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A cost-benefit analysis of high-speed rail
Matt Yglesias points us to this survey of costs and benefits from a Dallas-Houston high-speed rail link. I'm not convinced by many of the particulars of the argument, which claims to show that the link is a good idea. For instance will the train line really be built with green energy? Will 80 percent of flyers take the train? Is Madrid-Barcelona a good analogy?
More generally, my jaw dropped when I read the denouement:
In this more comprehensive model that takes into account trivialities like regional population growth and a reality-based route, the annual benefits total $840 million compared with construction and maintenance costs of $810 million.
I'm not sure what discount rates he is using but even if we put that problem aside this screams out: don't do it. Given irreversible investment, lock-in effects, and required hurdle rates of return, this still falls into the "no" category. And that's an estimate from an advocate writing a polemic on behalf of the idea. I'm not even considering the likelihood of inflation on the cost side or the public choice problems with getting a good rather than a bad version of the project. How well has the Northeast corridor been run?
So, on high-speed rail, count me as still unconvinced. Nonetheless if you know of a good cost-benefit study, of a single rail link, not in the Northeast corridor, favoring HSR, let me know in the comments. I'll try to read and report on it.
General remark: It's not about population density per se. It's about how many independent, hard-to-connect nodes the system has and that is why high-speed rail on the whole works better in Europe or Japan than in many other locales. To give an example from a slightly different realm, I live right near the Metro in a high-density suburban area. Yet I don't take the Metro to my Arlington office, which is about two minutes from a Metro stop. I'd rather do the 37-minute drive. Why? Because I stop at the supermarket and the public library on my way home at least half of the time or maybe I stop to eat at Thai Thai. If those conveniences were right next to my house I'd consider the Metro but they're not. The fact that my neighborhood has lots of people doesn't help me any. In Tokyo you could live for years within the confines of many (most?) individual city blocks.
Posted by Tyler Cowen on August 27, 2009 at 01:31 PM in Economics | Permalink
Comments
kurt9:
The other thing that really helps the Shinkansen is that most of Japan's population centers are more or less along a single axis. Additionally, a significant portion of the income for the various JR lines comes from the real estate they own. On many of the lines, train rides are essentially a loss leader to bring you to the department stores at the JR train stations.
Posted by: Sbard at Aug 27, 2009 2:44:19 PM
I just did the math and maybe it would make sense for business travelers to take a train instead of the airport. It currently takes 1 hour to fly from Houston to Dallas. At 186 mph it should take the train 1 hour 20 minutes. If the price were cheaper--and if the train ran ON TIME-- why not take the train?
Posted by: rob at Aug 27, 2009 2:45:16 PM
Tyler hit this one on the head. I think the main point here is the $840m benefit versus the $810m cost. (And that is probably a very rosy estimate.) If a corporation such as Disney or GE or Boeing was considering taking this project, then it would IMMEDIATELY reject it because it doesn't even come close to surpassing a likely hurdle rate.
They'd probably be better off investing that money in government bonds!! So long as economics matters, this project should not be undertaken.
Posted by: Admiral at Aug 27, 2009 2:45:29 PM
@ hibikir
Not for the houston/dallas rout. Being in Houston or DFW without a car is rough. Houston is roughly 50 miles across, and the DFW area is a collection of dozen or so cities with Dallas, Fort Worth, and Arlington being the largest. If you need to get anywhere in the areas you /really/ need a car. If you could at very low cost take your car on the train, it may be worth it, otherwise I'm not sure.
Posted by: Doc Merlin at Aug 27, 2009 2:55:40 PM
people in these cities take the train because they can't drive.
I live outside Philly, and when I go to NY, DC or Boston I almost always take the train. It's so much better than driving it isn't funny.
Posted by: bartman at Aug 27, 2009 3:04:46 PM
Bartman,
As Tyler and others have mentioned before, the NE is precisely where a high speed service should be built, but that's where it's not feasible for political and infrastructure reasons. I think there was a post somewhere that the DC Boston Acela doesn't even reach the routine speeds of the fastest train service of 50 years ago. So if not there, where?
The irony is that it's easiest (not cheapest) to build a train in places where trains aren't practical.
Figure out a way to get HSR in the Northeast and Tyler will probably get on board.
Posted by: jj at Aug 27, 2009 3:13:25 PM
Was anyone in 1860 convinced by the cost benefit analysis of the government funded, with lots of cash and land, transcontinental railroad?
Are you convinced today by its cost benefit analysis retrospectively? What did they get right and what did they get wrong?
What of the mission creep that resulted in the program continuing for decades afterward until the US was covered with railroads, half of which were going bankrupt by 1910 and unable to serve the prewar and war economy of WWI?
Were you then, or are you now, convinced by the cost benefit analysis of the Eisenhower Defense Highway System? Retrospectively, was all that massive government spending justified?
Of course, the first example of government spending was the National Road, approved by Jefferson. Are you convinced by the cost benefit analysis of that government project? Followed by government financed canals.
But then, what of the cost benefit analysis of the Roman highway system, parts of which are still in their original form two thousand years later. So, it isn't really a matter of when will they stop with all the government projects, or failure to deliver convincing cost benefit analysis, but when did it start. Did it start two thousand years ago, five thousand years ago? Was the investment in the pyramids justified by the revenues they produce for the economy of Egypt today? Were those tourism dollars included in the original cost benefit analysis of each of, or the first of the pyramids?
The thing that we should consider is the flexibility and willingness to adapt of such projects. Rail was originally designed for mining, moving the ore or coal or waste rock out of the mine and to some place where it is dumped or used. The idea that passengers would ride on rail wasn't imagined at the time. But over time, rail was adapted to new applications so that we now have a lot of rail than carries only people and can't carry coal or ore.
Planes flying regular routes was only for carrying Airmail. It is clear that the cost benefit analysis for Airmail service didn't justify the service, and furthermore, the losses were far greater than anticipated. Yet, regular air routes were adapted to carrying passengers, and then the unimaginable, cargo that at the time could only realistically be carried by rail. Should Airmail never been done because it regular air routes are not a useful system? Doesn't that mean the UPS (which was first to ship parcels by air before FedEx) should not exist because Airmail wasn't justified?
The question is, will this high speed rail corridor be setup in a way that it can adapt to new opportunities, like package shipping? Or like the new opportunity that the Post Office opened up when it very late in the game entered the package delivery market, that the railroads ignored, with Parcel Post combined with Rural Free Delivery? When the Post Office made Parcel Post with RFD available to farmers all over the nation, they started buying by mail order in a boom bigger than the Internet of ebay and Amazon, and they started shipping farm goods to businesses and making more money than ebay enabled.
Can we anticipate the either a UPS or the Post Office if they fail to do it like the Railroad Express Agency cooperative failed, or the Wells Fargos failed, to institute some new service like daily shipments of maybe farm goods - fresh from the harvest straight to your table in some bistro or home kitchen?
If the cost benefit is based purely on passenger service, then it is not taking into account unimagined services that will occur as a result of the opportunities is presents to innovators.
Posted by: mulp at Aug 27, 2009 3:19:27 PM
A 240-mile trip there-and-back would be approximately $60 of gas. Will HSR really cost less than that? For me that's about the distance to Chicago, for which trip Amtrak charges at least $58 round trip, but actually more if you want to go at peak times (like on the weekend or on Labor Day), up to $140 round trip. And if I have even one other person with me in the car, then there's no way rail is cheaper. Not to mention that the schedule of the trains is terrible. Do we really expect the HSR schedules to be any better?
Posted by: Andy at Aug 27, 2009 3:33:36 PM
The story of the Bay Bridge cannot be ignored by anyone proposing large infrastructure projects.
I trump your Bay Bridge with The Big Dig.
I know that the entire State of Mass is trying to avoid paying for its cost, no matter what the benefit, with everyone pointing fingers at everyone else claiming they should pay the cost of that part of Mass Transportation, because they are the ones who get the benefit, while "we" should get this part of the benefit for free because everyone paid for back then.
I do know that for decades I had the pleasure of the highways the Federal government paid for in Mass that were hardly used, and probably didn't meet any cost benefit analysis when built. Today those highways of the 70s are heavily used and critical to Mass Transportation, but thanks to the Federal government, they are free.
Posted by: mulp at Aug 27, 2009 3:40:08 PM
"...in large chunks of Europe, we'd rather take a trip by train instead of driving, even though we can drive."
I guess you must travel pretty light, huh? If you have any amount of luggage at all, the convenience of dropping it in your trunk and forgetting about it till you get to your destination is...pretty substantial.
To say nothing of the fact that "train" travel is generally pretty intermodal.
When I was growing up in Liege, Belgium, we took the train to the shore on our holidays:
1. Walk to nearest bus stop (about a quarter-mile).
2. Take 20-minute bus ride to rail station.
3. Walk from bus stop to platform (another quarter mile), stopping along the way to stand on humongous line and buy tickets (in those days you could only buy tickets for same-day travel).
4. Take 3h 15m train ride (sometimes standing in the corridor the whole way) to the seacoast stop.
5. Walk another quarter-mile from the platform to the tram stop.
6. Take a 35-minute tram ride to our destination.
7. Walk from the tram stop anywhere from a few feet to a half-mile to our rented apartment, stopping along the way to pick up keys at the rental office.
8. Possibly go up as many as three flights of stairs.
9. Collapse in a heap.
We'd get up at 7am and--with a bit of luck--we'd be in our rental apartment by 1pm.
Our "rich" cousins, who had a car, left after we did and got there before we did.
Posted by: David Hecht at Aug 27, 2009 4:09:05 PM
mulp,
You are argument proves too much and would justify any government program.
I mean gosh, we can't tell what will happen in the future, let's fund everything!
Furthermore, you don't address the innumerable failed government programs in transportation and other fields. Consider the boondoggle and environmental nightmare (see libertarians get to use that phrase too!) government funding of dams has been in the U.S. Far too many were built, all manner of species and biomes were screwed up because of it, and we ended up paying through the nose for water used and agricultural products produced through/by those dams.
Oh, and the Roman highway system, it helped the Romans commit genocide against the Dacians.
Posted by: Seward at Aug 27, 2009 4:14:15 PM
You seem to suffer from an extraordinary degree of confusion about the difference between interurban travel and daily commuting.
For most people, if they faced the delays that they face as part of flying as one option for a daily commute, they simply would not take that option. OTOH, people actually do fly.
As to the prospect that an transport option that is faster, cheaper, typically more comfortable and with greater opportunities to either get work done or watch entertainment than a short haul flight might capture a large share of the present air patronage ... what sort of irrational attachment to air travel are you presuming when this causes you surprise?
Finally, the notion that it is as easy to drive a train into the side of a building as to fly a plane into the side of a building ... that's a keeper.
Posted by: BruceMcF at Aug 27, 2009 4:15:31 PM
I doubt infrastructurist has been to Texas. People in college station do not fly to Houston. They fly to IAH to catch a connection. Taking a train and then having to rent a car to get around doesn't make sense for short or medium haul trips. On long haul trips, HSR can't compete with planes.
Posted by: KevinM at Aug 27, 2009 4:16:26 PM
will the train line really be built with green energy?
Would it actually make a difference to it being a good idea or not?
All that would do is increase the construction costs (and if "built" also means "operated", it'd increase the operating costs for its entire lifespan).
I don't see any way that the "green-ness" of the energy expended to build the system can significantly affect whether or not building and operating it as worthwhile; certainly if it's not worthwhile to build it using normal energy I can't see that it could become worthwhile if the construction used magical pixie dust (or solar power, say) at a higher price.
Even if we take the most hysterical global warming scenarios seriously the amount of "pollution" released to construct the rail line using non-"green" energy is still an insignificant cost compared to the other materials and the operating costs.
(Given that I don't take such scenarios at all seriously, the consideration is facially ridiculous posturing for hippies.)
Kebko: Michael Moore is hilarious, yes. If he thinks you can actually make a NY-LA rail system that can run at an average of 140-odd MPH (2443 miles straight line, 17 hours), do it non-stop, and have any riders for what it'd cost, well, he's daft. But then, he is daft.
It'd cost a fortune to build and operate, there's not that much demand that would tolerate that length of time, in the real world you'd have a lot of stops, there are annoying mountain ranges in the way... the ones that the Shikansen avoids.
Sure, Europeans and the Japanese have some high speed rail. And when you have a non-automotive culture and/or really high population density and nearby urban areas, you can make that plausible.
People seem to forget the scales involved; France is about the size of the Oregon, Washington, Idaho blob. And it's as far from Portland to Phoenix as it is from London to Moscow.
The busiest of the Shikansen lines in Japan (Tokyo-Osaka) is only 300-odd miles long, and from the maps appears to have 15 stops between the terminal points. You just can't count the top speed of the trains, divide the NY-LA distance by that, and call it that many hours - and then assume anyone would want to ride it non-stop.
NY-LA is the worst possible example, and leave it to Moore to bring it up as his shocker. A rail corridor along the eastern seaboard, for instance, is actually plausible - and IIRC the only place Amtrak is actually profitable.
Posted by: Sigivald at Aug 27, 2009 4:16:36 PM
Sigivald,
Well, that and once you have decided on a plan for what will be built, you are stuck with that level of "green energy" use. Cars as a fleet have a far higher turnover rate than a train system would have.
Posted by: Seward at Aug 27, 2009 4:27:40 PM
David Hecht,
Car use and ownership has done nothing but go up and up in Europe over the past few decades, despite all manner of government efforts to curb their use.
Posted by: Seward at Aug 27, 2009 4:31:07 PM
That $810 million "construction and maintenence" number can only be an error, or drug-induced. In Des Moines they're talking about installing a (silly)21-block long trolley loop for $105 million. It's a lot longer than that from Dallas to Houston - 237 miles. It costs $20 million+ per mile to build regular old rail, let alone "high speed." That works out to something north of $4 billion.
Posted by: Joe Kristan at Aug 27, 2009 4:35:20 PM
A c-b analysis that comes out in favour of HSR:
http://www.networkrail.co.uk/aspx/5892.aspx
Although it doesn't meet the criterion of "good" since the numbers are pretty finger in the air. And unfortunately for HSR advocates, I very much doubt it'll happen.
Posted by: GHB at Aug 27, 2009 4:37:07 PM
This should be funded, if at all, by Texas, not the US.
Posted by: Mark at Aug 27, 2009 4:40:02 PM
"Finally, the notion that it is as easy to drive a train into the side of a building as to fly a plane into the side of a building ... that's a keeper."
So is the idea that because one terrorist act had a certain method, all others must use the same method. 9/11 was a terrorist act, but not all terrorist acts are 9/11s. Nearly all are smaller, some possible ones are larger. The advantage of commercial aviation (in the era of the hardened cockpit door) is that the fixed physical infrastructure that must be secured is quite compact. An HSR network is sprawling by definition and requires large numbers of weak points: above-grade crossings, tunnels, bridges, etc.
Posted by: Eric at Aug 27, 2009 4:41:34 PM
I think we should eliminate amtrak and stick with the highly profitable highway, road, and parking lot system that we already have.
Remember -- roads don't cost money to build or maintain, and rail needs to turn a profit to be worth it.
Posted by: rdg at Aug 27, 2009 4:43:06 PM
The argument for NOT taking the train from Houston to Dallas is silly. Of course you need to rent a car once you get to Dallas, but you have to rent a car if you fly also! Nobody drives from Houston to Dallas for a business trip. Many fly back and forth in a single day.
Why wouldn't most choose to take the train if the travel time was the same and the cost less????? Am I missing something?
Posted by: rob at Aug 27, 2009 5:24:05 PM
Why don't we make our interstates more like high speed rail, rather than developing a parallel transit system? I've always been outraged that I can't average over 100 mph for travel between metropolitan areas. I wouldn't mind getting off the HSR (high speed road) system, once I reach the outskirts of town and getting on the subway (surface streets/highways), but it never ceases to amaze me that cruising through central Illinois at 66 mph on a restricted access road with near unlimited visibility is a crime (or maybe a civil infraction).
Also, Sigivald, while you make several good points about how dumb Michael Moore's statement is, to me, you still miss why its so egregiously stupid. To wit, having the technology to take people across the contitent in 17 hours isn't that amazing when we have the technology to do it in five hours (in the plane).
Posted by: Steve at Aug 27, 2009 5:40:33 PM
One assumption in the article Tyler links to is that cities will successfully encourage thousands people to move to inner city station areas so that high-speed rail can be viable. The author describes this as a "conservative" assumption. I would choose another word, like "dubious".
"Ridiculous" is a better one.
This myth that rail transport supports higher population density is totally refuted by all experience.
The history of the NYC subways shows exactly the opposite. They were intentionally created to promote "urban sprawl" -- and were a tremendous success at it! By the same token (so to speak) the regular train lines into the city enabled masses of people to move out of it.
Yet this strange belief that "rail lines promote population density" has become the core of their religion -- in spite of being more absurd than anything L. Ron Hubbard ever dreamt up.
Of course, the complimentary belief that population density is a good thing, masses of people should move to inner city areas, in spite of their well proven preference to flow in the reverse direction, is strange enough by itself.
Posted by: Jim Glass at Aug 27, 2009 5:51:43 PM
My futuristic travel fantasy is that we have high-speed moving sidewalks which operate as follows: Inner lane, about 3 ft wide, travels at 200mph. next lane over at 197mph, next lane 194mpg,... to 0. So you end up with a 200 ft wide sidewalk you can walk on and off of safely, and you could not only walk from Houston to Dallas in an hour--but you could get on and off at any location without slowing anyone else down. Anyone want to estimate the cost of that? What about with advancements in superconductors?
Posted by: rob at Aug 27, 2009 5:53:01 PM
