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date: 28 May 2020

The Economics of Physics: The Social Cost-Benefit Analysis of Large Research Infrastructures

This is an advance summary of a forthcoming article in the Oxford Research Encyclopedia of Physics. Please check back later for the full article.

In economics, infrastructure is a long-term investment aimed at the delivery of essential services to a large number of users, such as those in the fields of transport, energy, or telecommunications. A research infrastructure (RI) is a single-sited, distributed, virtual, or mobile facility, designed to deliver scientific services.

In physical sciences (including astronomy and astrophysics, particle and nuclear physics, analytical physics, and medical physics), the RI paradigm has found several large-scale applications, such as radio-telescopes, neutrino detectors, gravitational waves, and interferometers; particle colliders and heavy ion beams; high intensity lasers, synchrotron light sources, and spallation neutron sources; hadrontherapy facilities.

These RIs require substantial capital and operation expenditures and are ultimately funded by tax-payers. In social cost-benefit analysis (CBA) the impact of an investment project is measured by the intertemporal difference of benefits and costs accruing to different agents. Benefits and costs are quantified and valued through a common metric and using the marginal social opportunity costs of goods that may differ from the market price. The key strength of this approach is that it produces information about the project’s net contribution to society that is summarized into simple numerical indicators, such as the net present value of a project, in a quantitative form.

For any RIs, consolidated cost accounting should include intertemporal capital and operational expenditure both for the main managing body and for experimental collaborations or other external teams, including in-kind contributions. As far as social intertemporal benefits are concerned, it is convenient to divide them into two broad classes. The first class of benefits accrues to different categories of direct and indirect users of infrastructure services: scientists, students, firms benefitting from technological spillovers, consumers of innovative services and products, and citizens who are involved in outreach activities. The empirical estimation of the use-value of an RI depends on the scientific specificities of each project, as different social groups are involved to different degrees. The second class of benefits is for the general public of non-users: these benefits are associated with social preferences for scientific research, even when the use of a discovery is unknown. In analogy with the valuation of environmental and cultural goods, the empirical approach to non-use value aims to elicit the willingness of citizens to pay for the scientific knowledge that is created by an RI. This can be done by well-designed contingency valuation surveys.

While some socio-economic impact studies of RIs in physics have been available since the 1980s, the intangible nature of some benefits and the uncertainty associated with scientific discoveries have limited the diffusion of CBA in this field until recently. Nevertheless, recent studies have explored the application of CBA to RIs in physics. Moreover, the European Commission, the European Strategy Forum on Research Infrastructures, and the European Investment Bank suggest that the study of social benefits and costs of RIs should be part of the process leading to funding decisions.