A man with a plan

How should a proposal for, say, the construction of a new office building on a greenfield site be evaluated? So far as the developer is concerned the criterion is obvious - will it be profitable?

And if the market test were the sole criterion there would be nothing else to say, but even in post-Thatcher Britain it is recognised that the market test is not the only test. Even if development would be profitable, the developer has still to obtain planning permission. And it is evident that to be granted planning permission the proposal must pass some test other than mere profitability, so that planning committees must be assessing the balance of the benefits and costs to people affected by the development, in ways which are not captured by the profitability test.

Can this process be formalised? Most economists would suggest that social cost benefit analysis should be used, that the social costs and benefits of a proposal should be valued in money terms, and an investment appraisal should be carried out to ascertain whether, suitably discounted, the benefits outweigh the costs. But in practice it may be difficult to attribute prices to some environmental attributes, and even if one could do so with accuracy, we may also be concerned with who bears the costs and who reaps the benefits.

The solution of these practical problems has been Nathaniel Lichfield's life work, and this book is the summation of that work. At the core of his approach has been the view that the consultant cannot give a single answer to the question being asked. In the 1950s he set out what was then called the planning balance sheet approach, arguing that we cannot give accurate valuations of many social costs and benefits, as required by conventional cost benefit analysis, but at best indicate what the costs and benefits are in order to inform the decision maker. In effect, the balancing of costs and benefits can be better informed but cannot be reduced to a formula.

He has since taken on board the further view that it is also necessary to indicate who bears the costs and who reaps the benefits, so that a full community-impact evaluation will show the incidence of perceived costs and benefits, their nature, and a valuation if this is possible. The first half of the book sets out the origins of the method, both in cost-benefit analysis and in environmental impact analysis, as well as describing the process of carrying out a CIE. The second half of the book shows how the method is applied in practice, and concludes with an appendix listing over 50 cases around the world where his methods have been applied. Lichfield's combination of practical experience and academic background is unique in this field.

Alan Evans is professor of environmental economics, University of Reading.