A layperson says that a proposed government project simply costs too much and therefore shouldn't be undertaken. How might an economist's evaluation be different?
The major difference between the layperson’s analysis of this situation and the economist’s analysis would be that the layperson would look only at the present and the economist would look at the long term. The economist would look at the government project to determine if it were a good investment in long-term growth.
To a layperson (or at least to some laypeople), the only consideration would be whether the project costs a lot right now. But economists do not think that way. They think about how things that we do today can affect the economy in the long run. Economists know that investment is important. They know that investment today can bring about growth in the long term. They know that it is possible that the benefits that we got from the project could completely outweigh the costs of the project in the short term.
Therefore, an economist would look at the nature of the project. They would ask whether the project would bring economic benefits in the future. For example, if the project is a bridge, would it make traffic move so much better that a certain area of the city would become much more economically useful?
An economist, then, would look at the long term, not just at the immediate cost of the project.
The layperson would look at the project and see the large price tag and deem it too expensive. Governments operate with larger budgets than most individuals; therefore, a hefty price to a consumer might be only a tiny fraction of a government budget. Also, the layperson might only see if the project has any benefit to him or her. If the project is not personally beneficial, the individual will likely dismiss the project.
The economist, on the other hand, looks at the long-term benefits of the project. He or she looks at the potential revenue generated by the project in terms of jobs created for the area during the project's implementation and how the completed project will affect growth. The economist will also examine what would happen if the project was not completed. The project's implementation may be expensive, but not completing the project might be more costly in the long run. The economist might also be more aware of ways to fund the project (such as bond drives) than the average layperson.