  The article first describes characteristics of major infrastructure projects.
Second, it documents a much neglected topic in economics: that ex ante
estimates of costs and benefits are often very different from actual ex post
costs and benefits. For large infrastructure projects the consequence is cost
overruns, benefit shortfalls, and the systematic underestimation of risks.
Third, implications for cost-benefit analysis are described, including that
such analysis is not to be trusted for major infrastructure projects. Fourth,
the article uncovers the causes of this state of affairs in terms of perverse
incentives that encourage promoters to underestimate costs and overestimate
benefits in the business cases for their projects. But the projects that are
made to look best on paper are the projects that amass the highest cost
overruns and benefit shortfalls in reality. The article depicts this situation
as "survival of the un-fittest." Fifth, the article sets out to explain how the
problem may be solved, with a view to arriving at more efficient and more
democratic projects, and avoiding the scandals that often accompany major
infrastructure investments. Finally, the article identifies current trends in
major infrastructure development. It is argued that a rapid increase in
stimulus spending combined with more investments in emerging economies combined
with more spending on information technology is catapulting infrastructure
investment from the frying pan into the fire.
