Choosing Economic Analysis Software

Choosing Economic Analysis Software

How would you rank the following tools –hammer, screwdriver and pliers? Now you might ask: Why would anyone ask such a silly question …for each is appropriate for a different use (even though I could bang a nail with a pliers or screwdriver). Well, it is not very different when someone catalogs all of the various types and brands of “economic” software tools and throws together tools for evaluating user benefits, regional economic impacts, land use impacts and economic development targeting into the same list. Yes, they may all have some common economic element (like putting a $ value on time or access), but each has a different intended use.

So why is this done? Well for starters, making complicated comparisons of large numbers of economic models and tools can look impressive and be used to encourage public agencies to hire experts to help them sort it all out. But that can also lead public agencies into paralysis –seeing economic analysis as too complex to address.

Yet there is no real reason for anyone to be intimidated by economic analysis tools, as most are designed to enable planners, engineers and policy analysts to make more powerful decisions, and they are not necessarily hard to use. The starting point is to simplify the choice of tools to be considered and understand how each is designed for a different use. Then an agency can select the tool(s) needed to assist them in particular tasks – which may be setting policy, defining long-range vision plans, prioritizing projects, evaluating alternatives or operating facilities.

I make a start here by highlighting how different classes of tools are designed for different uses. The focus here is on transportation impact analysis, though parallel situations exist for analysis of energy or other infrastructure policy and investment impacts.

-  Input-output models are used to show the broader economic role of an existing facility (such as an airport or seaport), or a sector of the economy (such as public transit or trucking industries). They can also show the direct impact of opening, closing, expanding or contracting a facility.

- Economic impact forecasting models are used to show how economic growth in an area will change if there is a shift in costs or market access (which can occur if transportation system access or performance conditions changes). They are commonly used to assess the job and income effects of pricing policies, modal shift vision plans and proposed project scenarios.

- Land use models (spatial input-output models) are most commonly used for planning purposes, providing a basis for traffic forecasts and infrastructure investment needs forecasts.

- User benefit-cost models are used to compare the transportation system efficiency benefits and costs of projects affecting transportation facility or system performance. They may also provide inputs to feed into economic impact forecasting models.

- Economic development tools are used to identify sites for new business location and targeted types of business to be attracted to them.

saw pizzaNow each of these tools can be used in other ways. So you might see input-output models used to estimate impacts of transport pricing, or land use models used for benefit-cost analysis, or user benefit-cost models portrayed as showing comprehensive economic impacts. That is possible because all of these classes of tools generate $ estimates of cost or income effects in some way, and many of them also involve employment impact forecasts of some sort. But be aware, as such non-traditional uses can mean that the analyst has taken extra effort to supplement the tool with outside help (which might be OK), or the analyst is providing an inaccurate or less-than-complete portrayal of economic impacts or benefits (since each class of tool provides results in a different context and at a different level of detail).