provide for requirements likely to arise in the future many decades from now. Once
built, the infrastructure can rarely (because of the expenditure) be relocated, and may
attract other facilities. A new road might attract houses, schools, businesses, etc.
Thus, the planning of the infrastructure carries temporal and spatial dimensions with
it. A country may have real needs to satisfy, but it is perceived as modern, developed
and industrial, only when there are visible signs of infrastructure or use thereof:
buildings, roads, the internet. Infrastructure often depicts three dimensions:
(a) facilitating communication, travel, and the transportation of goods (b) a
biopolitical ambition to improve the health and welfare of the population (c) the
visible symbol of a visionary future.
7.1 Welfare Economics
Welfare economics analyses the circumstances which optimise the solution to a
general equilibrium model. This needs, inter alia, an optimal distribution of factors
among commodities and an optimal distribution of earnings among consumers.
The distribution of production factors is considered to be Pareto optimal if
production cannot be restructured to increase one commodity output or more without
diminishing the yield of some other commodity. Therefore, considering a
two-commodity economy, when the distribution of production factors for the two
commodities is Pareto optimal, the locus (curve joining the relevant points) gives the
production contract curve.
Similarly, a distribution of commodities can be considered to be Pareto optimal if
the allocation cannot be reshuffled to increase the utility of one individual or more
without diminishing the utility of another individual. Thus, in a two-individual
economy, the consumption contract curve is represented by the locus of the Pareto
optimal allocation of commodities between the two individuals.
A branch of economics that is particularly concerned with infrastructure planning
is welfare economics, which studies the apportionment of scarce resources. This is
different from traditional economics, because as natural resources do not always
possess a market value, they cannot be, usually, allocated by the market mechanism.
Another justification for this distinct branch of economics lies in that many natural
resources (e.g. air and water) are considered public goods. Thus, how they are
allocated or used is a societal decision, not necessarily decided by the market –
even if pricing is used. The objective of welfare economics is to distribute these
resources such that social welfare (or social utility) is maximized.
Essentially, welfare economics decide the combination of goods to be produced
from the available resources, which then define the respective utilities (values) these
commodities provide to the individual people. Eventually, if it were possible, the
goods would be allotted such that the overall societal utility was maximized.
Very often, this theory is not easy to apply to public service systems as there is no
clear obvious method to assess, measure, or even envisage qualitatively, the benefits
to be achieved from different allocations. Hence the next paragraphs are devoted to
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built, the infrastructure can rarely (because of the expenditure) be relocated, and may
attract other facilities. A new road might attract houses, schools, businesses, etc.
Thus, the planning of the infrastructure carries temporal and spatial dimensions with
it. A country may have real needs to satisfy, but it is perceived as modern, developed
and industrial, only when there are visible signs of infrastructure or use thereof:
buildings, roads, the internet. Infrastructure often depicts three dimensions:
(a) facilitating communication, travel, and the transportation of goods (b) a
biopolitical ambition to improve the health and welfare of the population (c) the
visible symbol of a visionary future.
7.1 Welfare Economics
Welfare economics analyses the circumstances which optimise the solution to a
general equilibrium model. This needs, inter alia, an optimal distribution of factors
among commodities and an optimal distribution of earnings among consumers.
The distribution of production factors is considered to be Pareto optimal if
production cannot be restructured to increase one commodity output or more without
diminishing the yield of some other commodity. Therefore, considering a
two-commodity economy, when the distribution of production factors for the two
commodities is Pareto optimal, the locus (curve joining the relevant points) gives the
production contract curve.
Similarly, a distribution of commodities can be considered to be Pareto optimal if
the allocation cannot be reshuffled to increase the utility of one individual or more
without diminishing the utility of another individual. Thus, in a two-individual
economy, the consumption contract curve is represented by the locus of the Pareto
optimal allocation of commodities between the two individuals.
A branch of economics that is particularly concerned with infrastructure planning
is welfare economics, which studies the apportionment of scarce resources. This is
different from traditional economics, because as natural resources do not always
possess a market value, they cannot be, usually, allocated by the market mechanism.
Another justification for this distinct branch of economics lies in that many natural
resources (e.g. air and water) are considered public goods. Thus, how they are
allocated or used is a societal decision, not necessarily decided by the market –
even if pricing is used. The objective of welfare economics is to distribute these
resources such that social welfare (or social utility) is maximized.
Essentially, welfare economics decide the combination of goods to be produced
from the available resources, which then define the respective utilities (values) these
commodities provide to the individual people. Eventually, if it were possible, the
goods would be allotted such that the overall societal utility was maximized.
Very often, this theory is not easy to apply to public service systems as there is no
clear obvious method to assess, measure, or even envisage qualitatively, the benefits
to be achieved from different allocations. Hence the next paragraphs are devoted to
186
7 Economic and Social Aspects of Infrastructure