Abstract
Public sector involvement in research is examined, with emphasis on the creation of incentives by government. In transportation, government investment in research is often a spark for improvements in overall economic productivity. This connection has been dubbed “the Virtuous Circle” and helps justify basic and applied research. Is research always justifiable from a societal perspective? The answer to this question is best approached with the application of cost-benefit analysis, or more specifically net present value (NPV). While NPV appears to be simple calculation yielding transparent solutions, a proper cost-benefit analysis requires careful construction of a base case as well as decisions on discount rates and indirect impacts. Sensitivity analysis is used to check the validity of the chosen assumptions. A case study of new, high speed rail technology illustrates how some of the concepts can be applied.