Question

2. Government investment in internal improvements represented about 5% of the costs of clearing the Western river system, then rose to about 73% of canal construction costs but then fell to about 23% of railroad construction costs. What factors explain this variable public investment philosophy?

Answer 1

** Please like if answer was helpful. It would mean a lot!! **

There are a lot of vairables when it comes to public investment. Firstly, we need to understand there is a time lag between sanctioning and actual construction of the projects. This will invariabley lead to a fluctuation of rates during this time period owing to the fact that the prices may change in the sanctioning window. Additionally, during the construction more problems may arise which are not allocated funds in the budget. This will lead to a surge in expenses for construction. Also the authorities should be aware that the public works may get stalled due to unforessen circumstances such as the pandemic, worker strikes etc which will again result in a change in estimation. This may also result in lower costs if the construction sector sees a change in its network. Economies of scale are also an important part of this work as with more and more construction activities the expenses will rpoporionately become cheaper due to expansive network which helps in procuring materials ata lower cost.