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Case Study 1: The Hidden Costs of Infrastructure Projects – The Case of Building Dams A fascinating study that was recently completed by a research group at Oxford University (headed by Professor Bent Flyvbjerg) found that many developing countries engage in large infrastructure projects under the assumption that these are the key to future economic success. A particular case in point is building large scale dams. Demand for electricity has gone up dramatically, particularly in third world countries that are assumed could benefit greatly from the hydropower generated by dams. Flood control, crop irrigation, transportation, and other reasons support the idea that large dams are a universal benefit. However, research suggests that the enormous costs of dam projects are such that countries simply cannot afford them. Close analysis of benefits and drawbacks shows that rarely do countries and contractors take a hard look at the “real” costs of large infrastructure projects like dams; if they did, they would be much more wary of engaging in these projects. This case concludes with some alternatives, such as the policy pursued in Norway of smaller, more eco-friendly dam projects that can produce needed energy but are affordable and environmentally sound. Questions: 1) Given the history of large cost overruns associated with megadam construction, why do you believe they are so popular, especially in the developing world? 2) Develop an argument in support of megadam construction. Develop an argument against these development projects.

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