Do Streetcars Promote Economic Development? |

Now at Streets.MN: Do Streetcars Promote Economic Development? :

 “It is often said that “Absence of Evidence is not Evidence of Absence”, but this is wrong. This is especially wrong in a context were we have motivated people searching for evidence. Consider the example of Bigfoot. Bigfoot is a supposedly big humanoid / primate living in very small numbers (and presumably hiding from humans). There was a fad in my youth for blurry pictures of Bigfoot to appear in weekly tabloids sold at supermarket checkout stands. However, as XKCD points out, cameras are everywhere now, on billions of phones, and yet we have no more evidence of Bigfoot than before.”

Do Streetcars Promote Economic Development?

As Bill notes, the Metropolitan Council argues that Streetcars are more for Economic Development than for Transportation, and so should be seeking a different pot of money.

We have evidence in many historical cases of the co-evolution of transport and land use (e.g. LondonNew YorkTwin Cities). In those cases the transport mode developed was faster than alternatives, and therefore increased accessibility, making land more valuable.


We have no evidence that streetcars, of themselves, promote economic development in the context of present-day US cities. That is, there is no case where modern streetcars were built, nothing else was done by the public sector (no road reconstruction, no public subsidies for development, no change in development regulations), and the level of private sector economic development changed measurably, and more than in an otherwise comparable control case.

We have hypotheses as to why there should be no effect, and that is the maturity of the system (streetcars are not connecting places that are presently unconnected) and the lack of positive changes to accessibility (or even negative changes to accessibility) that comes with adding a slow mode to a network which is already faster.

It is often said that “Absence of Evidence is not Evidence of Absence”, but this is wrong. This is especially wrong in a context were we have motivated people searching for evidence. Consider the example of Bigfoot. Bigfoot is a supposedly big humanoid / primate living in very small numbers (and presumably hiding from humans). There was a fad in my youth for blurry pictures of Bigfoot to appear in weekly tabloids sold at supermarket checkout stands. However, as XKCD points out, cameras are everywhere now, on billions of phones, and yet we have no more evidence of Bigfoot than before.

Does this constitute “proof” of the non-existence of Bigfoot? No, because one can never prove a negative (See Popper on Falsifiability). It does however cause the rational among us to become increasing skeptical about our hirsute friend’s likelihood of being real.

The very logical Less Wrong blog discusses this issue: Absence of Evidence Is Evidence of Absence :

“But in probability theory, absence of evidence is always evidence of absence. If E is a binary event and P(H|E) > P(H), “seeing E increases the probability of H”; then P(H|~E) [Probability of H given Not E] is less than P(H), “failure to observe E decreases the probability of H”. P(H) is a weighted mix of P(H|E) and P(H|~E), and necessarily lies between the two.”


We need to think in “but for” way when evaluating economic development claims.

Would the development not occur “but for” this particular investment? Would it occur with streetcars and BRT, with only streetcars, with only BRT, with neither?

We can’t fully know this without running 4 experiments in 4 parallel universes. We can estimate this statistically by looking carefully at multiple cases that have already opened, under multiple conditions, and get likelihoods that effects are as estimated by the model. There are some examples of modern transit lines increasing property values, there are some examples of no effect, and there are even some examples of transit lines destroying wealth (sometimes all found in the same study, e.g. Rail Transit Investments, Real Estate Values, and Land Use Change: A Comparative Analysis of Five California Rail Transit Systems by Landis et al.). Once lots of these studies are done, we can do a meta-analysis, and try to put the complexity of findings into some order. The meta-analysis is much more robust, in that it essentially has the combined sample size of all of the studies it takes in. For instance, see The Impact of Railway Stations on Residential and Commercial Property Value: A Meta-analysis . These studies unfortunately do not generally apply to modern streetcars, which have very different characteristics than high capacity services.

There have been a few attempts to summarize the results of the Streetcar and economic development debate:

None of the reports about economic development effects have survived a rigorous peer review process. So in the end, we equivocate. If the new transportation infrastructure notably increases the relative accessibility of a place (compared to other places), it might attract some development that would otherwise go elsewhere. If it signals to developers to coordinate actions, and develop here, rather than there, it might also concentrate development. If we concentrate development, and create more accessibility, we might have some economies of agglomeration further driving growth. If, If, If.

The evidence we do have is that employment in the core cities of Minneapolis and St. Paul is very stable, independent of most of the vagaries of the economy, shifts from low rise to skyscrapers, construction of freeways and skyways, the expansion of the University, the rise of the dual worker household, and so on.

The table below shows employment in Minneapolis and St. Paul from 1970 – 2010.


St. Paul Minneapolis
1970 170490 265090
1980 176900 268600
1990 172578 278438
2000 188124 308127
2010 175933 281732

Do we really believe a small investment in infrastructure serving a thousand additional people per day will move this? That would be the equivalent of urban homeopathy.


An anonymous source nicely summarized some publicly available information (Nicollet Alternatives Analysis and Met Transit’s Arterial BRT study) of the costs and ridership of all alternatives.

Line Length(miles) 2030 Avg Weekday Project Boardings 2030 Avg Weekday New Riders Capital Cost (million $) Operating Cost (million $) Capital Cost / Weekday Rider
Enhanced bus 9.2 13,400 -1,700 94 13.6 $7,015
Streetcar 9.2 19,900 900 393 20.1 $19,749
Streetcar starter line 3.4 7,200 1,200 200 10.6 $27,778
Met Transit aBRT 21.8 34,700 6,700 110.7 9.06 $3,190

And if you prefer your denominator to be riders per mile of construction rather than riders:

Cost / Rider / Mile

Upzoning and development would be factored into all alternatives, especially since a number are already being developed without a streetcar or other improvement. These ridership projections also include the AA’s assumption that streetcar riders perceive a 25-minute travel time savings (implicitly making their travel time negative in some cases), and thus more choose streetcar.

We need to consider that the Met Council would likely ask Minneapolis to cover most if not all operating costs. That means Minneapolis alone is responsible for $10 – 20 million per year, without a legislature or whole large transit apparatus to back the City up. And that’s only one line.

Advocates will advocate, that is their nature. If no one believes their small estimates of economic impact, the estimates will just grow and grow, just so they can get attention. But don’t confuse their advocacy with scientific knowledge, about which we have very little.

Streetcars are an amenity, like stadiumsfestival marketplacesEntertainment blocks, and new convention centers.

Are they the best amenity? Are they the best transportation service possible? Or do they drain resources that would otherwise be spent on something else, like maintaining and improving existing transit systems or serving many more passengers with Arterial BRT?


2 thoughts on “Do Streetcars Promote Economic Development? |

  1. Here is the simple reality. Concentration of economic activity is not the same as creation of new economic activity. The theory of the relationship between the transportation system and economic land rents (Haig, Alonso, Wingo) desperately needs to be better understood. The more flexible the transport system, the more economic land rents are “diluted”. Automobile based development with true competition, minimises the “gain” over and above rural land values, hence lot prices in affordable US cities are anchored in the cost of rural land plus cost of development plus a modest profit. (Urban growth containment planning destroys this benefit).

    Anthony Downs is one who has pointed out that “planned concentration” gives “monopoly powers of rent extraction” to property owners at those locations unless the property is compulsorily acquired (or targeted by taxes to discourage the owners from “holding out”).

    It is obviously quite wrong to assume that land rent is a proxy for “value created”. It might well be “value transferred”, i.e. as zero sum economic rent. Cheshire and Mills estimated from 1984 data that land at the centre of a UK city was 325 times more expensive than that in a comparable US city. Cheshire and Hilber more recently have pointed out that virtually all cities in the UK have office rents higher than Manhattan. Obviously land rents can be completely unmoored from actual production and income.

    The impact on different sectors of urban economies will vary according to the sector’s requirement for space, and ability to generate income. Planning for compactness and “transit” will be a good match for a city with “global” finance and so on; capital cities and their bureaucracies are another good match. London has both. But the UK economy as a whole is a working illustration of what happens to the nation’s higher-land-requirement, lower-income sectors when land rents are inflated. If they didn’t have London, they would have had to get real about the effects of their urban planning system; and they still do need to get real about it, because the level of extraction of land rent out of production and incomes in the economy is not inconsequential. Socio-economic outcomes are dire.

    Streetcar systems seem to require subsidies of 50 cents or more per passenger mile traveled; commuter rail still seems to require 20 cents or so; buses a bit less. But private car drivers “subsidy” via roads is about 2 cents per person mile traveled. Drivers willingly pay for most of their own costs; the car, the petrol, the insurance, the repairs.

    So in which system is there evidence of value or “consumer surplus”? Oh, I know, the anti-car activists will hunt like Bigfoot theorists for “externalities” that drivers don’t pay for; but are drivers and passengers in cars not pretty much synonymous with the society that bears the cost of externalities? And are there not “positive externalities” for which automobility is responsible, too?

    Colin Clark pointed out in his last book “Regional and Urban Location”, that subsidies to rail and subway systems are subsidies to the owners of certain types of property, for which there are no social justification. For some reason, levies on the property owners, especially in CBD’s that are the focus of transit routes, never seems to get on the political agenda as a means of funding this “infrastructure”. Of course the owners of the property do not mind capturing 80 cents of every dollar of benefit and paying in 20 cents of the several dollars of cost, the balance of which is paid out of taxes on incomes and petrol and non-benefiting property owners.

    So yes, I love the “Bigfoot” analogy, for “looking for economic benefits of streetcars”. We might as well be “looking for economic benefits of muggings”. Of course the muggers “benefit”. But their benefit is theft of someone else’s benefit. Streetcar systems work in much the same way.


  2. Useful journalism on this phenomenon in Portland has been done by Jim Karlock:

    The “monopoly powers” granted to the owners of property at the locations selected by the planners, leads to them holding out even for public subsidies. Under policies of urban growth containment, “intensification” at efficient locations is slowed down because of the sheer cost of the land. Land becomes a speculative commodity held by people who have little or no interest in its efficient use, just as people hold gold. The prospect of capital gains is everything.

    This is why planners in the UK insist there is “not a shortage of land for housing”; there are empty properties all over the place….! The fact that the average age of a first home buyer is now 39 years, or that the price of land is about 300 times higher per square foot than most US cities, does not matter to them.

    This is morally the same thing as an oligopoly in wheat growing leaving some proportion of their productive land fallow because the bottom quartile of the population could not afford bread at all at their asking prices, and claiming that this proves there is no shortage.

    Shlomo Angel et al find the rate of infill of fragmented land to be higher in Houston than in Portland.


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