August 31, 2008
A report called ‘Generated users benefits and Heathrow expansion: understanding consumer surplus has been produced by the Stockholm Environment Institute. This study, commissioned by Friends of the Earth, looks at the method used by the government to calculate the economic benefits of expanding Heathrow. It is also relevant to other airports.
‘Consumer surplus’ is a rather esoteric economic concept, and the report concludes that calculation of consumer surplus is subject to so many uncertainties and assumptions that it is an unsound justification for an expansion which has so many clear-cut and well-quantified downsides.