nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2012‒11‒03
five papers chosen by
Arvi Kuura
Parnu College - Tartu University

  1. Technology Classification with Latent Semantic Indexing By D. THORLEUCHTER; D. VAN DEN POEL
  2. How Should Benefits and Costs Be Discounted in an Intergenerational Context? By Cropper, Maureen
  3. Rare Disasters, Tail-Hedged Investments, and Risk-Adjusted Discount Rates By Martin L. Weitzman
  4. Tools for assessing the costs and benefits of green growth : the U.S. and Mexico By Harrington, Winston; Morgenstern, Richard; Velez-Lopez. Daniel
  5. Designing electiricty transmission auctions: an introduction to the relevant literature By Greve,T.; Pollitt, M. G.

    Abstract: Many national and international governments establish organizations for applied science research funding. For this, several organizations have defined procedures for identifying relevant projects that based on prioritized technologies. Even for applied science research projects, which combine several technologies it is difficult to identify all corresponding technologies of all research-funding organizations. In this paper, we present an approach to support researchers and to support research-funding planners by classifying applied science research projects according to corresponding technologies of research-funding organizations. In contrast to related work, this problem is solved by considering results from literature concerning the application based technological relationships and by creating a new approach that is based on latent semantic indexing (LSI) as semantic text classification algorithm. Technologies that occur together in the process of creating an application are grouped in classes, semantic textual patterns are identified as representative for each class, and projects are assigned to one of these classes. This enables the assignment of each project to all technologies semantically grouped by use of LSI. This approach is evaluated using the example of defense and security based technological research. This is because the growing importance of this application field leads to an increasing number of research projects and to the appearance of many new technologies.
    Keywords: Latent semantic indexing, SVD, Classification, Research Funding
    Date: 2012–09
  2. By: Cropper, Maureen (Resources for the Future)
    Abstract: Should governments, in discounting the future benefits and costs of public projects, use a discount rate that declines over time? The argument for a declining discount rate is a simple one: if the discount rates that will be applied in the future are persistent, and if the analyst can assign probabilities to these discount rates, this will result in a declining schedule of certainty-equivalent discount rates. A growing empirical literature estimates models of long-term interest rates and uses them to forecast the declining discount rate schedule. I briefly review this literature, focusing on models for the United States. This literature has, however, been criticized for a lack of connection to the theory of project evaluation. In cost-benefit analysis, the net benefits of a project in year t (in consumption units) are to be discounted to the present at the rate at which society would trade consumption in year t for consumption in the present. With simplifying assumptions, this leads to the Ramsey discounting formula. The Ramsey formula results in a declining certainty-equivalent discount rate if the rate of growth in consumption is uncertain and if shocks to consumption are correlated over time. Using the extended Ramsey formula to estimate a numerical schedule of certainty-equivalent discount rates is, however, challenging.
    Keywords: discount rate, uncertainty, declining discount rate, cost-benefit analysis
    JEL: D61
    Date: 2012–10–12
  3. By: Martin L. Weitzman
    Abstract: What is the best way to incorporate a risk premium into the discount rate schedule for a real investment project with uncertain payoffs? The standard CAPM formula suggests a beta-weighted average of the return on a safe investment and the mean return on an economy-wide representative risky investment. Suppose, though, that the project constitutes a tail-hedged investment, meaning that it is expected to yield positive payoffs in catastrophic states of nature. Then the model of this paper suggests that what should be combined in a weighted average are not the two discount rates, but rather the corresponding two discount factors. This implies an effective discount rate schedule that declines over time from the standard CAPM formula down to the riskfree rate alone. Some simple numerical examples are given. Implications are noted for discounting long-term public investments and calculating the social cost of carbon in climate change.
    JEL: E43 G11 G12 Q54
    Date: 2012–10
  4. By: Harrington, Winston; Morgenstern, Richard; Velez-Lopez. Daniel
    Abstract: This paper examines the processes used in the United States and Mexico to assess the economic costs and benefits of environmental improvement, the kinds of information obtained from these procedures, and the additional knowledge that is needed about both elements to improve understanding of the problems and prospects of advancing a green growth agenda. Because environmental and other development needs are large and resources are limited, it is important to choose the best projects, those with the highest returns on both public investments and private resources harnessed by regulation. The United States is well-established as a world leader in the use of quantitative methods to evaluate options for environmental regulation and policy. Mexico represents a case where a developing country has made clear advances in reforming its economy and in introducing transparency in its regulatory processes for environmental and other policy areas.
    Keywords: Environmental Economics&Policies,Regulatory Regimes,Public Sector Regulation,Transport Economics Policy&Planning,Climate Change Economics
    Date: 2012–10–01
  5. By: Greve,T.; Pollitt, M. G.
    Abstract: The UK has ambitious plans for exploiting offshore wind for electricity production in order to meet its challenging target under the EU Renewable Energy Directive. This could involve investing up to £20bn in transmission assets to bring electricity ashore. An investment of this magnitude calls for an efficient mechanism to determine which projects get financed and ensuring that only those projects that are selected can be delivered at least costs to consumers. The electricity regulator’s ongoing tender auctions are likely to work well for point-to-point transmission and for networks already built. However, it is still unclear what kinds of models could be considered for complex meshed offshore (and onshore) networks where licences are granted not only to own and operate, but also to build a transmission network. This paper provides an extensive survey on the current theory and experience of auctions. The main objective is to discuss the design of auctions for transmission assets in which bidding for packages of transmission assets is a possibility.
    Keywords: Energy Transmission; Auction Design; Combinatorial Auctions; Package Bidding
    JEL: D44 L94
    Date: 2012–10–26

This nep-ppm issue is ©2012 by Arvi Kuura. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.