The Economix Blog at the New York Times is launching a multi-part series on high speed rail, beginning with this post by Harvard economist Edward Glaeser. As a general rule I tend to dismiss any analysis of passenger rail that thinks a Simpsons episode has any role to play in the assessment (but then I did live through the endless and ultimately self-defeating debate over the Seattle monorail project, so perhaps I'm biased). But Glaeser has a high-profile soapbox to make his assessment, and as he is promising a fair analysis, it's worth taking this seriously.
Glaseser's basic approach can be gleaned from the following quotes:
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.
Already Glaeser is off to a bad start. By framing HSR as presidential optimism bordering on hucksterism and demanding a "cost-benefit analysis" he is assuming HSR is guilty until proven otherwise. HSR is cast as an unproven, almost mythical concept. Nowhere in this introductory post does Glaeser mention other HSR systems around the world, all of which generate operating surpluses and have successfully met their ridership goals (although it usually takes several years to reach that point).
In fact, as Glaeser lays out his methodology for the series, it seems that the numerous other HSR projects aren't going to put in an appearance at all:
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.
I'm not quite sure how a credible analysis can be given without looking at the experience of other HSR projects around the world. But even if we were to limit our study to the US - flawed methodology, but let's play along - Glaeser's metrics leave quite a lot out.
Glaeser is likely going to assume that the cost of doing nothing is zero, as he gives no indication that the construction and operating costs will be compared to the construction and operating costs of new freeway lanes and new airport terminals and runways that will be needed to handle future traffic. We spent virtually all of 2008 on this blog reminding people that the cost of doing nothing is NOT zero - that any assessment of HSR's costs must be done in the context of the costs of alternatives.
This is almost never done for passenger rail, let alone HSR. The default assumption, even among academics (and especially among economists) is that the cost of not building passenger rail is always zero. Rail projects are usually framed as a new, novel, and probably unnecessary cost. It gets held to standards and metrics no other form of transportation is ever held to, especially automobile transportation, whose costs are not only far from zero, but are far higher than the cost of HSR.
The list of benefits of HSR also seems unusually limited. Glaeser doesn't include the savings on oil consumption, or the financial benefits of reduced pollution. He does plan to mention "indirect" benefits, hopefully to be measured along the lines of the green dividend, but he apparently isn't going to examine the benefits of greater urban density that HSR will encourage.
Granted, this first post is like the introduction of a dissertation - doesn't really offer much in the way of hard analysis. But what analysis is advanced here isn't exactly encouraging:
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.
Actually, what is most in need is a clear definition of what makes a cost estimate "plausible." We need to see the logic and methodology behind an estimate. Land, labor, materials, etc - these costs can be estimated, and even though the estimates sometimes vary, there should always be a measurable reason for the variation - different assumptions about how land values will change in coming years, etc.
One reason I am so persistently critical of the "omg California HSR will cost $80 billion" claims are that those estimates are never explained. They're numbers pulled out of thin air. If someone sat down and looked at every single expenditure, questioned the assumptions, gave their own estimates for those expenditures, explained the reason for giving a different estimate on each piece, and then totaled it up and said "hmm this is higher than predicted" then that analysis would be quite welcome.
Unfortunately there's just something about passenger rail that seems to make some people think that it's perfectly fine to just pull numbers out of thin air and pass them off as if they are reasonable and credible. I don't know if that's Glaeser's plan, but what he's offered here isn't exactly encouraging.
So we will watch the next posts in the series (to be published once a week) with interest, but with skepticism. It's hard to shake the feeling that we're playing with a stacked deck on this one.