megaprojects are a rip-off
I’ve always known that some city projects are simply bad deals, like sport stadiums. What I didn’t know is that there is new research showing that maga-projects of all types are a giant rip-off. Bent Flyvberg of Oxford discusses this finding a new Econ Talk podcast. What Flyvberg did was collect data on “mega-projects” – construction efforts that cost at least a billion dollars and affects a million people. What was found is that 90% of the time, mega projects are over budget, not completed on time, or do not attract the customers that were predicted (i.e., the demand was wildly over estimated). This applies to both private and public sector projects. Flyvberg also reports that smaller projects tend to do much better, for a variety of reasons.
A few comments here:
- This is pretty strong evidence that states should completely avoid the expensive mega-sports projects like stadiums above a certain size. The Olympics, for example, should only be hosted in nations that have preexisting facilities.
- Flyvberg points out that mega projects can even destroy the engineers and other professionals who build them. The architect of the Sydney opera only did one building in his life. The cost-overruns and delays ruined his reputation.
- It is mainly state actors, contractors, and land owners who receive benefits.
- I recently saw the Church of the Sagrada Familia in Barcelona. Big project, but built little by little over a 100 years. A better model?
- There are some cases of success, but they seem hard to predict ex-ante.
Bottom line: The next time they tell you that we need this multi-billion dollar road, just say no.