I am talking (assuming my laryngitis disappears) tomorrow morning at the Citizen's League. My job is to open minds:
Upcoming Events > Mind Opener & Policy Forum: Transparent Funding Options for Meaningful Transportation Choices. My presentation will be posted online soon after.
From Freakonomics: Your City Needs You to Blow Through Red Lights
Apparently too much enforcement induces too much compliance, so there is not enough revenue to pay for the enforcement. There must be an equilibrium between revenue and compliance.
From the Washington Post: Letting the Market Drive Transportation, an article about the Bush administration's support for toll roads and road privatization, and the internal politics at the top level of USDOT.
The Legislative Auditor report on Minnesota's State Highways and Bridges report summary makes for interesting reading. (Full report here
"MnDOT is spending more—and a greater percentage of its resources—on trunk highway road and bridge construction than it did ten years ago.
MnDOT has increased the proportion of trunk highway spending dedicated to system construction, and decreased the proportion spent on operations, research, and support. In the 2002-03 biennium, about 63 percent of department spending was for road and bridge construction. Between 2003 and 2004, MnDOT reallocated over $36 million from its operating budget to fund highway construction. By the fiscal year 2006-07 biennium, spending on trunk highway road and bridge construction had increased to 71 percent of total spending."
later the report says:
"Overall, trunk highway project investments have not aligned with the department’s stated policy of "preservation first."
Between fiscal years 2002 and 2007, over half of MnDOT’s spending on construction contracts for trunk highway pavements was allocated to system expansion rather than preservation. In contrast, in fiscal year 2001, only 25 percent of pavement contract spending was allocated to expansion projects."
Of course ribbon cuttings are better politics than resurfacing, and I guess this whole debate depends on what is defined as spending, what is preservation, and operations and maintenance and what is new construction.
The Minnesota Department of Transportation. Metro Division Transportation System Plan. Technical report, MnDOT, 2001.
which I cited in Forecasting and Evaluating Network Growth implies that 21% of the total budget is spent on construction and 79% is spent on maintenance. Now there are differences (that was metro rather than statewide among them), but it should be clearer as to what spending is for capital expansion and what for capital maintenance.
As the system matures, maintenance takes an increasing share of resources (as there is more network to maintain), and new construction gets more expensive (the most cost effective projects have already been done), so one would expect more on maintenance and less on capital expansion.
That said, ride quality, which is said to be decreasing, needs to be quantified in terms of its economic value. Wearing down roads without rebuilding or properly maintaining is spending future capital (presumably it is more expensive to repair the more damaged it is), but the economic cost of the poor ride itself (a slightly bumpier ride) does not *seem* like it should matter so much, there is no evidence people go slower or waste time due to a somewhat rougher service (assuming we are talking Minnesota conditions, rather than truly decrepit roads).
I stumbled on this: Untangling Transportation - TIME
From 1975, i.e. the Ford Administration.
Transportation has been mature for a long time.
Via Peter Gordon, from New York Times: Welcome, Stranger. Here's a Speeding Ticket.
... " Michael D. Makowsky, a doctoral student in economics, and Thomas Stratmann, an economics professor, both at George Mason University, studied the issue in a recent paper, ''Political Economy at Any Speed: What Determines Traffic Citations?''
They examined every warning and citation written by police officers in all of Massachusetts, excluding Boston, during a two-month period in 2001 -- over 60,000 in all. Their conclusion wasn't shocking to an economist: money matters, even in traffic violations. They found a statistical link between a town's finances and the likelihood that its police officers would issue a speeding ticket. The details are a little sticky, but they show that tickets were issued more often in places that were short on cash, and that out-of-towners received tickets more often than drivers with local addresses." ...
(original paper by Makowsky and Stratmann available here)
So this paper provides some more evidence of tax exporting in transportation finance, a favorite topic of mine since my dissertation "On Whom The Toll Falls", extended in the book Financing Transportation Networks
More importantly, it is one less paper I have to write, it has on been my 'to do' list since my dissertation, but I never had the time to get together the data.
One could extend this work by looking at the location of "speed traps", where the hypothesis would be these are at the edge of town, and thus more likely to nab out-of-town drivers than in the middle of town (assuming imports=exports, and no through trips, 50% of all travelers at the edge of town are from out-of-town, a smaller percentage of travelers inside town are out-of-town; if there are through trips, then more than 50% of travelers at the edge are non-resident, while again a smaller number of internal trips are non-resident).
We need KOSHER Transportation Funding, Transportation legislation that prohibits pork. This New York Times article:
Campaign Funds for Alaskan; Road Aid to Florida describes the problem.
Local officials in Florida are receiving funds for a road they do not want, and are being blackmailed to accepting it with the threat they won't get other funding. The reason, a local property developer contributed to Congressman Young's campaign.
And the really strange thing is in the whole scheme of things, they did not give that much ... something like $200,000 for Republicans in exchange for $91 million in
local road projects.
KOSHER: Keep Our State Highway Expenditures Rational.
Article reprinted below:
Campaign Funds for Alaskan; Road Aid to Florida
By DAVID D. KIRKPATRICK
WASHINGTON, June 6 — It is no secret that campaign contributions sometimes lead to lucrative official favors. Rarely, though, are the tradeoffs quite as obvious as in the twisted case of Coconut Road.
The road, a stretch of pavement near Fort Myers, Fla., that touches five golf clubs on its way to the Gulf of Mexico, is the target of a $10 million earmark that appeared mysteriously in a 2006 transportation bill written by Representative Don Young, Republican of Alaska.
Mr. Young, who last year steered more than $200 million to a so-called bridge to nowhere reaching 80 people on Gravina Island, Alaska, has no constituents in Florida.
The Republican congressman whose district does include Coconut Road says he did not seek the money. County authorities have twice voted not to use it, until Mr. Young and the district congressman wrote letters warning that a refusal could jeopardize future federal money for the county.
The Coconut Road money is a boon, however, to Daniel J. Aronoff, a real estate developer who helped raise $40,000 for Mr. Young at the nearby Hyatt Coconut Point hotel days before he introduced the measure.
Mr. Aronoff owns as much as 4,000 acres along Coconut Road. The $10 million in federal money would pay for the first steps to connect the road to Interstate 75, multiplying the value of Mr. Aronoff’s land.
He did not return phone calls seeking comment. A consultant who helped push for the project spelled out why its supporters held the fund-raiser.
“We were looking for a lot of money,” said the consultant, Joe Mazurkiewicz. “We evidently made a very good impression on Congressman Young, and thanks to a lot of great work from Congressman Young, we got $81 million to expand Interstate 75 and $10 million for the Coconut Road interchange.”
Mr. Young’s role, first reported by The Naples Daily News, has escalated objections to the project. Environmentalists say the interchange would threaten wetlands. And a Republican commissioner of Lee County, Ray Judah, is campaigning against the interchange, calling it an example of Congressional corruption that is “a cancer on the federal government.”
“It would appear that Don Young was doing a favor for a major contributor,” Mr. Judah said.
The turmoil occurs at an awkward time for Mr. Young. A corruption scandal involving an Alaskan oil company has rattled the Republican Party in Alaska, and Mr. Young is among the biggest recipients of the company’s campaign donations.
One of his former top aides, Mark Zachares, has pleaded guilty to separate bribery charges involving the lobbyist Jack Abramoff.
House Republicans, meanwhile, are in a public relations battle with Democrats for the high ground on reforming “earmarks,” the pet projects that lawmakers tuck into spending bills behind closed doors.
As they have exploded in number for the last 12 years — the 2006 transportation bill included more than 6,300 projects worth more than $24 billion, the nonpartisan Taxpayers For Common Sense says — earmarks have proven ripe for cronyism, corruption and abuse. Though the House recently passed a rule requiring the disclosure of earmark sponsors, the flow does not appear to have slowed.
Until Democrats took control of Congress in January, Mr. Young was chairman of the Transportation Committee, and he and his staff distributed transportation earmarks to lawmakers seeking projects. Mr. Young may have first learned of Coconut Road on Feb. 17, 2005. That is when he flew to the region on a plane owned by Corporate Flight, a Waterford, Mich., charter company that is associated with the Aronoff family, which is based in nearby Bloomfield Hills, Mich. The Aronoffs are among the company’s biggest clients, said its general manager, Tom Hector.
Mr. Young’s re-election campaign reimbursed the company $3,422 for the flight, his campaign filings show.
At the invitation of the congressman from the district, Connie Mack, Mr. Young visited Florida Gulf Coast University for a meeting on the Interstate and other transportation questions. Afterward, Mr. Young went directly to the fund-raiser at the Hyatt Coconut Point.
His campaign records show that he received more than $40,000 in contributions on one day around that time, mostly from southwestern Florida developers and builders. Mr. Aronoff gave $500 to Mr. Young’s campaign and later gave $2,500 to Mr. Young’s Midnight Sun political action committee.
The invitations to the event listed as hosts Mr. Mack, a business group called the Southwest Florida Transportation Initiative that includes Mr. Aronoff’s company and two executives of other Florida developers.
Asked in a telephone interview who had organized the fund-raiser, Mr. Mazurkiewicz, the consultant, said he was then at another fund-raiser with a member of Mr. Mack’s staff who would know.
“Aronoff,” the staff member told Mr. Mazurkiewicz, within earshot of his mobile phone.
“Just some local businessmen,” Mr. Mazurkiewicz said into the phone. When pressed, he confirmed that the staff member had named Mr. Aronoff. Later, Mr. Mazurkiewicz called again to list the names on the invitation.
The Aronoffs, major Republican donors, gave more than $200,000 to Republican candidates and political committees in the 2006 election. Their business, the Landon Companies, is best known for building mobile-home parks. But it also operates a real estate development business in Florida.
Daniel Aronoff has taken over active management of the company from his father, Arnold Y. Aronoff, who had a checkered career in Florida real estate. In 1979, Arnold Aronoff was sentenced to two years in prison after pleading guilty to mail fraud in a scheme to sell Florida swampland at an inflated price.
When he was approached near the House floor by a reporter, Mr. Young responded with an obscene gesture.
A spokeswoman for Mr. Young, Meredith Kenny, initially said that Mr. Mack had requested the Coconut Road money. A spokesman for Mr. Mack, however, said he did not ask for the money. His chief of staff, Jeff Cohen, said Mr. Mack was surprised to find the project in the bill long after it had passed. “At the end of the day this thing got stuck in there unbeknownst to us and having nothing to do with us, other than it is our district,” Mr. Cohen said.
The plans for the earmark and the Aronoff land hit a roadblock when the Lee County Metropolitan Planning Organization voted twice last year to block a preliminary study for the interchange, mainly on environmental grounds. Studies by the Army Corps of Engineers, the Environmental Protection Agency, the Fish and Wildlife Service and the Federal Highway Administration have all warned that the proposed interchange could threaten wetlands.
But Mr. Young was evidently determined to see the interchange move forward. In a Jan. 23, 2006, letter to the chairman of the planning agency, Mr. Young warned that his committee would draft another bill taking away the $10 million if it was not used for the interchange.
On Jan. 31, Mr. Mack followed up with a letter warning that the rejection would “make it difficult for Southwest Florida to have future success in securing federal resources for other important projects.”
The planning organization subsequently reversed itself and approved an initial study of the proposed interchange. But the last election put more environmentalists on the county commission. Next month, county planners will again take up the question of what to do about Coconut Road.
According to this article : Transportation project more than a billion dollars over budget The FasTracks project in Denver will cost $6.1 Billion instead of $4.7 Billion, or 30% over the budget promised to voters as recently as November 2004.
Are officials constitutionally incapable of making accurate cost estimates, or was the misestimate intentional?
Mr recent paper with Andrew Odlyzko, Too expensive to meter: The influence of transaction costs on commuications has obtained some external notice:
Another London transport topic that has made its way across the Atlantic, The Canadian Press (via Breitbart) reports: London suburb to charge drivers parking fees based on emissions. Richmond upon Thames, a Borough of London, wants to charge £300 for cars to park in front of their houses if the cars are of models that are classified as big polluters (the local term: Chelsea Tractors).
The irony is that they are charging the cars when they are not polluting (i.e. when they are parked) rather than when they are.
Again, the technology could relatively easily be assembled to charge cars based on how much they pollute, that would be in the long run both more fair and more efficient. Robert Harley was doing tests on the measurements of this more than 10 years ago at Berkeley, see this paper for an example. That would just need to be tied to transponders or license plate matches (a la electronic toll collection or the London Congestion Charging scheme) and a price developed.
The continued use of second (or third) best solutions when much better ones are available is unnecessary.
A Tax on Gore: Truth and Carbon Taxes, some thoughts
Al Gore, in a recent speech at New York University about the appropriate response to global climate change said
“For the last fourteen years, I have advocated the elimination of all payroll taxes - including those for social security and unemployment compensation - and the replacement of that revenue in the form of pollution taxes - principally on CO2. The overall level of taxation would remain exactly the same. It would be, in other words, a revenue neutral tax swap. But, instead of discouraging businesses from hiring more employees, it would discourage business from producing more pollution.
Global warming pollution, indeed all pollution, is now described by economists as an ‘externality.’ This absurd label means, in essence: we don’t to keep track of this stuff so let’s pretend it doesn’t exist.”
It sounds like a neat trick, killing two birds with one stone. Certainly, I am open to taxing externalities based on the difference between their social and private costs. In contrast to Mr. Gore’s aspersion on economists, the word “externality” doesn’t mean we should pretend it doesn’t exist, it means the relevant actors (the polluters) pretend it doesn’t exist, which is a problem because it does.
Economists suggest several alternatives. Nobel Prize winner Ronald Coase suggests establishing legally enforceable property rights. The reason we have air pollution is because nobody owns the air. The reason we have less land pollution (e.g. dumping) hither and yon is because people do own the land.
The problem of course is (a) establishing ownership of the air and (b) tracking air pollution back to its source so that polluters can be legally charged.
The second solution is regulatory. With regards to traditional “criteria” pollutants in the US (ozone, carbon monoxide, oxides of nitrogen, sulfur dioxide, lead, and particulates), tailpipe pollution is regulated by the Environmental Protection Agency, and cities have to ensure their transportation plans don’t pollute beyond a certain threshold. Currently, CO2 is not a criteria pollutant because it does not have health effects, at least not in the same way. This is a quantity-based strategy. Mr. Gore advocates this when he suggests “freezing” carbon emissions.
A third solution, as Mr. Gore also suggests, is taxing pollution. In its pure form, we would allow anyone to pollute as much as they want, so long as they pay the carbon tax, which if properly set, would constrain the amount of pollution produced by providing the correct incentives. That tax (say X$/ton) would equal the social effect of the pollution. Establishing that social cost is not simple, nor is it uncontroversial. About 10 years ago I read a book about this by William Nordhaus, (the updated version is Warming the World: Economic Models of Global Warming by William D. Nordhaus and Joseph Boyer). The tax per ton would rise over time (as presumably would the impact of climate change, and our ability to pay for it). This is a price-based solution. The recent emergence of emissions trading combines quantity and price-based solutions.
Figuring out the proper level of the tax is no simple matter either. We can think about it in terms of damages: if the pollution went unprevented, what would it cost to fix. Or we can think about it in terms of prevention: how much would it cost to avoid the damage. If the cost of damage exceeds the cost of prevention, we should prevent, if the cost of damage is less than the cost of prevention, we should accept the damages. In practice we may prevent some damage and accept some damage.
Another point is that an externality requires two actors: the polluter and the pollutee. If I pollute, but no one is damaged, no harm is done. Think about noise: As the old koan goes, If a tree falls in the woods and no one is there to hear it, does it make a noise? No, the noise externality is only present if someone hears it and is harmed. By moving into the way of the harm, you are imposing costs on the polluter. Another example is the conflict that occurs with suburbanization into agricultural areas. As much as our politicians romanticize the family farm, farms smell. This isn’t a problem so long as only cows and farmers live there, but when suburbanites move in, this becomes a problem. Should the farmer pay, after all it is his farm producing the externality? Or should the suburbanites bear the cost, since without their presence, no externality would exist?
With climate change, because of its global nature, we might think consider the polluter clearly at fault. But what about people who move into low-lying, flood-prone areas? If no one lived below sea level in New Orleans, the economic and social damage of Hurricane Katrina would have been much less. Who should pay, the polluters (worldwide), who changed the climate and according to Mr. Gore, made the hurricane more likely, or those who moved into a vulnerable position? If you say some combination of both (which is of course the right answer), what is the combination?
So even if we have achieved consensus that we are spewing CO2 into the atmosphere, and are in agreement about the direction of that effect (it will make things warmer rather than colder in general), we are still in disagreement about the magnitudes of the climate effects resulting from that CO2, and in even greater disagreement about the economic cost that the climate effects imposes. I have worked with enough large-scale models to conclude that a plethora of assumptions founded on inadequate evidence must produce huge uncertainty.
Into this environment, Mr. Gore proposes a multi-part acronym-filled scheme that would make a Washington policy wonk swoon. Which leads us back to the carbon tax, which, if set correctly, is perhaps the most effective strategy. Mr. Gore proposes eliminating the Social Security payroll tax and replacing it with a carbon tax, ensuring the policy is “revenue neutral”. This reminds me a lot of 1980 presidential candidate John Anderson’s proposal for a 50 cent tax on a gallon of gasoline in exchange for dropping the Social Security tax. So the idea is at least 26 years old.
The payroll tax has elements of unfairness. However Social Security has nothing to do with climate change (except, I guess, that old people pollute). This is an illogical linkage, and will produce a perverse result. If the carbon tax is successful, we lose our funding base for Social Security, which as popular polls suggest, already fails to engender much faith in its fiscal health.
Two more Nobel Prize winning economists have suggested some rules about managing economic policy:
1) Jan Tinbergen's rule: Achieving a multiple number of independent policy targets requires an equal number of policy instruments.
2) Robert Mundell's rule: Each policy instrument should be assigned to a policy target on which it has greatest relative effect.
source
In other words, these economists posit one policy target per policy instrument (or one stone per bird). Trying to solve two problems requires two policy instruments, and so on.
If we levy a carbon tax, the revenue should be used to fix the damage global climate change causes or to prevent that damage in the first place. The amount of money that should be charged in a carbon tax is independent of the amount of money required for the payroll tax. By making the plan “revenue neutral” we are either raising too much money (and wasting money by reducing more carbon than would economically efficient) or not enough money (and wasting the opportunity to provide incentives to invest in more carbon-reducing strategies).
That said, Social Security should be financed appropriately as well, but that bird deserves another stone. I believe that there should be one policy analyzed per policy essay.
The overall quality of a public school is largely derived from two characteristics: the quality of the education provided (which depends in large part on teachers and facilities) and the quality of the learning (which depends on students). Hedonic models of house price indicate that the quality of public schools is capitalized in the value of land. Such matters are important. First, schools are a major determinant of property values and thus residential sorting by income, where the rich can isolate themselves from the poor. This introduces inequity into the system. Second, an analogy can be drawn to how roads should be paid for and whether users should pay or they should be capitalized into property taxes.
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