prevented
EE1. Principles and Techniques
Click to edit Master title styleCEA - Pros and Cons
•Pros• A simple technique which focuses on safety effects• Does not require monetary valuation of safety
•Cons• Can only be used for ranking measures• Does not consider tradeoffs against other policy objectives• It is not possible to consider different accidents
consequences (severe and slight injuries, property damages)
EE1. Principles and Techniques
Click to edit Master title style
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