Public Investment Criteria: Using an Interregional Input-Output Programming Model

Preface
Contents
List of Figures
List of Tables
Chapter 1: Public Investment Criteria: A Tentative-Specific Survey on the Benefit-Cost Analysis in the Early Years
	1.1 Underlying Fundamental Concepts of Public Investment Criteria: Significance and Necessity
		1.1.1 Definition of Investment Criteria
		1.1.2 Significance of Public Investment Criteria
		1.1.3 Adjustments with Product Quantity and Investment Quantity
	1.2 Benefit-Cost Criteria
		1.2.1 Several Variations in Basic Benefit-Cost Criteria
			1.2.1.1 Benefit-Cost Ratio Criteria
			1.2.1.2 Benefit-Less-Cost
			1.2.1.3 Internal-Rate-of-Return Criteria
		1.2.2 Present Value Criteria vs. Internal-Rate-of-Return Criteria
			1.2.2.1 Benefit-Cost Ratio Criteria vs. Benefit-Less-Cost Criteria
			1.2.2.2 Present-Value Criteria vs. Internal-Rate-of-Return Criteria
	1.3 Normalization of Various Benefit-Cost Criteria
		1.3.1 Mishan´s Theory of Normalization
		1.3.2 Elucidation by the Example
	1.4 Concluding Comments
		1.4.1 Further Examination of the Grave Shortcomings of the Benefit-Cost Analysis
		1.4.2 Organization of the Chapters
	References
Chapter 2: Economic Effects of Mei-Shin and To-Mei Expressways Based on the World Bank Formula of 50 Years Ago
	2.1 Preliminary Consideration
		2.1.1 Concept of Economic Effects of the Expressway
		2.1.2 Direct Effects of Expressway Construction
		2.1.3 Indirect Effects of Expressway Construction
		2.1.4 Impacts of the Expressway on the Whole National Economy: Observed Reality in 1970s Through 1980s in Japan
	2.2 Basic Data of Various Reduced Direct Costs
		2.2.1 Basic Data for the Calculation of Saved Running Costs
		2.2.2 Basic Data for the Calculation of the Reduction in the Traveling Time
		2.2.3 Basic Data for the Calculation of Decrease in Traffic Accident Rate
	2.3 Traffic Volumes of Mei-Shin Expressway
	2.4 Measurement of Direct and Indirect Effects of Mei-Shin Expressway
		2.4.1 Direct Effects
			2.4.1.1 Saved Amounts of Running Costs
			2.4.1.2 Saved Amounts of Traveling Time
			2.4.1.3 Effects of Decrease in Traffic Accidents
		2.4.2 Indirect Effects
			2.4.2.1 Effects of the Decrease in the Traffic Congestion on the Competitive Ordinary Road
			2.4.2.2 Dispersion Effects of Urban Population
			2.4.2.3 Effects of Expanding the Area of the Market
	2.5 Appraisal of the Mei-Shin Expressway Construction Project With the Estimated Direct and Indirect Effects
		2.5.1 Profitability of the Mei-Shin Expressway as a Toll Road
		2.5.2 The Appraisal by Taking into Account Direct and Indirect Effects of the Expressway: The Viewpoint of the Whole National ...
	2.6 Consideration of Public Investment Criteria of Mei-Shin and To-Mei Expressway: Benefit-Cost Ratio and Difference Criteria
		2.6.1 Benefits (Economic Effects) of To-Mei Expressway in the Year When it was Opened to Traffic
		2.6.2 Benefit-Cost Ratio Criteria
		2.6.3 Benefit-Less-Cost (BLC) Criteria
	2.7 Summary
	Appendix 1 Estimation of the Traffic Volume on Mei-Shin Expressway
		Opening the Door of Traffic Volume
			Other data for the analysis
		Method and Practice of O.D. Survey
			Roadside Interview Method
			Owner Interview Method
		Estimation of the Traffic Volumes on the Generation Basis
		Forecast of the Traffic Distribution on O-D Basis in the Target Year
			Estimation of the Current Traffic Distribution on O-D Basis
			Forecast of the Traffic Distribution in the O-D Basis by the Fratar Method
		Estimation of the Allocated Traffic Vehicles
		Estimated Traffic Volumes on Mei-Shin Expressway at the Opening Year
			Estimated Traffic Volumes by Vehicle Type and Section of Interchange
			Actual Traffic Vehicles of Mei-Shin Expressway by Section of Interchange
		Closing Comments
	References
Chapter 3: Generalized Benefit-Cost Criteria: Public Investment Criteria When Benefits Are Previously Measured
	3.1 Genealogy of the Public Investment Criteria in the Field of Development Policy of Developing Countries
		3.1.1 Public Investment Criteria: Definition 2
		3.1.2 Lineage of Typical Public Investment Criteria
	3.2 Generalized Benefit-Cost Criteria Which We Should Rely On
		3.2.1 Investment Choice Model of Steiner
			3.2.1.1 Sectors of the Economy and the Coding of the Projects
			3.2.1.2 Forms of the Objective Function
			3.2.1.3 Constraints and the Proof of the Equivalence Between (3.1) and (3.2)
		3.2.2 Investment Choice Model Over the Multi-Periods: Marglin´s Model
			3.2.2.1 Evasion of Myopia Rule
			3.2.2.2 Marglin´s Model
	3.3 Application of Generalized Benefit-Cost Criteria
		3.3.1 Setting Up of Our Problem to be Solved
		3.3.2 Code of Activity Variables
			3.3.2.1 Formulation of the Optimization a la Steiner=Marglin
		3.3.3 Restrictions by the Computer Capacity Constraints
		3.3.4 Confining the Investment Targets
		3.3.5 Valuation Coefficients
		3.3.6 Budget Constraint
	3.4 Solutions for the Optimization Problem
		3.4.1 Computer and Algorithm
		3.4.2 Image of the Integer Programming Format
		3.4.3 Optimal Solutions by the Two Methods
	3.5 Discussion on the Results of the Optimization
		3.5.1 Case Setting and Characteristics of Target Expressway/Highway
		3.5.2 Meeting Vehicle Traffic Demand in the Suburb of Tokyo
		3.5.3 Strategic Investments in the Developing Regions
		3.5.4 Tokyo-Gaikan Expressway
		3.5.5 Comparison with Physical Planning of the Ministry of Construction
		3.5.6 Total Benefit-Cost Analysis
	3.6 Closing Comments
	References
Chapter 4: Optimum Allocation of the Capital Funds to the Transportation Infrastructures Using the Interregional Input-Output ...
	4.1 Public Investment Criteria Incorporating the Endogenous Measurement of the Benefits-Two Subjects
	4.2 Basic Assumptions and Model Structures with the Economy
	4.3 Model
		4.3.1 Explicit Specification of the Transportation Sector Using Shipment Activities of Moses Model
		4.3.2 Capacity Constraints and Modes of Transportation
			4.3.2.1 Modes and Routes
			4.3.2.2 Production Capacity Constraints
			4.3.2.3 Capacity Constraints of the Transportation Infrastructures
			4.3.2.4 Value-Added and GRP/NRP
	4.4 Interregional Input-Output System of Noncompetitive and Competitive Import Types
		4.4.1 System of Regional Account and SNA
		4.4.2 Treatment of Interregional Shipments of Goods: Isard type
		4.4.3 Interregional Input-Output System of Chenery=Moses Type
		4.4.4 Explicit Specification of the Transportation Sector Using Shipment Activities of Moses Model (Again)
	4.5 Optimality Criteria Built in the Model
		4.5.1 Problem Presentation
		4.5.2 Bottleneck of the Development and the Measurement of the Investment Effects
			4.5.2.1 Necessity of the General Equilibrium Approach
			4.5.2.2 Elimination of Economic Bottleneck and the Measurement of Its Effects
			4.5.2.3 Numerical Examples
			4.5.2.4 Allocation of the Capital Funds Between the Private and the Public Sectors of Water Resource Development
			4.5.2.5 Capital Fund Allocation Matrix of Lefeber´s Type
			4.5.2.6 Opportunity Cost Criteria-Simplex Criteria
		4.5.3 Description of the Elimination of Economic Bottlenecks
			4.5.3.1 Capital Stocks in the Private Sectors
			4.5.3.2 Transportation Capacities in the Public Sectors
			4.5.3.3 Bottleneck due to Shortages in Other Resources
			4.5.3.4 Built-in Resource Allocation Mechanism of Lefeber´s Type
				Elimination of the Economic Bottlenecks and Allocation of the Capital Funds
					Private Sectors
					Transportation Infrastructures
					Labor
					Water Resources
				Limited Resource Allocation Mechanism of Lefeber´s Type
					Capital Funds
					Labor Assignment
			4.5.3.5 Objective Function
		4.5.4 The Model with Capacity Constraints and the Funds Allocation of Lefeber´s Type
			4.5.4.1 Formulation of the Model
		4.5.5 Concrete Image of the Matrix A
			4.5.5.1 Coding
			4.5.5.2 Definition of Variables
				Shipments of Goods
				Image with Tables
	4.6 Preparation of Basic Data
		4.6.1 Ad Hoc versus Proactive prescriptions
		4.6.2 Calculation of Input-Output Coefficients of the Competitive Import Type
			4.6.2.1 Interregional Input-Output Model of the Competitive Import Type
			4.6.2.2 Inter-regional Input-Output Table at Purchasers´ Price
			4.6.2.3 Construction of Shipment Activities at Purchasers´ Price
			4.6.2.4 Decomposition into Shipment Activities Mode by Mode
			4.6.2.5 Estimation of Shipment Activities in the Target Year of 1971
		4.6.3 Birdeye View of Interregional Input-Output Model of Shipment Activities: Illustration by Three Regions, Three Sectors, a...
			4.6.3.1 Shipment Activities in Region 1
			4.6.3.2 Shipment Activities in Regions 2 and Region 3
			4.6.3.3 Value-Added by Shipment (Production) Activities
	4.7 Simulation Model: Interregional Input-Output Programming Model of Five Regions, Five Industries, and Three Transport Modes
		4.7.1 Coding
		4.7.2 Simulation Results
			4.7.2.1 Optimal Basic Variables
			4.7.2.2 Objective Function
			4.7.2.3 Shipment of Goods and the Flow Conditions of Market
			4.7.2.4 Gross Regional Product and the National Account of the Economy
			4.7.2.5 Goods Flow Between Regions and Loads on the Transportation Infrastructures
			4.7.2.6 Investments for Increments in Transportation Capacities
			4.7.2.7 Investments for Increments in Production Capacities
			4.7.2.8 Investment Shares Between the Transportation Infrastructures
			4.7.2.9 Allocation of Labor
	4.8 Conclusion
		4.8.1 Superiority of the Model with the Endogenous Opportunity Cost Criteria
		4.8.2 Historical Background and Sprit of Our Main Theme
	Appendix 1: BirdEye View of Interregional Input-Output Model of Shipment Activities: Illustration by Three Regions, Three Sect...
	Appendix 2: Input-Output Table at Purchasers´ Price and Shipment Activities
		Input-Output Table
			General Definition
			Numerical Example
			Final Demand and Gross Value Added
			Primitive Input-Output Analysis
		I-O Tables at Purchasers´ Price and Producers´ Price
			Table of Explicit Trades via Commercial Sectors
			Basic Trade Table
			Table of Summarized Figures with Commercial Sectors
			Explicit Listing of Intermediate Inputs and Final Demand: Input-Output Tables at Purchasers´ Price
			Communication Services and Electric Power
			CIF (Cost, Insurance, Freight) Price and FOB Price
			CIF and the I-O Table at Purchasers´ Price
			Input-Output Table at Producers´ Price and FOB
		I-O Table at Purchasers´ Price Versus Producers´ Price
			Numerical Example 2
			Importance of the Basic Trade Table
		Treatment of Distributional Costs in the Interregional Input-Output Programming Model
			Installment of the Transportation Network Dimension into the Interregional Input-Output Model
				Image of Spatial Distribution of the Five Sectors and the Final Demand Sector
				Decomposition of the Input-Output Activity into Shipment Activities
				Illustration by the Numerical Example: Activities of Agricultural Sector
				Illustration by the Numerical Example: Shipment Activities of Manufacturing Sector
				Shipment Activities of Service Sectors
				A Numerical Example of the Interregional Input-Output Model of Shipment Activities (IRIO-SA)
			Construction and Installment of New Shipment Activities
				Prediction of Reduction in Transportation Cost
				Precise Estimates of Transportation Costs and Shipment Activities
			Installment of Shipment Activities in IRIO Model at Producers´ Price
				Input-Output Coefficients at Producers´ Price (Again) and Coefficients of the Final Demand Sector: Decomposition
				Shipment Activities at Producers´ Price
	Appendix 3: Parameter of θ(v,k,q)
	Appendix 4: Simplex Criteria
	References
Chapter 5: Optimal Comprehensive Transport System and Development of the Model
	5.1 Principle of the Comprehensive Transport System
	5.2 Points of the Development
		5.2.1 Practical Usefulness
		5.2.2 Comprehensiveness
	5.3 Possible Development of the Model
		5.3.1 Incorporation of Leisure Trips and Social Overhead Capitals into the Objective Function
		5.3.2 Assignment of Loads Generated by Passenger Trips
	5.4 Endogeneity Treatment of Investment
	5.5 Nonlinearity
	References
Chapter 6: Optimal Allocation of the Public Funds to the Transportation Infrastructures Using the Interregional Input-Output P...
	6.1 Achievements with the Minute Specification of the Model
		6.1.1 Coding of the Expanded Specification
			6.1.1.1 Regional Economies and Sector
			6.1.1.2 Transportation Modes
			6.1.1.3 Transportation Infrastructures
			6.1.1.4 Targets of Public Investments
			6.1.1.5 Import and Export
		6.1.2 Model Specification
			6.1.2.1 Leisure Trips
			6.1.2.2 The Capital Stock of Private Sectors and Transportation Infrastructures
			6.1.2.3 Incorporation of Social Overhead Capitals into the Objective Function
			6.1.2.4 The Public Funds and the Interregional Input-Output Table
	6.2 Summary of the Main Results
		6.2.1 Scale of the Linear Programming Model
		6.2.2 Simulation Results
			6.2.2.1 The Objective Function and the Optimal Basic Activities
			6.2.2.2 The Assignment of the Public Funds
			6.2.2.3 Opportunity Cost of the Public Funds
			6.2.2.4 Goods Flow
				Basic Data of Shipment Activities
				Agriculture, Forestry, and Fisheries
				Mining
				Chemical
				Metal
				Other Manufacturing
			6.2.2.5 Leisure Trip Pattern
				The Final Demand of Leisure Trips Against the Transportation Sector
				Private Automobile
				Domestic Air for Passenger Traffic
				Railway (Except for Kokuden)
			6.2.2.6 Optimal Allocation of the Public Funds to the Arterial Transportation Network
				Conventional Railway
				Shinkansen
				Highway
				Expressway
			6.2.2.7 Consistency and Complementarity Among Transportation Infrastructure Investments
	6.3 Conclusion
	References
Chapter 7: Optimal Planning of Asian Expressway Network Without Dynamic Interregional Input-Output Programming Model
	7.1 Introduction
		7.1.1 Characteristics of the Model
			7.1.1.1 Dynamic Optimality of Roundabout Production Through Both Time and Space
		7.1.2 Public Investment Criteria Endogenously Built in the Model
		7.1.3 Subjects to be Solved
		7.1.4 Economic Philosophy of Regional Development in Asia
		7.1.5 Shipment Activities and Transportation Infrastructures
			7.1.5.1 Explicit Treatment of Regions (Countries)
			7.1.5.2 Malleability of Goods (Again)
			7.1.5.3 Shipment Activities
			7.1.5.4 Input-Output Coefficients
			7.1.5.5 Commodity Flow Variables
			7.1.5.6 Input Coefficients of Logistics Services into Commodity Flow
			7.1.5.7 Market Flow Condition
			7.1.5.8 Total Supply Condition
			7.1.5.9 Gross Regional Product and Gross Domestic Product
			7.1.5.10 Which Region Provides Logistics Services
			7.1.5.11 A departure from the Conventional Interregional Input-Output Analysis
	7.2 Skeleton of the Planning and Framework of the Model
		7.2.1 Target Area, Planning Horizon, Industrial Classification, and Network of Expressway
			7.2.1.1 Zone Classification of the Target Area, Link Node, and Zone Node
			7.2.1.2 Classification of the Economy
			7.2.1.3 Planning Horizon
			7.2.1.4 Specification of Proposed Asian Expressway Network
			7.2.1.5 Specification of Routes by Origin-Destination
	7.3 Structural Equations
		7.3.1 Flow Conditions
			7.3.1.1 Market Flow Condition 1: Non-Service Industry
			7.3.1.2 Market Flow Condition 2: Other Service
			7.3.1.3 Market Flow Condition 3: Transportation Service
				Truck (Freight) Transportation Service
				Railway Transportation Service
				Coastal/Water Shipment Service
				Harbor Distribution Service
			7.3.1.4 Shipment Balance Equations
				Shipment Balance Equation 1: Shipment from a Region in China (Including Exports to Other Countries)
				Shipment Balance Equation 2: Definition of Export from China to Other Countries
				Shipment Balance Equation 3: Definition of Imports from Other Countries to China
			7.3.1.5 Balance of International Payments: Cumulative Deficit Constraint
				Definition of Accumulated International Deficit at Period t
				Control of Deficit Balance
		7.3.2 Conditions of Stock Variables
			7.3.2.1 Balance Between Demand and Supply Against Capital Stock, Labor, and Housing Stock
				Balance Between Demand and Supply of Industrial Capital
				Balance Between Demand and Supply of Labor
				Balance Between Demand and Supply of Housing Stock
			7.3.2.2 Balance Between Demand Against and Supply of Transportation Infrastructure
			7.3.2.3 Balance Between Demand and Supply of Social (Overhead) Capital (Other Social Capitals)
			7.3.2.4 Formation of Industrial Capital
			7.3.2.5 Formation of Housing Capital
			7.3.2.6 Formation of Social Capital (Other Capitals)
			7.3.2.7 Formation of Transportation Infrastructure
			7.3.2.8 Population Growth and Migration
				Natural Growth
				Migration: Social Population Growth
				Population Growth: Natural Plus Social Growth
		7.3.3 National Income Accounting of China
			7.3.3.1 Gross National Income (GNP/GNI)
			7.3.3.2 Net National Product (NNP)
			7.3.3.3 Gross Investment (INV)
			7.3.3.4 Net Investment (NI)
			7.3.3.5 Consumption
		7.3.4 Objective Function
			7.3.4.1 Maximization of GNP of China
			7.3.4.2 Maximization of NNP
			7.3.4.3 Welfare Maximization with Lower Constraint on the Accumulation of Industrial Capital Stock at the End of Period
			7.3.4.4 Consumption Maximization with Lower Constraint on the Accumulation of Industrial Capital Stock at the End Period
		7.3.5 Boundary Conditions for the Differential Equations
	7.4 Simulation Cases
		7.4.1 Presumptions
			7.4.1.1 Scope of the Spatial Area for Planning
			7.4.1.2 Borrowing from Abroad
			7.4.1.3 Disposition of Person Trip
			7.4.1.4 Capital and Labor Productivity
			7.4.1.5 Load on Transportation Infrastructure Capacity
			7.4.1.6 Population Movement
			7.4.1.7 Commodity Flows Induced by International and Interregional Trade
		7.4.2 Variants for Cases of Analysis
			7.4.2.1 Supposed Interest Rate of Borrowing from Abroad
			7.4.2.2 Upper Limit on Accumulating External Debt
			7.4.2.3 Objective Function
			7.4.2.4 Case (Scenario) for Simulation
	7.5 Simulation Results
		7.5.1 Optimal Allocation of Funds to Expressway Links by Period
			7.5.1.1 Period 2 (t = 1; 1990-1994)
			7.5.1.2 Period 3 (t = 2)
			7.5.1.3 Period 4 (t = 3)
			7.5.1.4 Period 5 (t = 4)
		7.5.2 Commodity Flow
			7.5.2.1 Overview
				Period 1 (t = 0)
				Period 2 (t = 1)
				Period 5 (t = 4)
			7.5.2.2 Minute Discussion with Visual Flow
		7.5.3 Macroeconomic Indicators
			7.5.3.1 GNP/GNI
			7.5.3.2 NNP
			7.5.3.3 Net Investment
			7.5.3.4 Value of the Objective Function
	7.6 Takeoff Accelerating Effects of Asian Expressway Network on the Chinese Economy
	Appendix 1: Mathematical Expression of the Model
		Index, Set of Indices, and Index Function
		Variables
		Parameters
		Structural Equation and Objective Function
			Market Flow Condition 1: Non-service
			Market Flow Condition 2: Other Service
			Market Flow Condition 3: Transport/Distribution Service
				Truck (Freight) Transportation Service
				Railway Transportation Service
				Coastal/Water Shipment Service
				Harbor Distribution Service
			Shipment Balance Equation 1: Shipment from Zones in China
			Shipment Balance Equation 2
				Export of China
				Import of China
				Balance of International Payments: Cumulative Deficit Constraint
			Shipment Balance Equation 3: Between Foreign Countries (Regions)
			Balance Between Demand and Supply of Industrial Capital
			Balance Between Demand and Supply of Labor
			Balance Between Demand and Supply of Housing Stock
			Balance Between Demand Against and Supply of Transportation Infrastructure
			Balance Between Demand and Supply of Social (Overhead) Capital (Other Social Capitals)
			Formation of Capital Stock
				Formation of Industrial Capital
				Formation of Housing Capital
				Formation of Social Capital (Other Capitals)
				Formation of Transportation Infrastructure
			Population Growth and Migration
				Natural Growth
				Migration: Social Population Growth
				Population Growth: Natural Plus Social Growth
			National Income Accounting of China
				Gross National Income (GNP/GNI)
				Net National Product (NNP)
				Gross Investment (INV)
				Net Investment (NI)
				Consumption (CC)
			Objective Function
				GNP(GNI) to Be Maximized
				NNP to Be Maximized
				Welfare Maximization with Lower Constraint on the Accumulation of Industrial Capital Stock at the End of Period
				Consumption Maximization with Lower Constraint on the Accumulation of Industrial Capital Stock at the End of Period
			Initial Conditions
	Appendix 2: Dynamic Programming Model and Roundabout Production Through Space and Time
		Production Function
		Flow Condition of the Markets
		Stock Formation
		Dynamic Equation
		Highway Capacity Constraint
		Definition of Vector Variable
		Feasible Trajectory of the Economy
		The Objective of the Planning
		Necessary Conditions for the Optimality
			Roundabout Production Through Time
			Roundabout Production Through `Space´
			Roundabout Production Through Space and Time
		Dynamic Optimality and Dynamic Model
		Dynamic Programming (Optimization) Model
		Bang-Bang Solution
		Expanding the Production Possibility Frontier
		Balanced Development
		Positioning of the Dynamic Programming Model
	References
Postscripts
	Connection with the Monograph by Leon N. Moses
	Argument for Optimal Composite (Comprehensive) Transport System
	Relationship with PPBS
	Shipment Activities Initiated by Moses
Acknowledgments
	Colleagues with Whom We Had Broken Bread
	Gratitude to My Family
	Two Teachers to Whom I have Been Greatly Indebted