Streetwise Professor

May 15, 2015

No. Trains Are Not Public Goods and Don’t Exploit Tragedy To Claim They Are

Filed under: Economics,Politics,Regulation — The Professor @ 9:39 pm

One of the least savory aspects of human behavior is the tendency to exploit tragedy for personal or political ends. This low tendency was on display in spades in the aftermath of the Amtrak derailment in Philadelphia. Before the bodies of the dead were even cold, pundits and politicians were out in force moaning that the tragedy proved the lamentable decay of American infrastructure, and the lack of government spending on it. Remarkably (or maybe not), the lamentations have continued even after it was revealed that the train had been going more than twice the speed limit, thereby making it highly unlikely that shoddy track or a poorly maintained train was to blame. No tragedy should go to waste, apparently, and the facts shouldn’t get in the way of a politically useful narrative.

There are many examples of the mo’ guvmint types exploiting the deaths of 8 people in Philly, but for 99.9 percent pure, unadulterated stupidity, you have to read this screed by Adam Gopnik* in The New Yorker. Where to begin?

To leverage the Philadelphia tragedy into a justification for more government spending, Gopnik has to claim that railroads, and passenger railroads in particular, are public goods:

And everyone knows that American infrastructure—what used to be called our public works, or just our bridges and railways, once the envy of the world—has now been stripped bare, and is being stripped ever barer.

. . . .

This week’s tragedy also, perhaps, put a stop for a moment to the license for mocking those who use the train—mocking Amtrak’s northeast “corridor” was a standard subject not just for satire, which everyone deserves, but also for sneering, which no one does. For the prejudice against trains is not a prejudice against an élite but against a commonality. The late Tony Judt, who was hardly anyone’s idea of a leftist softy, devoted much of his last, heroic work, written in conditions of near-impossible personal suffering, to the subject of … trains: trains as symbols of the public good, trains as a triumph of the liberal imagination, trains as the “symbol and symptom of modernity,” and modernity at its best. “The railways were the necessary and natural accompaniment to the emergence of civil society,” he wrote. “They are a collective project for individual benefit … something that the market cannot accomplish, except, on its own account of itself, by happy inadvertence. … If we lose the railways we shall not just have lost a valuable practical asset. We shall have acknowledged that we have forgotten how to live collectively.”

Trains take us places together. (You can read good books on them, too.) Every time you ride one, you look outside, and you look inside, and you can’t help but think about the private and the public in a new way.

In point of fact, railroads are not public goods, as defined by economists. Not even close. I get no benefit whatsoever from your trip on a train, or a train that ships a good to you. The benefits of rail travel and rail transport are internalized by the traveler and the consumer of the transported good.

Further, what characterizes public goods is non-exclusivity. If you produce it, I get to consume it too, and you can’t exclude me from doing so. Not true of railroads. You have to buy a ticket to ride.

Meaning that if the value of the service exceeds the cost of providing it, market forces will lead to its provision, in approximately the efficient quantity. Yes, indivisibility and market power issues may lead to some distortions, but the gross under provision that Gopnik and Judt fear will not happen. Period.

Yes, trains take us places together-but they also take us places alone. And we internalize the benefits of the company-or the solitude. You internalize the benefit of the book you read or the view you see: it affects me not one whit.

Given these facts, there is no case here whatsoever for public provision of this service. If Gopnik or Judt get psychic benefits out of other people riding on trains, let them buy them tickets: why enlist the coercive powers of the state to subsidize what they value?

Perhaps-perhaps-there was justification for subsidizing transcontinental rail in the mid-19th century, but even that is doubtful: the success of the James J. Hill’s Great Northern, which received no government land grants,  is a great counterexample. Privately funded rail investment boomed starting in the 1850s, and soon roads criss-crossed the northeast and midwest. Indeed, it is arguable that there was over investment.

Gopnik has a theory why there is not more investment in railroads (underinvestment in his view, in fact). Anti-government libertarian fanatics. (Shhh. No one tell him that the protagonist of Atlas Shrugged runs a railroad.)

The reason we don’t have beautiful new airports and efficient bullet trains is not that we have inadvertently stumbled upon stumbling blocks; it’s that there are considerable numbers of Americans for whom these things are simply symbols of a feared central government, and who would, when they travel, rather sweat in squalor than surrender the money to build a better terminal.

No, actually. It is the fact that the high speed rail projects that so enamor leftists like Gopnik-and Jerry Brown and Obama-are colossal boondoggles that pass no cost benefit test whatsoever, even if you make dreamy assumptions about ridership or the value of carbon allegedly saved.

Consider the California high speed rail project, much beloved by Brown. For $6 billion, the first phase will connect . . . wait for it . . . Merced and Bakersfield.  North Nowhere to South Nowhere. Buck Owens would have been so proud. But it will be a white elephant that California cannot afford, and ironically, will divert resources from other infrastructure that California could definitely use.

If you want to find an era in which investment in rail was truly throttled, go back to the halcyon days of the 60s and 70s, when nearly a century of rate regulation, combined with the rise of air transport and the (government funded) creation of the interstate highway system brought the entire industry into severe financial distress, and drove many famous rail companies to bankruptcy. (It’s an irony, no, that government infrastructure spending undercut the left’s beloved railroads?) Investment in track and rolling stock plummeted, and the industry was truly decrepit. And that was almost completely the result of archaic and inefficient regulation. Government almost killed rail.

The freight industry was reborn starting in 1980, with the passage of the Staggers Act, which deregulated rates. As surely as day follows night, the freight rail industry was revitalized. The profit motive worked wonders. Economic forces were permitted to work, and routes were rationalized, resulting in the closure of uneconomic routes that the government had forced roads to retain. Economically viable routes were expanded.  Innovation, in particular the development of intermodal systems, led to dramatic improvements in efficiency and incredible integration between ocean, rail, and road freight.  The private enterprise that Gopnik and Judt believe cannot possibly lead to good except by accident (“inadvertence”) revived what their beloved government had almost strangled.

Passenger rail did not experience a similar revival, but that too was driven by economics. Rail cannot compete with air on long distance travel, especially when the value of time is considered. For shorter trips, the point-to-point convenience and flexibility that cars offer means that driving typically dominates rail.

Gopnik claims “We all should know that it is bad to have our trains crowded and wildly inefficient—as Michael Tomasky points out, fifty years ago, the train from New York to Washington was much faster than it is now.” We know no such thing. Indeed, the massive subsidies necessary to keep passenger rail operating in the US tell us the exact opposite: that it is economically unviable.

It is beyond funny that liberals consider passenger rail a “symbol and symptom of modernity.” In 1880, maybe. In 2015? Seriously? Now it is an anachronism.

In brief, there is no “plot against trains.” If anything conspires against passenger trains, it is economic reality, and they have survived only by coercing you and me to pay for it. Economic reality is quite congenial to freight rail, and it has thrived as a result, without us being compelled to subsidize it.

Gopnik’s economic illiteracy is annoying, but his supercilious tone and East Coast superiority makes his ignorance almost unbearable: he fits in perfectly at the New Yorker, and personifies the famous cover depicting the view of the US from 9th Avenue. A condescending ignoramus. Not an appealing combination.

In sum, it’s appalling enough that Gopnik, like others, leaped to use the Philadelphia tragedy to advance his pet political cause.  It’s even worse that this pet political cause is economically retarded.

*Gopnik’s name cracks me up, because in Russia the term “gopnik” (го́пник) refers to lower class street punks known for their drinking, loutish behavior, petty criminality, and stylish dress, usually consisting of Adidas track suits and dress shoes. In other words, го́пники are pretty much the antithesis of Manhattan prog Adam Gopnik, and no doubt the typical го́пник would take great pleasure in beating the snot out of the likes of Adam Gopnik.

 

 

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8 Comments »

  1. […] Harsh but true. […]

    Pingback by Ouch | Tim Worstall — May 16, 2015 @ 1:37 am

  2. “Indeed, it is arguable that there was over investment.” That’s easy to see – go to http://www.railstotrails.org/ to see the hundreds (if not thousands) of railroads that are no longer operating.

    Comment by Tom — May 16, 2015 @ 5:13 am

  3. I agree with you completely as long as you extend this argumentation to roads which should also be user-pay.

    Comment by Kiffmeister — May 16, 2015 @ 6:08 am

  4. Shows what ignorance of history can do for you.
    If they really, really wanted to bitch about the decline of a “public good” it’d be the canal network. The infrastructure projects preceeded the railroads & were the basis for the industrialisation of the US eastern seaboard. So lets defund all those new-fangled rattling, noisy trains & return to the serene calm of the horsedrawn barge they drove out of business.

    Comment by drifter — May 16, 2015 @ 9:00 am

  5. @kiffmeister-I agree completely.

    The ProfessorComment by The Professor — May 16, 2015 @ 10:13 am

  6. @drifter-Good point re canals. Robert Fogel (Nobel Prize winning Chicago economic historian) wrote some fascinating papers about canals. He concluded that the contribution of railroads to economic growth had been overestimated because in many regions canals could have been built and transported agricultural goods as efficiently as railroads. So railroads weren’t special.

    The ProfessorComment by The Professor — May 16, 2015 @ 12:05 pm

  7. The gummint types were in full Mummer regalia regarding the train tragedy. Ed Rendell, a prominent Stimulus promoter, complained about ‘infrastructure’ spending, as if Amtrak hadn’t gotten plenty. On that topic, all Americans west of the Susquehanna should be up in arms about Amtrak subsidies.
    The Mayor of Philadelphia was also unprofessional. He rushed to judgement on the train engineer, even though there had been projectiles hurled at trains on that same stretch of track just minutes earlier. When you see reports from transportation tragedies, you never see NTSB or FAA officials engage in blame engineering of any kind. They get the facts and consider them carefully. Unfounded early accusations, putting many on the defensive, inhibit fact finding.

    Comment by Richard Whitney — May 16, 2015 @ 8:17 pm

  8. AMTRAK likely could be run on a for profit basis and be divested entirely from the government. However, that means AMTRAK would only operate its profitable lines (mainly the BOS-WASH corridor) and a select few others it could hope to run profitable by investment. It would need to end a lot of current services elsewhere – but that’s exactly why the government won’t let it.

    Local pols want that local money-losing passenger train. But they don’t want to have to pay for it, so they force AMTRAK to subsidize it from their few profit making lines. Of course that means overall AMTRAK loses money so it needs to be kept subsidized.

    We should probably split AMTRAK in two. Let AMTRAK keep whatever lines it wants to operate as a private company. Eventually it’ll earn enough profits to expand and innovate. Let the government form another money losing train system if politicians want to keep the local lines going. It’ll lose even more money, but at least someone is able to keep and grow a passenger train system.

    Of course, that’ll never happen. The pols need AMTRAK to subsidize the loser lines as it means the government appears to spend less.

    Comment by Chris — May 18, 2015 @ 5:42 pm

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