More on HSR

Discussion of High Speed Rail, David Levinson’s comments at the CTS Research Conference April 27, 2010.
At dinner last night, our speaker (Eric Peterson, President of the American High Speed Rail Alliance) estimated that a complete national truly High Speed Rail system for the United States (on the order of 220 MPH peak speed), not simply an improved Amtrak system, would cost about $2 Trillion Dollars, give or take. This sounds about right. This is about the cost of 2000 Vikings Stadiums, and I think I agree with the speaker that a HSR network would be a better investment than 2000 Vikings Stadiums. This would also be the cost of 2000 Central Corridor LRTs, which would serve more people on a daily basis, and probably more passenger miles as well.

Is this a good thing for the United States or for Minnesota?

I think the answer differs. From a local perspective, someone else spending money here is a good thing, and spending our money somewhere else is not. A local benefit/cost analysis (which excluded non-local benefits and non-local costs) gives a different answer than a national B/C analysis. If someone picks up half the bill (which is typical for transit projects) or 90%, which was the case with the interstate, the local incentive for match is much greater than if the locality must pick up 100% of the cost.

The network, which was only briefly shown (and can be seen here) is essentially a hub-and-spoke system. Minnesota is at the end of the Chicago-based “Chicago Hub Network”. Clearly this is more advantageous for Chicago than Minneapolis, Chicagoans can (going counter-clockwise) get to Minneapolis, Madison, Milwaukee, St. Louis, Kansas City, Indianapolis, Louisville, Cincinnati, Columbus, Cleveland, Toledo, and Detroit, among others. Minneapolitans can go to Madison, Milwaukee, and Chicago before the travel time becomes unreasonable. The access from Chicago is much greater, and thus their benefit is much greater. Chicago has a much greater interest in this than Minnesota.
E.g. If Wisconsin were to pay for the line from Milwaukee to LaCrosse, the extension to Saint Paul would be relatively short, and the political economics (local B/C) would be different than if Minnesota paid for half the line crossing Wisconsin.

The logic also varies based on whether the line can be used for commuter traffic in addition to HSR traffic. The history of transportation is rife with long-distance transportation infrastructure being adopted for short-distance travel. The interstate highway is only the most recent example (commuter railroads are another example).
The cost is not small. The nature of HSR is that Fixed Cost is much greater than other modes, and the Variable Cost (per trip) may be lower. If the demand is great enough, this trade-off is worthwhile, if demand is small, you have a white elephant and can never repay the initial fixed cost. Thus far, no HSR system pays its full Operating Costs, much less paying back its initial Capital Costs. Dick Soberman, a Civil Engineering Professor at the University of Toronto joked if we wanted to make symbolic statements about our community, we should build Pyramids rather than rail lines, since the operating costs were lower.

Some individual HSR lines may cover the cost of running trains, but not the cost of infrastructure. The idea of profitability is nonsense. If this were to be private, following the history of most transportation infrastructure investments, the first generation of investors are likely to be wiped out in bankruptcy. Governments do not typically go bankrupt, they just borrow from other sources, tax, or reduce spending elsewhere.
Some argue in favor subsidy, but the argument for a subsidy for a mode serving people undoubtedly of above average income (inter-city business travelers) has no basis in equity reasoning.

Reducing congestion also seems a spurious argument, since most congestion is urban, and that would possibly justify subsidies for non-highway urban transportation, but not for non-highway inter-city transportation. (Air transportation, the dominant mode of longer distance travel, is on the order of 1/10th the total Person Miles Traveled of highway travel, I don’t know the breakdown of all intercity travel vs. all local travel (and it depends on definitions), let me know if you have a sourced reference). Even if inter-city travel were somewhat congested, that argues for pricing the congested mode more appropriately, not for subsidy. The environmental argument is also a straw-man, comparisons need to be made between auto and air transportation 20 years from now, not today’s, and for must less than $2T, a lot could be done in those sectors. The source of electricity could be clean if we so chose, with adequate investments in new electric (e.g. nuclear, wind, solar) generation.

The cost people are not talking about is noise, the noise externality is much larger for rail than for other modes, as fast trains are loud and infrequent, and so don’t generate the white noise that neighbors of highways can more readily adapt too. While my five-year old son may be happy living next to a rail line, with the ideal spot being the apartment in Chicago in The Blues Brothers, most people would not.

We also need to consider the opportunity cost of using tracks for passenger transportation. This means they cannot be used for freight. Europe moves a greater share of freight on trucks than the US, while the US employs more trains. If we want a HSR network, we will have to take freight traffic, thereby making the cost of rail-freight relatively more expensive (and if we do reduce congestion, the relative cost of highway travel less expensive) moving more freight onto trucks. While this benefits the trucking industry, I don’t think there is evidence it benefits society at large.

In end we need to ask what is the best investment of $2T. Is it in transportation? If it is in transportation, urban or intercity? Freight or Passenger? Which corridors? Which modes best serve those corridors given the transportation network they are embedded in? If you had $2T what would you spend it on?

The presentation and my spoken comments (of which this is the “revised and extended version”) can be seen here.

2 thoughts on “More on HSR

  1. You write: The idea of profitability is nonsense. If this were to be private, following the history of most transportation infrastructure investments, the first generation of investors are likely to be wiped out in bankruptcy.
    If this is indeed the history of transport infrastructure investments (and recent fiascos here in Australia bear you out) why do these projects continue to find investors?


  2. @Jarrett See my recent post which says:
    That is an interesting question. I cannot explain the irrationality of markets, but I would refer you to some excellent papers by my friend and colleague (and mathematican and transport and internet historian) Andrew Odlyzko

    Collective hallucinations and inefficient markets: The British Railway Mania of the 1840s
    This time is different: An example of a giant, wildly speculative, and successful investment mania


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