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Can good infrastructure decisions be made with little information?

Aditi Raina's picture



The simple answer is yes—with a little help from the Infrastructure Prioritization Framework developed by the World Bank.
 
Experts can make decisions based on remarkably few pieces of information. Research by James Shanteau at Kansas State University has shown that expertise is reflected in the type of information used, not the amount of it. The Infrastructure Prioritization Framework, or IPF, attempts to capitalize on precisely these aspects of expertise and decision-making. This enables objective evaluations of infrastructure projects using minimal but relevant data in information-constrained environments.
 
Why is this important? It’s easy to make decisions when complete information is available. But this is rarely the case in most developing economies, where policymakers must rely on limited data to make decisions. But this does not mean the resulting decisions have to be poor. Critical to such situations is the ability to identify and select accurate and relevant information to achieve the desired objectives, something that requires experience, expertise, and judgment. 

This is precisely what the World Bank's IPF aims to do. It helps policy makers streamline the decision-making process for prioritizing infrastructure by identifying the minimal amount of relevant information needed to achieve diverse policy goals. Then, it uses standard statistical techniques to objectively increase information-processing speed.

How the IPF works

This is done in a two-fold process described in a paper by the World Bank. First, the experience, expertise, and knowledge of various subject-matter experts and stakeholders within government is pooled to determine what minimally important information would allow projects to be distinguished based on two major parameters: 1) social and environmental impact, and 2) financial and economic benefits. Second, the IPF uses principal component analysis (PCA) to objectively weigh these identified factors. Alternative scenarios with subjective weights and simple averages are also provided for comparison. The information is then consolidated into two composite indices, allowing decision makers to see where each project falls on both the parameters.

A key advantage of the IPF is that it takes out subjectivity in the ranking of the projects while incorporating the many development objectives essential for decision-making. If an indicator does not vary much over the projects, then its usefulness in cross-project comparison is negligible and would have a low weightage. Alternatively, indicators that allow for greater differentiation between projects get a higher weightage and would, consequently, contribute more to the overall composite score.

While this analytical process is objective, the IPF provides space for deliberation to remain responsive to policy priorities. This happens both in the selection of indicators, as they are not pre-determined or externally imposed, and in decision-making, as projects are ranked on both economic and non-economic parameters. Decision makers can evaluate which parameter is more of a priority, or if they are of equal importance. This makes the IPF inherently adaptive with space to incorporate the subjective priorities of different stakeholders. At the same time, it can narrow down data collection efforts and keep the analytical process free from personal biases.

The IPF in action

Recently, the IPF was implemented in Sri Lanka for water infrastructure projects. In consultation with the National Planning Department, National Water Supply and Drainage Board, and other water experts, several indicators were identified after deliberations on importance and feasibility of obtaining the information. These included social and environmental aspects such as the number of new beneficiaries, jobs created, safe water coverage, and incidence of chronic kidney disease (a high-priority issue for the government); and financial and economic factors such as the financial cost-benefit ratio and project sustainability in terms of access to year-round water and legal rights to access water.

One interesting finding was that the two projects ranking highest on the social-environmental index did so for two completely different reasons. One project ranked high because it created the most number of jobs and had the highest number of new beneficiaries, whereas the other had the lowest safe water coverage, a poor public water supply system, and was proposed in an area with a prevalence of chronic kidney disorder. This reflects the flexibility and multi-dimensionality of the IPF, which can capture different elements of policy priorities, interpret diverse data points, and distill them into more meaningful information about the projects. Complete results can be found in the recently-published report.

How these results are used in the final decision-making remains to be seen, but the IPF is an enabling tool for decision-making with limited information. It provides a transparent and inclusive process to work with limited information in an objective and expedited manner.

Going back to the question asked in the title—yes, with the right tools, knowledge and expertise, it is possible to make sound decisions with little information.


Related posts:

Prioritizing infrastructure investments: Helping decision-makers do their job

Embracing uncertainty for better decision-making