U.S. Employees Selling Transit Passes Illegally, Investigators Say

From today’s New York Times: U.S. Employees Selling Transit Passes Illegally, Investigators Say .
The federal government, to provide incentives for its employees to take transit, has given them a subsidy of transit passes. Instead of paying their employees more dollars (a currency in fact produced by the US government) and letting them make their own transportation decisions, or charging more for alternatives (on parking generally owned by the US government), it attempted to impose an alternative currency, and is outraged, outraged I say, that people have attempted to perform currency exchange, economic arbitrage between the subsidy and money for them that is more useful.
This is what you get for trying to direct human behavior .. performing “social engineering” as the term is used in Minnesota.
The report was apparently requested by Republican Minnesota Senator Norm Coleman, who is apparently upset at government employees using the market system.
Coleman should instead be pleased at how well the federal employees understand markets and are willing to cut through red tape.

Manhattan Congestion Charging Scheme

Mayor of NYC Bloombergproposes a Fee for Driving Into Manhattan
“The proposal that is sure to attract the most attention, and possibly objections, is one to impose the $8 fee on car drivers, and $21 for truck operators, to drive in Manhattan south of 86th Street.”
As the article notes, this proposal copies the London congestion charging scheme, almost point for point, including the use of cameras and the extremely expensive AVI system for enforcement.

History of the Future

A list of predictions made in 1900 by the Ladies Home Journal (making its round in various blogs). Note the transportation predictions:
“Prediction #4: There Will Be No Street Cars in Our Large Cities. All hurry traffic will be below or high above ground when brought within city limits. In most cities it will be confined to broad subways or tunnels, well lighted and well ventilated, or to high trestles with “moving-sidewalkâ€? stairways leading to the top. These underground or overhead streets will teem with capacious automobile passenger coaches and freight with cushioned wheels. Subways or trestles will be reserved for express trains. Cities, therefore, will be free from all noises.
Prediction #5: Trains will run two miles a minute, normally; express trains one hundred and fifty miles an hour. To go from New York to San Francisco will take a day and a night by fast express. There will be cigar-shaped electric locomotives hauling long trains of cars. Cars will, like houses, be artificially cooled. Along the railroads there will be no smoke, no cinders, because coal will neither be carried nor burned. There will be no stops for water. Passengers will travel through hot or dusty country regions with windows down.
Prediction #6: Automobiles will be cheaper than horses are today. Farmers will own automobile hay-wagons, automobile truck-wagons, plows, harrows and hay-rakes. A one-pound motor in one of these vehicles will do the work of a pair of horses or more. Children will ride in automobile sleighs in winter. Automobiles will have been substituted for every horse vehicle now known. There will be, as already exist today, automobile hearses, automobile police patrols, automobile ambulances, automobile street sweepers. The horse in harness will be as scarce, if, indeed, not even scarcer, then as the yoked ox is today.
Prediction #7: There will be air-ships, but they will not successfully compete with surface cars and water vessels for passenger or freight traffic. They will be maintained as deadly war-vessels by all military nations. Some will transport men and goods. Others will be used by scientists making observations at great heights above the earth.
Prediction #8: Aerial War-Ships and Forts on Wheels. Giant guns will shoot twenty-five miles or more, and will hurl anywhere within such a radius shells exploding and destroying whole cities. Such guns will be armed by aid of compasses when used on land or sea, and telescopes when directed from great heights. Fleets of air-ships, hiding themselves with dense, smoky mists, thrown off by themselves as they move, will float over cities, fortifications, camps or fleets. They will surprise foes below by hurling upon them deadly thunderbolts. These aerial war-ships will necessitate bomb-proof forts, protected by great steel plates over their tops as well as at their sides. Huge forts on wheels will dash across open spaces at the speed of express trains of to-day. They will make what are now known as cavalry charges. Great automobile plows will dig deep entrenchments as fast as soldiers can occupy them. Rifles will use silent cartridges. Submarine boats submerged for days will be capable of wiping a whole navy off the face of the deep. Balloons and flying machines will carry telescopes of one-hundred-mile vision with camera attachments, photographing an enemy within that radius. These photographs as distinct and large as if taken from across the street, will be lowered to the commanding officer in charge of troops below.
Prediction #22: Store Purchases by Tube. Pneumatic tubes, instead of store wagons, will deliver packages and bundles. These tubes will collect, deliver and transport mail over certain distances, perhaps for hundreds of miles. They will at first connect with the private houses of the wealthy; then with all homes. Great business establishments will extend them to stations, similar to our branch post-offices of today, whence fast automobile vehicles will distribute purchases from house to house.
Prediction #29: To England in Two Days. Fast electric ships, crossing the ocean at more than a mile a minute, will go from New York to Liverpool in two days. The bodies of these ships will be built above the waves. They will be supported upon runners, somewhat like those of the sleigh. These runners will be very buoyant. Upon their under sides will be apertures expelling jets of air. In this way a film of air will be kept between them and the water’s surface. This film, together with the small surface of the runners, will reduce friction against the waves to the smallest possible degree. Propellers turned by electricity will screw themselves through both the water beneath and the air above. Ships with cabins artificially cooled will be entirely fireproof. In storm they will dive below the water and there await fair weather.”
Of course they missed the airplane, and were optimistic about how people should deal with traffic. But number 6 about the replacement of the horse was spot on
What will 2100 look like, or are we just so cautious now that we don’t make 100 year predictions anymore?

Russia Plans World’s Longest Tunnel, a Link to Alaska

Russia Plans World’s Longest Tunnel, a Link to Alaska
April 18 (Bloomberg) — Russia plans to build the world’s
longest tunnel, a transport and pipeline link under the Bering Strait to Alaska, as part of a $65 billion project to supply the U.S. with oil, natural gas and electricity from Siberia. … more.
This reminds one of Buckminster Fuller, who long ago advocated linking the world’s electrical grids to balance loads (assuming low losses on transmission). Looking at his Dymaxion Map gives a new perspective on how close Alaska and Siberia are.

History of MN Gas Tax

A nice article in today’s Strib on the History of the Minnesota as Tax: Over its 82 years, state’s gas tax has never cost so little

Paying for heavier trucks

From today’s Strib: Editorial: Want heavier trucks? Fully fund highways. Again misanalyzing the issue they say

“Oberstar was right; raising the gas tax is doing the right thing. In the case of allowing heavier trucks on state roadways, it is also the necessary thing. “

Raising the gas tax on cars is not necessary to allow heavier trucks on the road. Raising the diesel tax on trucks might be somewhat more appropriate, after all, at least the class that benefits would be the class that pays. Even better would be charging trucks a weight-distance tax (pdf).

The cited issue brief (Legislative Committee Services Oregon Legislature, Dec. 2000) notes

“Most of the ongoing revenue collected by states and the federal government for highway construction and maintenance is from vehicle fuel taxes. To the extent that a vehicle’s fuel use correlates with its road use and wear, a fuel tax is an equitable way to “charge? for use of the road system. Variations in vehicle fuel economy, however, weaken the correlation between a fuel tax and road wear. This is true for all vehicles, but especially for heavy vehicles. An increase in truck weight that nearly doubles road wear may only increase fuel use by 10%. A weight-mile tax can be structured to more accurately assess for costs of wear.”

This of course would not be popular among truckers, who would love to get all the benefit for one-tenth the cost by having light vehicles pay per distance instead.

Twins ballpark will have Minnesota flavor

Twins ballpark will have Minnesota flavor … it is surrounded by parking ramps. Even parking ramps look nice in watercolor.

DARPA Grand Challenge

DARPA Grand Challenge is a competition for driverless cars, the third of which will be held in an urban environment in November 2007. These challenges are excellent ways to motivate research (read Longitude by Sobel on earlier challenges). This is getting some buzz as one of the contestants is being parked at the London Science Museum, (an excellent Science Museum by the way).
Let’s hope this ends better than the Automated Highway System demonstration of 1997, which despite technical success resulted in cancellation of the program.
I believe Driverless cars will succeed where AHS did not, as this is a much better design path, as it does not require both new networks and new vehicles, only new vehicles which can operate (we hope without incident) in mixed traffic.

Are sunk costs sunk, is salvage value salvageable? A paradox in engineering economics analysis

Salvage value is defined as “The estimated value of an asset at the end of its useful life.”
Sunk cost is defined as “Cost already incurred which cannot be recovered regardless of future events.”
It is often said in economics that “sunk costs are sunk”, meaning they should not be considered a cost in economic analysis, because the money has already been spent.
Now consider two cases
In case 1, we have a road project that costs $10.00 today, and at the end of 10 years has some economic value remaining, let’s say a salvage value of $5.00, which when discounted back to the present is $1.93 (at 10% interest). This value is the residual value of the road. Thus, the total present cost of the project $10.00 – $1.93 = $8.07. Clearly the road cannot be moved. However, its presence makes it easier to build future roads … the land has been acquired and graded, some useful material for aggregate is on-site perhaps, and can be thought of as the amount that it reduces the cost of future generations to build the road. Alternatively, the land could be sold for development if the road is no longer needed, or turned into a park.
Assume the present value of the benefit of the road is $10.00. The benefit/cost ratio is $10.00 over $8.07 or 1.23. If we treat the salvage value as a benefit rather than cost, the benefit is $10.00 + $1.93 = $11.93 and the cost is $10, and the B/C is 1.193.
In 10 years time, the community decides to replace the old worn out road with a new road. This is a new project. The salvage value from the previous project is now the sunk cost of the current project (after all the road is there and could not be moved, and so does not cost the current project anything to exploit). So the cost of the project in 10 years time would be $10.00 – $5.00 = $5.00. Discounting that to the present is $1.93.
The benefit in 10 years time is also $10.00, but the cost in 10 years time was $5.00, and the benefit/cost ratio they perceive is $10.00/$5.00 = 2.00
Aggregating the two projects
the benefits are $10 + $3.86 = $13.86
the costs are $8.07 + $1.93 = $10.00
the collective benefit/cost ratio is 1.386
the NPV is benefits – costs = $3.86
One might argue the salvage value is a benefit, rather than a cost reduction. In that case
the benefits are $10.00 + $1.93 + $3.86 = $15.79
the costs are $10.00 + $1.93 = $11.93
the collective benefit/cost ratio is 1.32
the NPV remains $3.86
Case 2 is an identical road, but now the community has a 20 year time horizon to start.
The initial cost is $10, and the cost in 10 years time is $5.00 (discounted to $1.93). The benefits are $10 now and $10 in 10 years time (discounted to $3.86). There is no salvage value at the end of the first period, nor sunk costs at the end of the second period.
What is the benefit cost ratio?
the costs are $11.93
the benefits are still $13.86
the benefit/cost ratio is 1.16
the NPV is $1.93.
If you are the community, which will you invest in?
Case 1 has an initial B/C of 1.23 (or 1.193), Case 2 has a B/C of 1.16. But the real benefits and real costs of the roads are identical.
The salvage value in this example is, like so much in economics (think Pareto optimality), an accounting fiction. In this case no transaction takes place to realize that salvage value. On the other hand, excluding the salvage value over-estimates the net cost of the project, as it ignores potential future uses of the project.
Time horizons on projects must be comparable to correctly assess relative B/C ratio, yet not all projects do have the same benefit/cost ratio.
This “paradox” was first noted to me by Mark Snyder. I don’t know how widely it is known or understood, but it does affect analysis.