“TEMS, the consultant hired to advocate for the project, asserts that revenue will exceed operating costs at higher speeds. I agree that both revenue and costs will increase with speed, whether one increases faster than the other is an empirical question on which forecasts are highly questionable for a variety of reasons, not the least of which is lack of existing service on which to base such assumptions. Many have suggested the Downeaster is the most comparable market.
The Downeaster already carried 300,000 riders in 2005 and was in fact forecast to carry 625,000 passengers between Boston and Portland in 2015, so, [the fact] that it exceeds 525,000 riders in 2012 after a major investment is hardly testament to it beating targets. http://www.edrgroup.com/pdf/report-downeaster-final.pdf
More important is to compare the structure of the markets. Boston and Portland are less than 100 miles apart. Duluth is 137 miles from Minneapolis, so you would expect more trips between Boston and Portland if the sizes of the city pairs were equal. They are not.
The population of metropolitan Portland, Maine (516,000) exceeds that of Duluth (280,000); while the metropolitan Boston combined statistical area (7.6 million) remains larger than the Twin Cities (3.6 million). The number of trips between two places is a product of their sizes and inversely proportional to the travel time. On a population basis alone we expect the Boston to Portland market to have almost four times as many trips as Minneapolis to Duluth.
Of course metropolitan Boston has much greater transit use (12.2 percent) than Minneapolis (4.7 percent), and much better connections so that will also tend to increase ridership for the Downeaster above what the NLX should expect.
Unfortunately, U.S. experience with passenger rail for the past 50 years suggests the forecasts are optimistically biased in favor of the project in order to increase the likelihood they will be funded. The question at hand is will the project in fact recover its operating and capital costs?
We have no evidence it will. TEMS admits that Amtrak considers state revenue as income. A subsidy is a subsidy whether it comes from the federal, state, or local government. So even if the Northeast Corridor were operationally profitable (conveniently forgetting capital costs, which need to be paid somehow), that is not evidence any other particular route would be. Just because it pays its utilities (operating costs) doesn’t mean it pays its mortgage (capital costs). Who will pay if the NLX fails to meet revenue hopes?”
From Sacha Kapoor and Arvind Magesan (pdf):
Most empirical studies on the role of information in markets analyze policies that reduce asymmetries in the information that market participants possess, often suggesting that the policies improve welfare. We exploit the introduction of pedestrian countdown signals – timers that indicate when traffic lights will change – to evaluate a policy that increases the information that all market participants possess. We find that although countdown signals reduce the number of pedestrians struck by automobiles, they increase the number of collisions between automobiles. We also find that countdown signals caused more collisions overall. The findings imply welfare gains can be attained by revealing the information to pedestrians and hiding it from drivers. We conclude that policies which increase asymmetries in information can improve welfare.
Hat tip goes to @m_sendhil.
(Via Marginal Revolution)
Reihan Salam talks about infrastructure, and cites our Access Across America work.
When Thinking About Infrastructure, Focus on Accessibility :
“… David Levinson, a transportation economist at the University of Minnesota, has emphasized that one of the key issues in infrastructure investment is improving accessibility, or the ease of reaching valued destinations. One way to improve accessibility is make it easier to traverse long distances, so you can reach a larger number of jobs and consumption opportunities, etc., in a given amount of travel time from home. Another way to improve accessibility is to bunch up jobs and consumption opportunities and homes, i.e., by increasing density. Levinson finds that while accessibility has deteriorated relative to 1990, it has improved relative to 2000. My sense is that the best way to increase accessibility is to focus on implementing peak road-user fees and using the resulting revenue stream to carefully add capacity at bottlenecks, and also to ease local land use regulations that have proven a barrier to increased density in high-productivity regions. These strategies ought to be pursued in tandem. One crude way of putting this is that while we tend to fixate on the ‘hardware’ layer of infrastructure, we should devote more attention to the ‘software’ layer, i.e., the systems governing the allocation of infrastructure resources. Focusing on accessibility rather than infrastructure spending levels as such will get us much closer to tackling the frustrations that plague commuters. “
I posted a while back Transportation Benefits Too Little.
Matt Logan sends me to another paper of interest: Understanding the Contribution of Highway Investment to National Economic Growth: Comments on Mamuneas’s Study by Randall Eberts
Since the early 1990s, various researchers have attempted to answer the question: “What is the rate of return of highway investments to the economy?” This follows from the simple proposition that highways provide the arteries for the flow of raw materials, and intermediate goods to producers and access to employment and markets for consumers. Without a highway system producers would not be able to obtain economies of scale to obtain the most efficient operation. Many economists agree that the rate of return to highways during the period 1950 – 1970 exceeded the rate of return available to alternative investments.
Recent studies have indicated that the rate of return to highways has decreased following the initial boost provided by national connectivity. There is strong debate about the actual level of returns in the late 90’s to the present day. The level becomes critical because some studies show the rate near or below the rate of return available from alternative investments. The Federal Highway Administration (FHWA) of the U.S. Department of Transportation seeks to continue to provide the best information available to policy makers to understand the benefits and trade-off involved with alternative uses of the scarce federal resources.
To that end, the Theofanis P. Mamuneas recently completed an update of his highway benefit research for the FHWA. During the 1990s Prof. Mamuneas conducted several studies with Prof. Nadiri based on a general equilibrium approach to modeling the returns to highway investments accounting for both consumer and producer benefits. This paper endeavors to place the most recent study authored by Prof. Mamuneas in context with previous results and results from alternative methodologies and data sets. Each study examining the returns to highways employs complex econometrical and data intensive modeling efforts. The studies also yield different and sometimes conflicting results, even though all employ generally accepted economic techniques. Policy makers need a technically skilled and unbiased review of the field in order to use the results of this literature for policy decisions.
The purpose of this paper is to review and summarize current literature relevant to contextualizing the recent update by Mamuneas to the previous Nadiri-Mamuneas estimates of the returns to highway investments. To provide this context, the paper will first provide an overview of the conceptual relationship between highways and output. The next section describes the highway capital stock estimated by Fraumeni and used by Mamuneas. Next, the paper describes the study conducted by Mamuneas and carefully analyzes the results for consistency within the modeling framework and in context with other studies. The paper then briefly summarizes the broad range of estimates from the literature to offer additional context. Finally, the paper offers an overview of the issues that still need to be addressed to provide more definitive estimates.
… While there may not be a consensus in the literature on the absolute value of estimates of the rate of return to highways, and perhaps that may not be possible given the different methodologies and levels of aggregation used in the literature, it appears that there is a convergence of thought that the U.S. highway system is maturing and that the system is no longer underbuilt. However, that does not mean that funding for the highway system should be reduced. As a mature system, highways require maintenance, upgrading and replacement to provide the same level of services as before. And with a large infrastructure, that requires considerable investment to maintain highways in the condition that they were originally built. In addition, as the economy continues to expand over the long-run, the proportion of highway stock to other factors of production will need to be maintained so that if the economy is at an equilibrium state in which the rates of return are roughly equal, that relationship can be maintained into the future.
I agree with the first part of the conclusions. I am less convinced the economy is ever in equilibrium nor that the share of highway stock in factor of production needs to remain constant. The whole point of dematerialization is to reduce transport and inventory costs, so I would hope transport costs might go down over time as more things can be done virtually.
I get quoted in the Pine City Pioneer about the proposed Twin Cities to Duluth train: Does NLX rail make sense for Pine County?
I assume you can derive the answer from first principles.
Cross-posted from streets.mn: Mis-structuring employee parking charges: An example from a local university
Parking in a structure is the quintessential private good. It is excludable (no pay, no park), and it is rivalrous (if I park in a space, you cannot). Someone at Metropolitan State University does not understand this, and is instead trying to get all employees and students to pay for a parking structure at the St. Paul campus, whether they use it or not (transforming this into a club good). The attached images show the memo of the proposedpolicy.
See particularly Section 6:
“Parking fees for all employees, irrespective of their office location, (resident and community faculty, staff, and administrators) are mandatory …
The estimated annual parking fee for full-time staff and faculty is $400 per year … The anticipated rate for students will be $10.50 per credit. … “
So if you take the bus to the Midway campus (nowhere near the main St. Paul campus), you still subsidize parking in St. Paul. If you pay for parking in downtown Minneapolis and walk to the Minneapolis campus via the Skyways, you will subsidize a parking ramp in St. Paul. If you take an online course (distance learning), you still subsidize parking in St. Paul.
Leaving aside the urban design aspects for now (see below) and the creation of a fortress campus, this is so misguided from an economics perspective I don’t know where to begin.
(1) Why is Metropolitan State University in the parking business? Is this a core part of their mission? Shouldn’t they contract with someone to build and operate the ramp and charge parkers (students and staff) market rates? If they need to subsidize staff to work where it is more expensive (or lose people), they can pay them more. (I realize other universities have parking as well, but they charge users directly, and don’t charge non-users, since parking is profitable.) If they lose students from their St. Paul campus, that might indicate they have a bad location.
(2) Why don’t they charge people who want to buy parking contracts directly, or charge people who use it on an ad hoc basis directly, instead of charging everyone? The incentives they are creating will encourage more people to drive to campus rather than fewer.
(3) Why doesn’t Metro State have a subsidized transit program (like U-Pass) for their staff and students?
(4) Why doesn’t Metro State work with Metro Transit to coordinate service with class schedules. The longer-term plan seems to be providing BRT or LRT on the Gateway Corridor, with a stop at Mounds Boulevard (on either 3rd or 7th depending on which alternative is picked), easily accessed from campus.
(5) If the neighborhood is concerned about student (or staff) parking on public streets, why don’t they start putting meters on the street (maybe exempting residents who pay for a seasonal pass), and make some money for the neighborhood. Parking benefit districts are a logical and positive response to parking spillover.
Now to the urban design aspects. Metropolitan State almost has a quad (with a driveway in the middle, but that is easily remedied). It actually has nice architecture on the St. Paul campus. Why muck that up with a parking ramp? You could see from their existing surface lot how the campus might naturally extend across Maria Avenue, and later across Bates Avenue. If you must build something, do it underground rather than wasting precious above ground space that could be used for better purposes. Stored cars need no natural light.
Yes, parkers should pay for parking. No, non-parkers should not pay for parking. No, parking costs are not the same everywhere, nor should the prices be. No, St. Paul does not require more parking ramps.
Disclosure: I have a family member who is an employee of Metropolitan State University. These views are my own.
The Greater Minneapolis-Saint Paul region ranks fifth nationally in accessibility to jobs by car, following much larger metropolitan areas: Los Angeles, San Francisco, New York, and Chicago, according to a study we recently completed at the University of Minnesota. The region is punching above its weight following a boxing metaphor. Why?
Accessibility is the product of speed and destinations. The more destinations I can reach in less time, the more accessibility I have.
As noted previously, at 72 km/h the region has one of the fastest street networks in the United States (which has an average of 65 km/h across all 51 metros in the study).
Our circuity (the ratio of network to Euclidean distance) has increased by about 10% over this period, from 1.34 to 1.37 (note the minimum circuity is 1.00, so a 0.03 change over 0.34 is about 10%), meaning the routes are on average less direct. We can attribute this largely to suburbanization, suburban street networks in newly developed areas are more circuitous than networks built in earlier decades. National trends have been similar but more modest, increasing by about 3% to 1.37
Looking at this over time, accessibility has increased about 20% in the metro area from 1990, though it has dropped about 4% since 2000. Overall, the region had the fourth largest increase in accessibility rank between 1990 and 2010, following only Los Angeles, San Francisco, and Jacksonville (To be clear, other cities had larger increases in overall accessibility, but Minneapolis move the most places up the standings.).
The small changes in accessibility from 2000 to 2010 is due to the decrease in employment between 2000 and 2010, following a sharp rise from 1990 to 2000. This also mirrors national trends. There are many reasons for the decrease in employment, including changing demographics, labor force participation rates, and the Great Recession, among others, but the fewer jobs the lower the accessibility. While employment drops, speeds increase (fewer cars on the road) so these effects are somewhat offsetting, though I think most people would trade some congestion for more employment.
Today we released a new report describing the level and change of accessibility across the 51 metropolitan areas in the United States: Access Across America. The website includes an interactive map, the report can be downloaded directly here.
Accessibility is the ease of reaching valued destinations. It can be measured across different times of day (accessibility in the morning rush might be lower than the less-congested midday period). It can be measured for each mode (accessibility by walking is usually lower than accessibility by transit, which is usually lower than accessibility by car). There are a variety of ways to define accessibility, but the number of destinations reachable within a given travel time is the most comprehensible and transparent as well as the most directly comparable across cities. This report focuses on accessibility to jobs by car. Jobs are the most significant non-home destination, but it is also possible to measure accessibility to other types of destinations. The automobile remains the most widely used mode for commuting trips in the United States.
This study estimates the accessibility in the 51 largest metropolitan areas in the United States for 2010, and compares results with 2000 and 1990.
Rankings are determined by a weighted average of accessibility, giving a higher weight to closer jobs. Jobs reachable within ten minutes are weighted most heavily, and jobs are given decreasing weight as travel time increases up to 60 minutes. Based on this measure, the ten metro areas that provide the greatest average accessibility to jobs are Los Angeles, San Francisco, New York, Chicago, Minneapolis, San Jose, Washington, Dallas, Boston, and Houston.
Job accessibility has changed over time. In the past two decades, Las Vegas, Jacksonville, Austin, Orlando and Phoenix have seen the largest percentage gains in job accessibility while Cleveland, Detroit, Honolulu and Los Angeles have seen the largest percentage drops.
- In 2010, the average American living in the top-51 metro areas could reach slightly fewer jobs by automobile than in 1990, but more jobs than in 2000.
- Automobile speeds were faster in 2010 than in 2000 (and about where they were in 1990).
- Overall job losses in these 51 areas have limited accessibility gains associated with faster networks.
- The average American city is slightly more circuitous in 2010 than in 1990 because roads in newer areas (suburban growth) are not as well connected as those in older areas of the metropolitan region.
- The overall most accessible metropolitan areas in 2010 were (in order): Los Angeles, San Francisco, New York, Chicago, Minneapolis, San Jose, Washington, Boston, Dallas, and Houston.
- There have been significant changes among accessibility leaders since 1990, when New York, Philadelphia, Chicago, Miami, Los Angeles, Boston, Cleveland, Detroit, Washington, and Dallas made up the top 10.
- People living in many smaller metropolitan areas can reach as many jobs by car as people living in much larger areas within both the 10- and 20-minute time frames. For instance New Orleans, Salt Lake City, and Jacksonville are all among the top 10 for number of jobs that can be reached within 10 minutes. Jacksonville, Milwaukee, and Las Vegas are among the top 10 for number of jobs that can be reached within 20 minutes.
There are two ways for cities to improve accessibility—by making transportation faster and more direct or increasing the density of activities, such as locating jobs closer together and closer to workers. While neither of these things can easily be shifted overnight, they can make a significant impact over the long term.
At a March 32 meeting of the Streets.MN Board, it was announced that Streets.MN was considering an offer to relocate to Los Angeles unless a new modern state-of-the-art server was built in Minnesota. The Board said in its press release:
We have lived with our server for nearly 18 months (which is 30 years in non-internet time), sharing it with lots of other web-based services, and served millions of words, tens of millions of letters, and billions of bytes. While the server (see image on upper right) was state-of-the-art when it opened in late 2011, it has become uncompetitive with servers in other peer cities, such as Cincinnati, Indianapolis, and San Francisco, which have all provided their leading blog with new hardware. We lack basic features like a high-definition LED readouts on the front of our server. A schematic of the user interface of the proposed new server is shown on the lower right. In short, Streets.MN cannot remain competitive in recruiting new writers with its existing server infrastructure.
We have received inquiries from a group in City of Commerce, California, which has offered us a new server if we would simply relocate. As everyone knows, Los Angeles lacks a blog. While we love Minnesota, we have been presented with an impressive offer which we are hard pressed to turn down in the absence of a new facility locally. The lease on our current server expires at the end of this season, at which time we will need to seriously consider our options.
The Board further said that if Streets.MN moves, it will just do a search and replace for all posts: replacing the words Minneapolis with Los Angeles, and St. Paul with Long Beach and expect that everything else will remain meaningful to our new readers. The Board expects readers to purchase Personal Seat Licenses to pay for the server.