Imagine that you were the governor of Massachusetts 15 years ago and needed to decide if you should support the "Big Dig" which put Interstate 93 underground through the center of Boston. The Big Dig was estimated to take 7 years to complete. The project is estimated to require $45 million in construction materials per year and $20 million in labor costs per year. In addition, the construction would disrupt transportation in the city for the duration of the construction. The transportation disruption lengthens transport times for each of the 100,000 workers by 30 hours per year. All workers are paid $15/hour (assume that there are no distortions in the labor market so the wage reflects the value of an hour of leisure). When complete, the project is estimated to ease transportation within the city. Each of the 100,000 workers will have their transport time reduced by 35 hours per year as compared to the pre-construction transport time. In addition, the space formerly taken up by an elevated highway will be turned into a large park. The State of Massachusetts has determined that each worker will value the park at $40/year. We will assume that no one else will use the park. We also assume the government has a 5% discount rate and that the workers live forever. The benefits to the Big Dig begin in year 7, assuming construction on the project begins in year 0 (i.e. the construction runs from t = 0 to t = 6 and in t = 7 the benefits begin to flow). This means you can calculate the benefits that last forever in nominal year 7 dollars and then convert this total to year 0 dollars.

(a) Should you, as the governor, proceed with the project? Formally show the cost benefit analysis. Note that the actual costs of the Big Dig far exceeded these estimates as did the time it took to complete