What’s a new rail line worth?

This is hilarious! (click) Men in Suits choir - Metro Trains Melbourne Regrets...

One way to answer this question is to consider what else the money could be spent on.

One possibility is the 1,235 people with disabilities in Victoria who, according to this article, are registered with the Department of Human Services for supported accommodation.

One of them is David Graham, a 44 year old who is legally blind, has an intellectual disability and suffers from epilepsy. Last month his 70 year old mother died of cancer. She had looked after him all his life since he was born premature at 24 weeks. Now Mr Graham is on the waiting list for supported accommodation.

Mr Graham’s plight illustrates the importance of opportunity cost, something I’ve banged on about here at length. In plain terms, when you spend money it refers to what else you could have spent the money on i.e. the opportunities you’re foregoing.

The writer of the article, Carol Nader, refers specifically to the $50 million that Ted Baillieu promised he would spend in his first term to commence building a rail line from the CBD to Avalon Airport. The full cost would be $250 million.

She implies that $50 million could instead be spent on something else, like supported accommodation for people with disabilities. It costs $1.5 million on average she says to provide a unit for five residents and an average annual cost of $125,000 to support each resident. Read the rest of this entry »

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