From the perspective of neo-classical economics, there is little to dispute that overall public investment in infrastructure and resultant economic growth is generally positively correlated although real effects are disputed, see for example Munnell (1992), and a post 1970s slowdown is evident. A complex systems perspective, which highlights inter-dependencies and co-evolutionary effects, and which is more generally used by heterodox and evolutionary economists, is growing in the infrastructure systems literature and beginning to question the simplistic relationship between infrastructure and economic growth. This paper reviews the significant phenomena relevant for the infrastructure investment and economic growth debate in the context of sustainable future life-styles. Economic growth is measured by the change in GDP however infrastructure assets, the object of infrastructure investment, require further elaboration due to their idiosyncrasies.
The scope of infrastructure stock must include not only core assets in the domains of energy, water, transport, telecommunications and waste, but also social infrastructure stock including state funded hospitals, schools, fire stations, police buildings, etc. These infrastructure assets are not the same as other types of capital stock (Égert et al, 2009): Infrastructure stock often exhibits features of a natural monopoly characterised by public good through which citizens gain universal access to basic requirements and address poor service and ecological concerns via public forums, making services from infrastructure politically sensitive. Infrastructure stock also exhibits network effects and spill-overs into other sectors, a good example being the effect on property prices when OFSTED changes a school evaluation. Investments in infrastructure stock are often large with long life-cycles and alternative financing models as well as extensive government intervention to address market imperfections through various forms of regulation or state ownership which can have competition enhancing effects. There also exist economies of scale due to network externalities by connecting both regions and countries. The availability, accessibility and cost of infrastructure enable economic activity, as well as social cohesion, via their ability to convert resources into services.
Infrastructure, growth and sustainable living (pdf, 720 KB). The future of national infrastructure systems & economic prosperity conference, Cambridge, UK, March 27–28, 2014.