Friday, February 25, 2011

Edward Glaeser's economics of high-speed rail in 2009; a look backward

Almost two years ago, Harvard economist and New York Times blogger Edward Glaeser wrote a four-part series on the costs and benefits of high-speed rail.  He did a pretty good job and it's worth re-printing the first two of them here.  I'll split them up into two entries on this blog.

Remember, the date for these is mid-2009.  Since then, the President has promised to have 85% of all Americans close to high-speed rail access within 25 years. I'm inclined to add to that promise, "whether they want it or not."  

Do all those Americans have to be so close to high-speed rail as well as to airports and Interstate highways?  Wouldn't regular rail serve them almost as well at far lower cost to the taxpayers?  Even if it was a great idea, is there some point where one can have too much of a good thing?  Is the President over-promising, hoping at least to get a little something of high-speed rail?  

From this grandiose vision, it would appear that America must be travel-obsessed and each and every one of us must be constantly on their way from one city to another. Is there that great a need to justify the vast costs of building and running so many HSR trains?  Is that the case?  Or, will our economy recover and flourish only if we are are all whizzing around the country on a high-speed train?  When thinking about this, it seems absurd.

Practically speaking, I question the authenticity or sincerity of this plan.  Is it the trains that Obama wants to improve and replace, or is it the economy which he believes will benefit from massive infusions of funding from Washington into the cash-poor states? For that latter agenda, the trains are, figuratively speaking, merely the wasteful vehicle for that funding transfer.

To the President I would suggest, cut out the middle man; that is, the train, and the many sticky fingers that, one way or the other, have their hands in the till.  Send the dollars directly to each state's Transportation Department to spend as they see fit.  Don't waste those dollars, Mr. President.  Let the states do it.

Part I.

JULY 28, 2009, 6:57 AM
Is High-Speed Rail a Good Public Investment?

Edward L. Glaeser is an economics professor at Harvard.

Last Thursday, the House of Representatives voted another $4 billion for high-speed rail projects, on top of the $8 billion that was part of the stimulus package. 

President Obama has described a vision of “whisking through towns at speeds over 100 miles an hour, walking only a few steps to public transportation, and ending up just blocks from your destination.” The administration is imagining 10 high-speed rail networks scattered throughout America, not only in the Northeast, but in California, Texas, Florida and Wisconsin.

There is a powerful magic in the president’s vision of fast, sleek trains carrying Americans at dazzling speeds. Why shouldn’t the transport technology that hauled Americans during the glory days of American industry also bring us to a brighter future? Older cities, like New York and Boston, were built around rail lines: A move from cars to rail would certainly help other cities develop. Europe’s fast trains, like the speedy connection between Madrid and Barcelona, are marvels that show the progress that trains have made since the plodding trip I first took on that route in 1985. Personally, I almost always prefer trains to driving.

Yet the public must be wary every time our leaders decide to spend billions of our tax dollars.

The Government Accountability Office’s comprehensive report on high-speed rail that reminds us that:

While some U.S. corridors have characteristics that suggest economic viability, uncertainty associated with rider and cost estimations and the valuation of public benefits makes it difficult to make such determinations on individual proposals. 

Research on rider and cost has shown they are often optimistic and the extent that U.S. sponsors quantify and value public benefits vary.

The founders of transportation economics, like John Meyer and the deeply missed John Kain, found that the benefits of passenger rail rarely exceeded the costs.

Their views were caricatured by generations of Harvard graduate students as “Bus Good, Train Bad.” 

Is money really better spent on fast trains than on educating our children?

I would be delighted to share the president’s optimism about high-speed rail, but if benefits do not exceed the costs, then America will just be living through a real-life version of “Marge vs. the Monorail,” where the residents of the Simpsons’ Springfield were foolishly infatuated with a snazzy rail project oversold in song by Phil Hartman’s character.

Economics doesn’t have any inherent opinion on trains, but it does strongly suggest the value of cost-benefit analysis, which may be the best tool ever created for evaluating public investments.

Large infrastructure projects are complicated things that all have hundreds of consequences, some good and some bad. It is easy to come up with good and bad side effects of high-speed rail: More people coming into a centralized train station might reduce long car trips associated with sprawling airports (that’s good), but increase congestion in the city (that’s bad).

These ideas are so cheap that unless they are seriously quantified they have no place in the debate. Serious accounting, not clever debating points or soaring rhetoric, is the critical ingredient in good public decision-making.

I will spend the next three blog posts on the major costs and benefits of high-speed rail. The costs include up-front construction and operating costs. The benefits include direct benefits to riders, indirect benefits include reductions in carbon emissions and traffic congestion, and any indirect aid that rail gives to local economies and to national economic recovery.

The up-front costs of rail are primarily the cash outlays, and these are perhaps easiest to quantify. The Government Accountability Office’s summary of building costs in Europe range from $37 million to $53 million a mile. The Japanese lines cost from $82 million to $143 million a mile. (Higher costs in Japan reflect difficult earthquake-prone terrain and expensive land.) Cost estimates in the United States range from $22 million a mile, for a Victorville, Calif., to Las Vegas route, to $132 million a mile for connecting Baltimore and Washington.

These figures are all debatable, but anyone who thinks that the G.A.O. got it wrong needs to come up with alternative figures that are equally plausible. As such, the cost of a 240-mile line, like the one that could connect Dallas and Houston, would probably run about $12 billion, but it could be as cheap as $6 billion or as expensive as $24 billion, and these are the numbers that we have most confidence about.

Next week, I’ll turn to operating costs and the direct benefits to riders.
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