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Source link: http://archive.mises.org/15637/rails-the-environment-and-economic-calculation/

Rails, the Environment, and Economic Calculation

February 10, 2011 by

I just had an interesting online discussion with John Payne from the Show-Me Institute about light rail. Light rail fails on pretty much every efficiency measure, and I write that as someone who likes being able to get to the places I need to go in St. Louis without having to drive. It just so happened that the MetroLink in St. Louis was consistent with my preferences.

John pointed out that to take the MetroLink would require that he stand on a platform in the cold. This raises an interesting question. One might argue that taking the train is going to be eco-friendly relative to driving if the trains are going to run anyway. Or is it?

John mentioned standing in the cold on a platform. Most of the people who are going to stand in the cold are probably going to wear an extra layer or drink more coffee. This all requires energy to produce. Are the alleged environmental benefits of light rail relative to driving swamped by additional energy costs that don’t get measured?

As I argued earlier this week, we can’t know without prices, profits, and losses. To the extent that we can measure (even indirectly) some of the costs and benefits of light rail, it fails by its own standards. Here’s John with more, and here’s an op-ed and a policy study by Randall O’Toole in which he analyzes proposals to build light rail in Kansas City.

I mentioned at the beginning of this post that I like the MetroLink in St. Louis because I prefer taking trains to taking cars. In November, I went to a conference at Washington University. I was able to take Greyhound from Memphis to St. Louis and then Metrolink between Wash U, my hotel, and the parts of St. Louis I wanted to visit (Wong’s Wok in the Loop, specifically). Light rail makes me better off. It is a mistake to observe that I am better off and then observe that society is better off. I think Henry Hazlitt had something to say about that.

{ 22 comments }

John February 10, 2011 at 2:01 pm

Think on the margin. Most sensible people take a coat/gloves/hat with them in their car in case it breaks down or if they will need it when they walk outside their car. The only clothes that would be eco-unfriendly would be those that people did not have before and whose purchase is driven largely by riding the light rail.

Michael A. Clem February 10, 2011 at 2:23 pm

Light rail might be “light” in some way compared to regular trains, but it’s still in need of a special infrastructure to travel, and thus the designers need to think about how much rail and exactly where it should travel to.
You may have been lucky that Metrolink served your needs as well as it did, but by the same token, it will be unable to satisfy many other people’s needs, even though they have to pay taxes to support it, too. It is very much like the urban planners trying to decide where a city should grow and how it should grow–what kind of character they will try to give it.
I’ve grown to hate my city’s bus system, and at this point, the city would have to pay me for the inconvenience of taking the bus instead of me paying them. But at least the bus schedules could theoretically be changed to adapt to population growth in different areas of the city. Rail can only change if they build more infrastructure for it.

J. Murray February 10, 2011 at 2:59 pm

Pretty much. Rail systems are useless for people who don’t live within “walking distance” (as defined by each individual) of the nearest terminal and useless for a destination that isn’t in walking distance as well. Failing either pre-requisites necessitates an alternate form of transportation to bridge the gap.

Additionally, the location of government planned rail places improper financial subsidization of businesses simply because they exist near the planned rail platforms. I recall a business trip to DC and I intentionally looked for hotels within a half-mile of a Metro terminal. There may have been plenty of fine establishments outside that radius, but because of cost concerns over vehicle rental and parking, I went this path. I know that Metro isn’t subsisting on barely filled passenger cars outside of the two rush hour periods for $2.90 for a trip nearly the entire length of D.C.

TANSTAAFL February 10, 2011 at 3:07 pm

Iremember when thi billion dollar boondogglo that is light rail came to minneapolis some ten years ago. The first line was built from Mall of America to downtown mpls, which is maybe ten miles of track. It was ridiculously expensive and has yet to attract the number of riders that were touted.

The second line was completed last year or the year before. It runs from downtown mpls to one of the outer ring suburbs north west of mpls. While not quite so expensive it also has failed to draw the riders the statists said would be there.

Both will take years to pay off and will always require subsidy so the ride is ‘affordable.’ The two lines have the highest demand during nfl and mlb games that are played downtown mpls. The next stage is set to connect st paul and mpls. The route will run parrelel to I94, the highway that connects the two cities, along university ave. University is a couple blocks north of 94 and is a good four lane alternative route. The rail will take away two lanes of traffic which will have ta divert bark to 94 and has the potential to make bad commuting even worse since no one rides the train here.

The most ironic part of the whole thing is I remember my grandpa telling stories of riding the street cars when he was young. You see, at one time this rich guy named Lowry built a whole system of private track and cars that covered what eventually became the greater mpls st paul metro area. It was way ahead of its time. But after the war the auto became king and the state shut Lowry down and built highways instead.

Times have changed and most people prefer to drive themselves on the ‘free’ public highways. But since some group of statist planners decided the light rail would be a good idea, more mobility for the poor, we are now being soaked to build this boondoggle.

Ohhh Henry February 10, 2011 at 3:10 pm

The leftie/green crowd loves light rail – they’ve got trains on the brain.

You’re right about light rail failing in almost every efficiency measure. Their construction and operating costs are enormous and they can’t even carry very many people. They can’t go all that fast, and despite their name they’re a lot heavier than buses. It takes a lot more energy to move them, which is lost every time they slow down and stop. Because of this there are fewer stops, which makes people walk further or else requires more buses, to bring people to the stations. The heavy weight means that you can’t even place many trains on the tracks at peak times, because of the requirement to have a safe stopping distance between trains. Buses on the other hand can travel practically bumper to bumper during rush hour. In any case the trains or so expensive that most municipalities can’t afford to buy many of them anyways. The train tracks don’t coexist well with automobiles, and the trains don’t mix in traffic because of the vastly different acceleration and braking characteristics. The tracks are difficult route through tunnels and across bridges because of the difficulties with grades, and they don’t turn well because of the large turn radius. And so on.

Needless to say, these inefficiencies are the reason why governments really love light rail. To you, the taxpayer and commuter, they scream “failure”. But to government, “failure” spells “opportunity”.

Matt Haldane February 10, 2011 at 4:40 pm

I have a similar experience with the Phoenix light rail. As a student, I benefit greatly from cheap transportation between the Arizona State University Tempe campus and downtown Phoenix campus. It is $40 per semester or $80 per academic year. As you note, this does not necessarily signify a benefit for society as a whole. Last September, Warren Meyer wrote a blog post for Forbes claiming “the City of Phoenix could have (instead of building this system) given a new Prius to every regular daily rider and provided him or her with enough gas to drive 10,000 miles a year, and we still would have saved two-thirds of the capital cost and half the annual operating subsidy of the system.” I do not know what else these resources might have gone towards had the state not built the light rail, and now no one will ever know.

Ohhh Henry February 10, 2011 at 6:29 pm

“the City of Phoenix could have (instead of building this system) given a new Prius to every regular daily rider and provided him or her with enough gas to drive 10,000 miles a year, and we still would have saved two-thirds of the capital cost and half the annual operating subsidy of the system.”

But you know what the officials would think about this plan … other than the initial work of handing over the money, this would not create a single, municipal “job for life”. And with the reduced expenditures they would have to lower taxes, which would make it easier for people to pay, which would mean that they could not seize as many houses for back taxes. Less home seizures, less bureaucracy required, nor could they engineer sweetheart deals with their cronies in the legal, banking and real estate professions. Fewer people living on the street or in housing projects, less crime, fewer jobs for cops, judges, probation officers, etc. By introducing a single grain of common sense into City Hall the entire edifice is in danger of crumbling in a vicious circle of efficiency and freedom. Can’t have that.

RTB February 10, 2011 at 10:09 pm

Your light rail doesn’t serve my needs, but I’d bet my bottom dollar some of my federal taxes found their way into it. Money I could have used to buy a pair of gloves, a sweat shirt or a few gallons of gas for my very convenient automobile.

Brandon Adams February 11, 2011 at 11:39 am

I haven’t studied light rail in general, but have done some reading on monorail systems.

In the 60′s, monorail maker ALWEG was so confident of the profitability of monorail that it approached the city of Los Angeles with a monorail construction bid in which it would bear all the costs of building and operating the monorail system – all it asked for in return was the ability to collect fares.

From sci-fi author Ray Bradbury, in an editorial in the LA Times:

http://www.wilshirecenter.com/future/Monorail.html
“The company said that if it were allowed to build the system, it would give the monorails to us for free — absolutely gratis. The company would operate the system and collect the fare revenues.”

From Bradbury’s and others accounts, we’re told that oil company lobbyists were successful in derailing the monorail proposal. Just think how much less oil would be sold if Los Angeles had a monorail powered by electricity from the Hoover dam!

J. Murray February 11, 2011 at 1:09 pm

So why didn’t ALWEG just buy up all the land and build it? If it was going to be so profitable, they wouldn’t need a single input from Los Angeles to get it up, running, and operating. The so-called profitability claims melt down when the project can’t get running without some sort of government intervention.

Brandon Adams February 11, 2011 at 2:00 pm

I suspect it’s because ALWEG needed right-of-way on public land. Any structure that crosses a public street, even if it’s thirty feet in the sky, is on public land. Even if you want to build a skybridge for foot traffic across a public street you’ll have to get clearance from the city first.

I don’t think the problem would disappear if that land were instead in private hands.  Wealthy opponents (in the LA example, oil lobbyists) would then just have to pay private landowners in a small number of strategic locations to deny the monorail builder access. Private landowners would be no more immune to lobbying than public ones – in fact, I’d say they’re less immune, since their actions are less subject to public scrutiny.

Speaking of public land, one of the big cost savings that monorails provide is that the pylons and tracks are skinny enough that you can run them down the medians of streets. That means there’s no need to acquire new land or run an expensive drilling operation to go underground.

J. Murray February 11, 2011 at 2:08 pm

Then ALWEG would have to outbid those individuals. You seem to think that it’s somehow ALWEG’s right to build a monorail at a price they decided it should be. If some wealthy oil baron wants to buy up land to block a monorail, that’s his right to do so. ALWEG’s only recourse is to convince the land owner to transact with the monorail as opposed to the other individual. That’s assuming the land owner had any interest in having a monorail fly over his property. If I were a landowner and a monorail company wanted to fly one over mine, I’d tell them to fuck off and come back with a bag of gold that weighs as much as I do (approximately $4.5 million). If the oil baron paid me this, I would put my bag of gold in the back of my car and thank him for his transaction.

Those costs MUST be considered in the long run. That’s why monorails aren’t that common, the people aren’t willing to part with their land based on wild-ass guesstimates by ALWEG. Which is why they ran to LA to use governmental force either in terms of eminent domain or telling landowners they’ll get a monorail over their property and like it.

Brandon Adams February 11, 2011 at 2:35 pm

You’ve described an oligarchy, and a market in which the supply curve has been shifted left by factors that have nothing to do with the factors of production.

A company using its wealth to drive the price of a product up (or destroy the product) generates a deadweight loss. Government isn’t the only entity capable of creating deadweight loss.

What do you fear from government intervention if not deadweight loss? How is government-generated deadweight loss any different than the loss generated by market failure?

J. Murray February 11, 2011 at 2:54 pm

That’s not an oligopoly. Oil barons don’t have infinite resources to buy up an entire city. Monorail systems can just as easily divert the path of their intended track to different plots of lands. If anything, this can be used as a strategy to put those “oil barons” out of business themselves. Additionally, this would be a ridiculous strategy as other oil companies would capitalize on the foolish business operations and overtake them on the market. Oil companies aren’t immune to competition and bankruptcy. No one is.

I don’t fear deadweight loss. It’s not something that can be avoided. It happens. People make mistakes, people are driven by emotion, there isn’t a force in the universe that can solve this problem, especially not government. What I fear is an entity that can steal my property. The monorail company can’t steal my property. The oil company can’t steal my property. The government can. And government deadweight loss is always infinitely worse than private deadweight loss because governments have a significantly larger pool of resources to draw from to perpetuate the loss on top of a lack of a price, and profit and loss mechanisms to establish if the decision is proper and wise. Governmental deadweight loss will always be incalcuably huge compared to potential private loss, which private individual seek to minimize. And don’t forget, there is no such thing as “society”, so it can’t take a deadweight loss since it doesn’t exist.

Name a comapny in the history of the world that has a $7 trillion budget (combined spending of the Federal, State, and Local governments in the United States) and you may have an argument against eliminating government in the marketplace 100%. As it stands, the closest any entity that can match just the base financial reach of government is Wal-Mart, and the combined US governmental regime is 17 times larger than they are. And this is on revenue, Wal-Mart can only, realistically, utilize 3% of that revenue reach because of existing operating expenses, so the maximum abuse reach of Wal-Mart is $14 billion, which is their existing profit margin. The US Government is capable of abuse on a scale that is 500 times greater than the world’s largest corporation. Further, Wal-Mart can’t just walk up to your house, hand you a check based on an arbitrary land value, and tell you to bugger off. They have no legislative powers or powers of eminent domain. And don’t tell me that Wal-Mart can just hire thugs with guns to take it from you, because Uncle Sam already does that now. And Uncle Sam can afford far more guns and thugs than Wal-Mart can. Your evil Exxon had a potential abuse reach of $31 billion in 2010, the government is still 225 times worse.

An oligopoly is a set of legislative rules that forcibly keep all but a select few competitors out of the market, either by grossly raising operating costs beyond free market levels, regulatory costs that cannot be absorbed by new competitors without becoming uncompetitive in the marketplace, a licensing regime physically limiting the competitior pool, or straight up legislating that only certain operators can do business in the market (see telecommunications laws in most states for this one).

Brandon Adams February 11, 2011 at 3:51 pm

I didn’t say oligopoly, I said oligarchy. Ironically, the oil market does have an oligopoly problem – OPEC. And, an oligopoly isn’t a set of legislative rules, it’s a non-competitive market with very few but more than one seller. You can create an oligopoly through the legislature, but it’s not required. It’s just a natural consequence of economies of scale and barriers to entry.

I think you’re conflating having a government at all with having a government that abuses eminent domain powers. I don’t agree with the Kelo ruling either, but I don’t think it precludes the possibility of having responsible government.

There are no absolutes, so you have to do some rough calculations in your head. What’s more likely to cause you harm – eminent domain, or congested roads? Taxes, or lack of police? Zoning laws, or an uneducated workforce? This is how I operate.

Also, you’re going to have far more political success if you target those things about government that you don’t like rather than attacking the very idea of having a government that does anything not within the confines of an arbitrarily defined limited scope. It’s far easier to convince someone that eminent domain can be abused than it is to convince them that all government is at best a necessary evil.

Really, I hope you don’t take this the wrong way, but it’s almost like we’re arguing about religion. You’re assuming that government creates more deadweight loss than the private sector! I’ve never seen this issue studied, but you’re assuming that if the government does something, then it must be worse than the private alternative. I don’t know which creates greater deadweight loss. With all the monopolistic markets that exist, the only thing I can say is that the deadweight loss involved in firms charging artificially higher prices for less unit of product is not insignificant. The oil market alone, through OPEC, has a huge deadweight loss.  I don’t have any idea how much deadweight loss government generates. Taxes, of course, generate deadweight loss. Paternalistic laws that create a black market generate a deadweight loss. But I don’t know whether government’s deadweight loss is greater than the private sector’s. You’re taking it as given!

I’ll tell you one thing, that is not science. You’re entitled to your own opinions, but not your own facts.

Lastly, sorry I didn’t reply directly – it looks like the comment system has a limit on how many levels deep a reply can be.

J. Murray February 11, 2011 at 4:39 pm

“eminent domain, or congested roads? Taxes, or lack of police? Zoning laws, or an uneducated workforce?”

Eminent domain because a congested roadway creates incentives for private individuals to find alternatives. Roadways and automobiles were private inventions to solve the problem of the rigid nature of railways.

Taxes, because police don’t actually stop crimes and I can hire private investigators to string crime tape around my house when I’ve had a break in or battery situation. Even with our tax-funded police force today, private citizens stop 30 times as many crimes as a police force does via exercising rights of defense of self and property.Zoning laws because people aren’t so stupid they won’t hire people to educate their children. Do you think government invented schools? Do you think those evil corporations, the ones that are so greedy to squeeze out profits from a rock, would actually allow the workforce to dumb down, thus reducing the quality and output of their own employees? Companies spend a fortune on graduate and post graduate degree programs for their employees, what makes you think they wouldn’t start funding elementary schools and creating vocational schools? It’s funny how people hold these strange double standards on the business world – they love profits but are too stupid to avoid the conditions that would destroy them. Hell, if it wasn’t for all the bullshit government regulations, I’d be willing to take on a class of 50 students for $2,500 a head, which is 1/4 the national average spent on education per student right now. And I guarantee I’d do a better job than someone with a teaching certificate that has no advanced mathematics, physics, economics, or language training like I do. I can’t teach in a public school, but someone with a GED and a teaching certificate can teach high school physics. See a problem here? If anything, education will dramatically improve if we quit publicaly funding it. Because then teachers will have to justify their jobs directly to the parents expecting results.

And government deadweight loss is a given by the simple fact that government has resources far in excess of nearly the whole of the Fortune 500 and has no limitations on operations that private organizations do.

Brandon Adams February 11, 2011 at 6:14 pm

You’re still making assumptions.

I found a couple of studies on the correlation between police employment and crime, but I don’t have journal access and can’t read the full articles. The exec summary of one suggests that the correlation is inverse (more police -> less crime), the summary of the other doesn’t reveal its conclusion.

Given the history of education, I think it’s upon the person proposing to eliminate public education to provide evidence that taking the government out of education would provide some kind of improvement.

In response to this:

Do you think those evil corporations, the ones that are so greedy to squeeze out profits from a rock, would actually allow the workforce to dumb down, thus reducing the quality and output of their own employees?

This is a tragedy of the commons problem – in the absence of public schooling almost all businesses would benefit if they worked toward the common goal of educating the public, but they have every incentive to let someone else take care of the problem, since if they alone provide education there’s no guarantee that those they educate will come back to work for them.

Companies that pay for grad school usually do so conditionally, the employee has to agree to stick around for awhile. I’m not comfortable with the idea of guaranteeing that a child will be working for company X when he’s only five years old and has no idea whether or not he’s going to be a good fit at the company. It sounds a lot like indentured servitude.

In response to this:

And government deadweight loss is a given by the simple fact that government has resources far in excess of nearly the whole of the Fortune 500 and has no limitations on operations that private organizations do.

Show your work! It’s going to take a lot of study to answer this question. You’re going to have to look at not only all the inefficiencies caused by government, but you’re going to have to balance that with any efficiency improvements, like taxes imposed to account for negative externalities.

Then, you’ll need to look at the effects of monopolistic pricing, as well as all the negative externalities generated in the private sector.

I don’t know which generates more deadweight loss, and I don’t think you do either.

I’m starting to see a pattern in your posting: we should take the government out of X because then the government would be out of X. No suggestion that there’d be any kind of improvement in X – getting the government out is a goal in itself.

Am I getting you wrong?

Joe February 11, 2011 at 12:27 pm

There are certainly points in favor and contrary to building light rail but these have to be some of the grasped-at-straws I have ever heard. Clothing costs? Coffee? SERIOUSLY?!?! I seldom see from my bundled warmth in a Starbucks people driving by naked without coffee.

I drive to work because I have no other choice. At my old job, there was a bus route but it would take way longer than driving (like an extra hour), and it would only save me about 20 bucks a month in gas and parking… thus I didn’t. In both situations, I have/had to walk about 1/4 mile from parking to office.

I think part of the negativity toward light rail and positivity towards buses is that we are comparing VASTLY different animals. A bus on a road with mixed traffic doesn’t transport people around any faster. It is in the thick of the congestion. Of course we could build dedicated grade separated bus lanes but that is never what O’Toole suggests. Why? It would be just as expensive as light rail to build and would cost more to operate. I’ll comment on that later.

Randal O’Toole in the 2008 article mentions that train systems need revamping every 30 years as if roads don’t need repaving (they do) and buses last longer than 30 years (they don’t). He also mentions Portland’s transit usage is 7.6% far lower than bus ridership was years earlier. Not true. It is currently 12.6% (or was as of 2008).

But even this misses the point. Transit works best where density is the highest. Most city centers have to weigh different considerations. We want growth but we need parking. When a company decides to relocate if they know it will cost their employees 100 bucks a month for parking, it will be tougher to attract employees there. If the city has more parking lots then there is less room to grow. Let’s face it, parking lots are not efficient uses of land, so most cities split the difference and build parking decks. If most of that 12.6% would have otherwise needed a car in the city center that translates to less opportunity for growth.

Further more, since both rail and buses (roads too) are subsidized let’s look at farebox recovery for each in Portland: Bus (24%) and Rail (45%) when the “system costs” (operation costs each fare about 4% better). The dollar subsidy per rider is 2.6 times for buses what light rail is. $2.30 vs $0.90.

There is a reason people prefer rail (in addition to how smooth it rides compared to buses) Buses average 14 mph, rail averages about 22. And if you were to look at the routes that mirror light rail routes, I bet it would be more stark.

Light rail systems around the country and near my biggest metro, Charlotte, recover around a third of the operating costs from the riders and a little bit more from advertising. However, the 1/2 mile radius around each stop has seen a boom in real estate that would otherwise not have happened without the rail system. The other 2/3rds that gets subsidized by local tax payers is offset by extra real estate taxes. The condos cost roughly what single family homes do but instead of having 5-6 on the same area you have about 50-60 (and at times even more). The benefit of more space for business and easier transit access has also helped housing in downtown Charlotte. Those that work nearby end up walking and aren’t picked up on any transit rider survey.

All this is not to say that light rail is always the answer and that buses aren’t. Far from it. Rail, buses and private automobiles all have their place and we should be fair about how we analyze those costs and acknowledge our own biases. Having dealt with years of rush hour traffic, I am biased toward rail.

Joe

J. Murray February 11, 2011 at 1:13 pm

Then pay the costs, 100%, for building, operating, and maintaining the rail out of your own pocket. I’m sure your opinion of light rail will change when your riding costs triple because the line can no longer dip into the pockets of people who don’t use it. Transportation of any kind is not a function of government. Yes, roads are also subsidized, but that should also be eliminated from the taxpayer teat. No individual should fund what they don’t use. That includes me funding your light rail via federal taxes.

Steve February 11, 2011 at 9:01 pm

Yes, road subsidies should be eliminated too. And I’m sure your opinion will change when your driving costs triple.

TANSTAAFL February 11, 2011 at 8:43 pm

LOL

Negative externalities

LOL

Stranger February 11, 2011 at 8:54 pm

Even Dubai Metro has closed stations with doors that open for trains so that the stations and trains can be air conditioned. The only reason that public agencies do not provide the same service to their customers is that they are economically incompetent, are unable to calculate and oblivious to production quality. This is an argument for the privatization of the state.

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