UOC Economics New Jersey Kills Hudson River Tunnel Project Case Study Questions

The drawings and the case study should be in one document. Case Study 14.1—New Jersey Kills Hudson River Tunnel Project

This case illustrates the challenges in making an early termination decision. Often, particularly in the case of public projects, there is a real difficulty in stopping a project once it has gotten “on the books.” As a result, projects with huge cost overruns, like Boston’s “Big Dig” are allowed to continue almost indefinitely. New Jersey Governor Chris Christie made a tough call in deciding to cancel the Hudson River Tunnel project because he was given a number of rosy projections that did not match the actual costs incurred to that date. This is a great case to let students pick sides: should Christie have cancelled the project or not? There are arguments to be made that the need was strong (although others could argue that the need was over-sold). On the other hand, the history of the project to date and the uncertainty about future federal funding made it a real gamble, especially during a time of economic recession.

Questions

How would you respond to the argument that it is impossible to judge how successful a project like this one would have been unless you actually do it?

Take a position, either pro or con, on Christie’s decision to kill the ARC. Develop arguments to support your point of view.

In your opinion, how clearly must a large infrastructure project like ARC have determined its need, costs, and so forth before being approved? If the criteria are too stringent, what is the implication for future projects of this type? Would any ever be built?