Is transport too expensive?


Lisa responds to my earlier post in: Is transport too expensive? The Transportationist gets us thinking

To reduce her excellent post, she has 4 hypotheses to add to my 8:

9) The highest demand areas for maintenance and new stock occur in places that are expensive.

10) Project creep.

11) Envy is a much bigger problem in public works than in personal life,

12) Benefit cost is only as good as the integrity of the data and the analysts, and the whole process is too easy to roll.

In the comments to my original post,

Dick Mudge (I think) added another, which is

13) Federal funds favor capital-heavy technologies and investments.

"knowing home" writes:

14) Transportation planners also must demonstrate their projects will address potential peak traffic 20 years down the road, when it is assumed congestion will have increased dramatically.

PWG writes:

15) Planners and engineers are paid as percentage of total project cost

16) Materials are scarcer (and thus more expensive)

17) Regulations like ADA and environmental protection are driving up costs

*Updated 12/3* David King adds two more via FB:

18) Formula spending reduces the incentive or need to worry much about costs. This is obviously related to many of the other hypotheses already considered but I think deserves it's own number.

19) What Chuck Marohn said about the State Aid system: "In short, large sums of money are collected at the state and federal levels for transportation and then a portion of that money is transferred back to local governments for transportation. Along with the money comes requirements that dictate how that money is to be used. These include engineering requirements for things such as lane width, degree of road curvature and design speed and planning requirements for things like maintaining a hierarchical road network. (Knowing this can actually make you a touch sympathetic, on a personal level, to the ridiculous engineer bear.)"

** Updated 12/5 ** The Economist writes about the UK:

20) Stop/start investment and

21) Poor commissioning.
"Since the competition for infrastructure investment is global, not national, Britain faces a further problem: project costs are “excessively high”, according to Infrastructure UK, a Treasury body charged with helping the private sector invest. That is partly because regulation tends to be rigorous and planning onerous. But Infrastructure UK reckons stop-start investment and poor commissioning are also to blame. It hopes that laying a pipeline of projects now will help to cut costs by £2 billion to £3 billion a year."

*** Updated 12/6***

22) Stephen Smith posits another reason for high costs, "starchitecture", when he argues Good Transit Is Ugly Transit - Forbes: "As always though, America must be the exception. Spain would never spend $3.8 billion on a single starchitect-studded station, but its own Santiago Calatrava was happy to build one if New York was footing the bill. Calatrava’s original design called for an enormous bird-like World Trade Center PATH station whose walls would open up in a sort of flapping motion, but it was scaled back for security and cost reasons. The wings were clipped and evolution was set back a few hundred million years – the bird will now be a ”slender stegosaurus.” Even the originally projected $2.2 billion cost would have been more than Paris spent on its entire new 9 km-long Métro Line 14."

I will add another couple:
23) Separation of design and build. We know design/build saves money, yet this is not standard practice, but instead is innovative. In addition to driving up costs, dividing responsibility, it extends construction time.

24) Doing construction on facilities still in operation. Aside from the rare bridge, it is unnecessary to keep facilities opening and operating while doing construction. This reduces construction space, reducing time, increases set-up/break-down costs, and otherwise adds to total costs. Construction is much faster (and thus cheaper) if rebuilding could be done on a closed facility. See the London Underground as the classic example of the high cost of doing construction only at night and weekends, but keeping the line in operation. The system as a whole must be reliable, meaning I can get from here to there, but that does not mean every segment must be open 24/7/365. One reason the reconstruction of the I-35W bridge was so fast as that they contractors did not need to worry about existing traffic, (and it was design/build).

**** Updated 12/8 ****

David King posts some in the comments (25-27), and mailed some others(28-32), which I renumber for consistency:

"This list was timely for me. I covered Cost-Benefit Analysis in my transport course today and went through these 19 hypotheses, and my students came up with a couple of new ones:

25)Union work rules (not wages)that inhibit productivity gains through new technologies. See this this story.

26) Fragmented governance leads to large and meandering projects rather than centralized projects. Politicians have to "share the wealth" of projects. This is perhaps a cause of "project creep."

27)Environmental Impact Statements (Reports) lead to "lock-in" effects where a complete EIS is a determining characteristic of a project's viability rather than some other type of analysis. Since EISs can take years to complete, having one ready is a big deal."

"28) Public-private partnerships trade additional up front costs for faster construction. See this story.

29) Open government/costs of democracy. The planning process is required by law to bring in as many stakeholders as possible. This has (potentially) led to transportation investment being sought and justified for non-transportation concerns. Transportation investment is now used for social, moral and economic goals that are not directly related to mobility.

30) Marketplace had a story today that climate change adaptation is increasing the costs of projects."


Michael Iacono gives me the

31) Ratchet Effect: Interest groups are attracted to a particular public issue and pressure the legislative body to increase spending on that issue, but make it impossible to decrease spending on the issue.

***** Updated 12/9 *****

32) Wikipedia identifies "Baumol's cost disease (also known as the Baumol Effect) is a phenomenon described by William J. Baumol and William G. Bowen in the 1960s. It involves a rise of salaries in jobs that have experienced no increase of labor productivity in response to rising salaries in other jobs which did experience such labor productivity growth. This goes against the theory in classical economics that wages are always closely tied to labor productivity changes.

The rise of wages in jobs without productivity gains is caused by the necessity to compete for employees with jobs that did experience gains and hence can naturally pay higher salaries, just as classical economics predicts. For instance, if the banking industry pays its bankers 19th century style salaries, the bankers may decide to quit and get a job at an automobile factory where salaries are commensurate to high labor productivity. Hence, bankers' salaries are increased not due to labor productivity increases in the banking industry, but rather due to productivity and wage increases in other industries." [Since fewer employees are needed in the now more productive industries, the relative labor costs of the unproductive industries rises].

David King Identifies:

33) Transit investment isn't realizing any productivity gains from labor.
Thanks to the Tappan Zee Bridge replacement NY papers and blogs have been arguing about infrastructure investment as stimulus. This report from Smart Growth America, for instance, states that every dollar spent on public transportation yields 70% more jobs than a dollar spent on highways.

This is used to bolster the argument that we should spend more on transit, but I think there is an alternative explanation which is that we are much, much better at building roads than at building transit. As labor is a large proportion of total cost, transit investment has not realized productivity gains that have occurred in road building. This could be explained in part by lack of competition, low levels of total investment haven't brought new producers into the market, or a number of other reasons. I don't think the relatively high number of jobs per dollar spent necessarily means that transit investment is more virtuous. It may just be more inefficient. This is a problem with treating transport investment as industrial policy.

34) Utilities have little incentive to minimize the costs and disruptions from moving and upgrading service, and there are far more utilities now than there used to be. The UK once considered charging utilities rent for road space when doing subterranean work, though nothing happened. Christian Wolmar mentioned this in this post:

griffin1108 in the comments on the Washington Post article identifies:

35) Experience: "I think the reason has to do with experience and competence. We have no high speed rail lines, so any high speed rail line built in the US will be a "one off". Same applies to subways and light rail. If you don't do something regularly, you never develop an expertise that will reduce costs because you are constantly reinventing the wheel. The US has become a "stupid" country. We are paying the price for being stupid."

David in the comments of John Bedell's Blog identifies 3 items:

36) Ethos, training and prestige: "I suspect that two other explanations might be more apt: first, the kinds of ethos, training, and prestige that go with bureaucratic jobs in Germany and Japan,"

37) Government power: "and, second, the ability of government in those places to run roughshod over local resistance, property claims, special interest complaints, and lawsuits."

38) Legal system: "I wonder if there aren't also different laws applying to things like bond issues and insurance."

So we are now at 17 19 21 24 31 38hypotheses. Martin Luther had 95, so we may close in on that.


This list was timely for me. I covered Cost-Benefit Analysis in my transport course today and went through these 19 hypotheses, and my students came up with a couple of new ones:
23)Union work rules (not wages)that inhibit productivity gains through new technologies. See this story:

24) Fragmented governance leads to large and meandering projects rather than centralized projects. Politicians have to "share the wealth" of projects. This is perhaps a cause of "project creep."

25)Environmental Impact Statements (Reports) lead to "lock-in" effects where a complete EIS is a determining characteristic of a project's viability rather than some other type of analysis. Since EISs can take years to complete, having one ready is a big deal.

It is the lack of market systems that add costs to infrastructure bills. When cost constrained much greater return on smaller investment can be delivered, as illustrated below:

For the past 10 years the San Antonio Metro government officials have been working on developing seven mile stretch of US 281 in the region. From 2003 to the present the main focus has been a full freeway at a price near $500 million(1). But due to strong opposition an interim fallback position had to be taken in 2008-2009. The $7 million(2) interim project delivered $19 million(3) in annual benefits compared with total delay costs of $25 million(4) annual cost of delay estimated by TTI for TxDOT.

At the heart of the matter is what Scott McBride says they are doing in Minnesota on MnPass Lanes “Rather than funding a few big ticket road projects a year, MnDOT's new priority is to take on more smaller projects that deliver 80 percent of the benefits of bigger projects at 10 to 20 percent of the cost”(5). These two examples are far from what people want when there is no direct payment for the use of facilities. However, the examples show options that provide greater return on investment with the resources that are available.

Andrea Neal Provides an excellent example of Federal inefficiency (6). Solutions that are constrained by what users are willing to pay (for use) focus the resources to more efficient investments. A federal pool of resources has too little user market signalling to efficiently direct infrastructure spending.

P.S. An admonition, while Scott McBride has my favorite quote ever regarding cost effective solutions, cost benefit analysis cannot replace the market place in efficiency of allocating resources. Work done by the University of Minnesota on the MnPass lanes shows benefit cost ratios of 6.3:1 (7) but shows only resulting revenue stream to cover 25% (8) of the project capital costs. If there truly is a 6:1 benefits to cost ratio then is is hard to believe that a fully funded implementation plan is not available.


2. (page 106/116)

3. (page 7/116)

4. (Line 37 of Texas Most congested roadways)


6.|newswell|text|Frontpage%20DontMiss|s (HT Cafe Hayek Blog)

7. (slide 23, I -494 TH 212 to MSP Airport)

8. (slide 24, I-494 TH 212 to MSP Airport)

David Levinson

Network Reliability in Practice

Evolving Transportation Networks

Place and Plexus

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Assessing the Benefits and Costs of Intelligent Transportation Systems

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