ABSTRACT
A with a big city, one that will offer an hourly service from six in the morning to midnight. The social value of the rail link is to be calculated, as usual, by the most potential users are willing to pay for it less any negative externalities the construction and service may incur. From this figure, the value of the net benefits is obtained by subtracting the opportunity costs of its construction and operation. In consideration of the variety of advantages conferred by the rail link on the
residents of areaA, house prices there are apt to rise, the increase in the price of any particular house being, possibly, an indicator of the benefits expected to accrue to those occupying it: in effect, the capitalized value of the expected benefits. But only under special conditions may the rise in house prices in the area be accepted as a valid measure of the benefits over time from the introduction of the rail service. One of these conditions is that the size of area A be large – large enough to accommodate residents that are so far distant from the location of the railway station that the rail link offers them no advantages at all. The houses of such residents will therefore not rise at all in consequence of the rail link to the city. For the remaining houses, the closer to the railway station, the greater the benefit of the railway service and the greater the rise in the house price. Yet even were this condition met, people’s uncertainty about the future usefulness of the rail link in view of possible later developments, to say nothing of the possible irrelevance of the implicit rates of discount involved, make it apparent that the differential rise in house prices in the area that may be attributed to the introduction of the rail link is a poor indicator of the extent of the benefits conferred.
