• Cocktail and Dinner Party Economics
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  • Dinner Party Economics

Right in the Margins

When sorting out the costs and benefits of a project it is important to think about marginal costs and marginal benefits. For example, the comments I made in the Globe and Mail about oil pipelines is very contingent on the fact that some oil currently goes to ocean tankers by train. This fact changes the analysis of benefits because we must include, as part of the benefits of a pipeline, the decrease in emissions and increased safety of not using trains.  Furthermore, oil companies would save transportation costs on trains and gain capacity which are benefits. On the cost side, we need to know the infrastructure costs of constructing or retrofitting pipelines which seems obvious but also the environmental and safety issues due to a pipeline. The pipeline decision is not pipelines or nothing but rather pipelines or trains. You need the right margin to get to the right answer.    

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