The costs of not building trains

http://www.nytimes.com/roomfordebate/2012/01/26/does-california-need-high-speed-rail/california-can-spend-on-roads-or-on-rail

1) This seems to be the appropriate context in which to discuss building railroads--we're going to have to accommodate regional growth somehow, what are the alternatives? The airways are packed, and intercity roads will guarantee a traffic nightmare in the urban hubs.

2)Why does no one care about the wastefulness of rural highways? Why is no one complaining about the myriad of projects like our spending $1-2 billion on corridor H in WV, which connects Elkins to Winchester, VA (which will require high maintenance costs and not have any revenue stream)? Or the stupefying ICC, for that matter?

3)It's amazing how high a discount rate people apply to visible construction projects--infrastructure lasts for a LONG TIME given the costs. We're still using subway tunnels built in 1900 in Boston and New York. And the Big Dig--now that it's done, it's AWESOME. For all the complaining, in 40 years time, people won't be able to imagine life without it.

4) Also, people complaining about ballooning costs are bordering on dishonesty. Keeping costs down is easy--cities need to learn to put up with a train in their backyards if they want service. Modesto can't demand a center-city tunnel and then whine that they're going to have to pay more for it.

By the way, if you weren't paying attention to this "debt ceiling" hubbub...

...this is serious business.

The debt showdown has now begun to mimic the global warming debate, in that all rhetoric about consequences is framed probabilistically and speculatively, and some would like to pretend that there wont be a problem at all. The debt ceiling is different to the extent that many Americans and political leaders are convinced that, if we act to late, mitigation of the damage will be relatively easy. We can prioritize our payments, or use potentially illegal fallback strategies, or resolve the showdown a day late and cover for any shortfalls.

Reading the news this week, though, I've noticed two major shifts in reporting on the issue. First, consequences are being framed in less probabilistic terms. Second, it's become increasingly clear that the mitigation strategies will be ineffective.

In particular, this is really unsettling news.

The two most important takeaways:

1.) You don't need to default to spook financial markets. Remember how all of this deficit scare business began with concerns that a lack of confidence in US debt securities would cause a run? That is the crisis we feared, not a default. This could be that crisis. Not twenty years from now, when our debt gets "too big".     Now.




2.) What the treasury department does isn't as straightforward as most people like to pretend. There are a large number of different flows of funds at hands, and many depend on market operations. Which might make it more difficult to quickly clean up any mess or to prioritize payments than members of congress seem to realize.

Keep watching. There's way more at stake here than in the shutdown showdowns.

Ernest Becker on the Deficit

...we think the budget mess is a squabble between partisans in Washington. But in large measure it’s about our inability to face death and our willingness as a nation to spend whatever it takes to push it just slightly over the horizon.

That's David Brooks, not actually Becker, in today's NY Times. If you're unfamiliar with the reference, Becker's Denial of Death is a minor classic, known for its very brunt yet sober claim that death plays a large role in our lives that most people are not ready to acknowledge. Though David Brooks doesn't always get the political dynamics of Washington correct, he does deserve credit for eschewing the rhetoric of the political leadership, with all it's hand-waving, wonk-speak, and intentionally inoffensive superficiality, and trying his best to address the heart of our political problems, even when doing so is probably uncomfortable and unpalatable for popular audiences. I do think there's truth to what he says, but I also think it would be comforting to put this out of mind and go back to speaking about the debt like it's just a matter of hard math.

The great marathon transit trek, part 1: Philly

I went up to New York over the weekend, and I decided to make the trip there more interesting by seeing how many rail transit systems and urban landscapes I could explore in one day. In total, I was able to get to 5 heavy rail metro systems, 3 light rails, 1 commuter rail, with 4 urban walks in between. In the next few posts, I'll share a little of what I saw.

Philly

I began my journey with a quick foray into the metro-like components of Philadelphia's SEPTA system. For those who have never had the fortune (I wouldn't necessarily call it good fortune) to experience transit in Philadelphia, SEPTA is perhaps the most schizophrenic system in the world. Just look at the map.

Seems straightforward enough. But I'll comment nonetheless. The amazing thing about this map is that one has no idea what kind of train (or whatever) to expect on any given line, or if switching lines is an easy transfer or a transition to an entirely different system with different fares, etc. Looking at a Metro map in DC, one can be relatively sure that every Metro train and station will look pretty much like every other one. But in Philly, the map depicts subway lines, trolley lines, light rail lines, and commuter rail lines--and it's not clear which is which.

To make things better (that's schadenfreude, not optimism),  Philadelphia has four subway lines, each of which is nothing like the other. That's why there's no mention of a "SEPTA metro" on the map. The two primary heavy rail lines--the Broad Street and Market-Frankford lines--form something of a metro system, with a central transfer station at city hall, but there are still major differences between the two--in particular, the two lines run on different gauges (which means they are different technologies), and the broad street line has express service, while the Market line doesn't. What they have in common (besides the archaic token fare system), is that they are both relatively foul and old.

I took the Market line from 30th street to City Hall, and then switched to the Broad line, which I took from City Hall to Walnut/Locust.

Market-Frankford Train Approaching 30th Street

The stations are reminiscent of an unkempt, older Boston subway station, except without the lively buzz of activity or any attempt to convey that someone is trying to keep the system updated and modern (that is, without the charm). The fare is a token that one purchases from an attendant in a booth (like it used to work in Boston). Waiting for a train, one gets the sense that no new work (or maintenance, really) has been done to the station since the early 70s. And then the loud, creaky, screechy train finally comes bumbling down the track, and one begins to suspect that the same might be true of the subways cars. Admittedly, this was more the case on the Broad line than the Market line, but the difference was a matter of degree. In particular, there was an striking absence of professional-looking people on the Broad line, but that's probably because of where it goes (and doesn't go).

Inside a Market-Frankford car

Boarding the Broad Street Line

I mentioned four subways lines, but have only mentioned two so far. The third is actually only a "pre-metro", which is a fancy way of saying that it's a streetcar/trolley line that has a section with underground tracks and stations. Many, but not all, of the trollies in Philadelphia collect near 30th Street Station and enter the tunnel that the Market-Frankford line runs through. The trolly lines straddle the heavy rail line, and have more frequent underground stops than the heavy rail line does (visible in the first picture above). At least at 30th street, the platform was not shared between trollies and heavy trains, and it was not clear if it is possible to transfer without leaving and reentering the station. The trollies turn around underground at 13th street.

The last subway line is a real heavy rail metro, but isn't part of the SEPTA system at all (though it's on the map). I'll talk about it in the next post.

I didn't have time to ride the trollies or the various light-rail-type-trains that run out in the suburbs, but I did have time to walk down to the italian market and get a ridiculously awesome italian hoagie at Sarcone's. This is the sort of thing that Taylor Gourmet in DC is trying to emulate. And it's fantastic.

Doesn't technological progress mean being able to make things more cheaply?

In almost every economics textbook I've seen, the hallmark of technological progress is increased productivity. That is, the ability to produce more stuff with the same amount of resources.

So, if we've really undergone a century of unprecedented technological and economic progress, full of productivity gains across the boards, then why the heck is the ARC tunnel (and it's successors) so darn expensive?

Just to recap--right now, all heavy rail traffic goes through two bores built over a century ago. They may not be perfect, but we've done pretty well with them over those 100+ years, right? We still send trains through them every few minutes now, and the opponents of a new tunnel are content to do so indefinitely. So in looking for new tunnels we don't need a better product, just additional bores to get more trains through, or maybe a replacement tunnel for when the existing one finally does reach its retirement age, right?

Given all the advancement we've seen over the past hundred years, I would have thought that we should be able build an identical tunnel at significantly lower cost. But the price tag for the ARC project (originally 8.7 billion, rose to 11 billion) and it's successor, the Gateway project, are significantly higher than the tunnels that have preceded it. For example, the PATH tunnels to midtown, built in 1908, cost about $1 billion in current dollars. The Holland Tunnel, built in the 1920's, entailed $48 million in construction costs, which is well under $1 billion in 2010 dollars. I can't find too much about the original tunnel, but this article makes it seem like the 1904 cost was $2.5 million, which is-again-less than $1 billion in today's terms (and, of course, my belated condolences to the grieving, inverted Mrs. Sea Cow).

The problem, then, isn't that transportation infrastructure is innately too expensive--it's that for a variety of reasons, transportation projects have become more expensive, despite improvements in technology.

I find this trend disheartening, and a little puzzling. Several explanations offer themselves: rising real estate costs make eminent domain more expensive; labor costs have risen above productivity gains; it's always cheaper to build the first tunnel (which claimed the most direct routes) than those that follow (especially if existing infrastructure needs to be reconfigured); the costs of interrupting activity in the city are much larger in the modern economy; new regulations and standards have drastically increased the costs of doing business. Some of these obstacles have no real justification--what's the point of new regulation if we were content with the previous outcomes? But others seem to be innate to the task of modifying well-established urban areas, and finding ways to overcome those hurdles will be one of the great challenges of the urban renewal age, which is finally in full swing.

Update: Did I mention lack of competition as a potential problem? I reckon I should have.

Taller buildings downtown would not solve all of DC's problems.

As I was biking across what I suppose is now called "Penn Quarter" today, I was reflecting on the arguments for skyscrapers in DC. And while I suppose there is some validity to a handful of them, many of them seem off the mark to me.

First of all, Yglesias' argument that there is nowhere left to build downtown is a little bizarre. As far as empty land goes, of course that's true. The innermost core of the CBD in any city will unlikely have any undeveloped land. It's not like there's any room "left to build" in Manhattan, or even most of the Bronx! You'd have to tear something down and build something bigger. But we have a height limit, Yglesias would say. And yet, as I look around many blocks downtown, many of the buildings are six or seven stories tall, while the height limits would allow for buildings twice that size.

And that fact should serve as a reminder that maybe the height limit isn't the only reason we don't have skyscrapers. Sure, Providence has the Hospital Trust Building and the Bank of America building--but that's it!

Also, the claim that the height act has induced people to build ugly boxes build right to the sidewalk and as high as possible, with no friendly aesthetic presence seems to be untrue. Sure, that's what buildings look like around Farragut square, but most of that construction occurred during a time when people built ugly things. Compare that area to Seventh st. in Penn Quarter, where new buildings incorporate the historic fronts of their predecessors, and rise fourteen stories in the rear--a style I find to be very tasetfull. It would seem as if there is quite a lot of room for expansion in that area, and there's evidence that it can be done in a tasteful way.

Second, the idea that the height limits are the biggest problem downtown because urban development should occur in immediate proximity to the current center of development to maximize returns to scale, or density, or something-or-other, doesn't seem very well, founded either. I can easily understand why keeping jobs in a dense area close to other business is preferable to letting it expand into sprawling suburbs, but why is it preferable to have everything crammed into the twenty blocks that are the existing core, rather than developing the next twenty blocks over? That's not even how things work in Manhattan! Midtown is several miles from Downtown, separated by several neighborhoods with relatively short buildings. So why not push out into SW, SE, and east-of-river? As long as new development is sufficiently close to existing development, there doesn't seem to be any real problem with the creation of a second (Midtown Manhattan-style) core.

In fact, expanding density into new neighborhoods instead of building taller in the existing core seems to encourage transit use, despite what Yglesias has said. Transit has been most useful in cities where density is pervasive, like New York, London, Paris, or even Boston. In areas with dense, sky-scraper laden cores but no density outside that core--like Houston, Charlotte, or Kansas City, or really most "new" American cities--transit has taken a backseat. So it's not clear why DC would be different. As much as DC-skyscraper advocates like to write off the Roslyn-Ballston corridor, the new density in those not-too-far-out regions has is widely cited as one of the nation's great transit-oriented-development success stories of the pas several decades. There's no reason that model could work in parts of DC.

Which brings me to the third main point. Yglesias loves to talk about the height limits as a revenue issue. But let's be clear--that is not a net gain! Whatever revenue the city government would gain would probably be revenue lost by a neighboring government. Yglesias is not advocating a regional perspective, but a strictly municipal one--a perspective that places the District in an adversarial relationship to it's neighbors.

Of course, backhanded policy measures to raise revenue are always suspect. What would the city do with those revenues? How much would go back towards serving the businesses that have moved into DC? Would that really solve our budget problems? And isn't this a local version of "grow our way out of the deficit"? Why is Yglesias so skeptical of the Bush tax cut's intentions, but so lenient when it comes to local policy? And, the maxim still applies that any revenue-raiser raises less than you think, but causes all the distortions you'd expect. I wonder if he takes into account the slopes of supply and demand--that increasing supply will lower average prices and property values, which will lower taxes owed per unit. So there's a tax gain from new supply, but not as high as it would be if prices and property values stayed at the same level.

Now, this isn't to say that there aren't good reasons for taller buildings downtown. It's definitely true that one block in central Charlotte, NC has as much office space as ten blocks in DC (but Charlotte's downtown is puny as result). And I know that economists think that prohibitions always lead to deadweight losses (though, given the massive positive and negative externalities, city planning and the resulting restrictions are a necessity). But what causes me, a native of DC, a lot of alarm (and I suspect what irks so many people about Yglesias), is when people from Manhattan come to DC and make a lot of patchy arguments to create a sense of urgency about the need to make DC look like Manhattan. One can't help but think the driving motivation is personal taste, and not sound policy logic.

Moral Hazard and Morals and Hazards

While the phrase "moral hazard" does not, I think, come from ethics (the concept originated in the insurance industry), moral hazard is actually a central and yet not-well-addressed concern in ethics. That is, moral behavior is almost always subject to abuse. That includes both mean-spirited abuse (con-artists targeting do-gooders, or bullies picking on someone who won't hit back), but also the more common, passive abuse displayed by homeless people who become content to live off of the goodwill of others who might otherwise be working--though, as a liberal, I guess I'm supposed to pretend like that is very rare. A better, and much more pervasive case of the latter emerges in Ezra Klein's discussion of Yglesias and Cowen's back-and-forth over replacing Medicare with block grants:

[Providing cash to be used at the recipients will instead of Medicare] has a lot of wonkish allure, particularly if you think, as I do and Matt does and Tyler does, that medical care is overvalued. But it misses the problem that leads to universal health-insurance systems: As a society, we are not willing to let people die painfully in the street, even if they have previously made decisions that would lead to that outcome. In reality, what terrifies all of us is what happens after someone takes the cash and then gets sick. .....

This is why Medicare is universal and the health-care law has an individual mandate. If we were willing to let people simply live with the consequences of their decisions, we could have a very different health-care system than we do. But we’re not — and, as a compassionate, rich society, I don’t think that’s such a bad thing. This is why we, like every other developed nation, are moving toward insurance solutions that assume an eventual need for health care. If we can’t say no credibly, then we need to say yes responsibly, and in advance. 

It's a fascinating point, and I think Ezra nails it. To understand Medicare, you have to go back to the reasons we care at all. For a true ethical consequentialist, the cash grant idea is probably right, since letting someone die isn't a problem if they received all the cash they were entitled to, and their choice to spend their healthcare money on something else made them happier on net. But for most people, the driving moral concern for Medicare is the one Ezra highlights--we don't like hearing about people dying when it could have been avoided. Period. And that is more of a deontological view--regardless of the greater universe of consequences, many people feel it's just wrong to let someone die.

But in reality, these "it's just plain wrong"  types aren't totally unconcerned with consequences, at least when they have some experience with the world--and that's because of moral hazard. Maybe at first we can maintain the moral stance that "it is always necessary to give money to those in need of urgent medical care"--but the truth tends to be not that we consider the statement in quotes is a categorical imperative, but rather that we can't stand unnecessary deaths, perhaps at a gut level. And thus as we learn that people might abuse fungible cash, the imperative becomes "provide cash when explicitly used to prevent unnecessary death". In a sense, we look for the most efficient means to avoid gut disgust, and to allow us to sleep easily. Welfare programs like Medicare should be understood in this context.

I wish more people involved in philosophy or policy research wrote more often about the detailed calculations people make--not in pursuing a consequentialist ethics--but rather in merely alleviating gut-level moral disgust. In particular, I wish we knew more about the implications of moral hazard-type situations for deontological views. Or at least were more willing to apply what we have been learning from psychological/neurological studies. I think that line of work would prove invaluable in understanding the dynamics of the policy debates that are typical of the modern welfare state.