The Cost of Aging Infrastructure

The complete destruction of a building in NYC from a gas explosion makes this report (pdf, summary here), from which the graphic is drawn, from the Center for an Urban Future timely. The Center also reports that the cost of building infrastructure in NYC has risen by 50% since 2000 alone. As I said in Launching the Innovation Renaissance:

Building in the United States today, for example, requires navigating a thicket of environmental, zoning and aesthetic regulations that vary not only state by state but county by county. If building a house is difficult, try building an airport. Passenger travel has more than tripled since deregulation in 1978, but in that time only one major new airport has been built: Denver’s. That airport is now the fourth busiest in the world. Indeed the top seven busiest airports are all in the United States, not so much because we are big but because without new construction we are forced to overcrowd our existing infrastructure. The result is delays and inefficiency. Meanwhile, China is building 50 to 100 new airports over the next 10 years.

…Our ancestors were bold and industrious. They built a significant portion of our energy and road infrastructure more than half a century ago. It would be almost impossible to build that system today. Could we build the Hoover Dam today? We have the technology. We seem to lack the will. Unfortunately, we cannot rely on the infrastructure of our past to travel to our future.


'The Center also reports that the cost of building infrastructure in NYC has risen by 50% since 2000 alone'

Yeah, that Bloomberg was about as anti-business as your typical billionaire could be.

Infrastructure doesn't equal luxury high rises.

But upzoning, which Bloomberg did, that results in redevelopment that increases density does help infrastructure. (And even if what is built are luxury high-rises, it is better to build more density than to have the wealthy bid up the price of existing buildings.) That part at least he did was good. But New York has its own special problems that make building there more expensive. (Scaffold Law is but one example.)

There are two different issues with infrastructure. (i) The issue here, the viscosity introduced by regulation. (ii) The maintenance problem: politicians are much keener on new projects intended to bear their name or add to their réclame, than they are on ensuring that the sewers keep working.

So, all it takes to get politicians to vote for tax hikes, like higher gas taxes, is to have their name put on something?

No problem, let them hike taxes to pay for high speed rail across the nation connecting major urban areas, and they can name the new stations built according to the "low" standards of a century ago on stations like the many Penn Stations and the NYC Grand Central, most considered today to be great architecture.

Alex channeling Obama. Who'd have thought?

Not hardly. Obama wants more regulation and more infrastructure spending. Alex wants less regulation and more infrastructure.

I know everyone is supposed to fit in convenient boxes but life is sometimes a little more complex.
There are plenty like available to whoever wants to look.

“Building in the United States today, for example, requires navigating a thicket of environmental, zoning and aesthetic regulations that vary not only state by state but county by county.”

Maybe the following adds some perspective:

“This is a useful anecdote to remind people what "regulation" means. I get asked all the time, "doesn't the financial crisis mean we need more regulation?" They seem to think "regulation" is something you pour in like gas in the tank. Or maybe they envision "regulation" as a simple set of impartial rules. You know, there is a 50 mph speed limit, which everyone routinely violates, a huge crash, so we enact a 30 mph speed limit and put a lot of cops on the road.

No, we put 50 cops in your car. And how long can this possibly go on before the cops start asking where you're going and why?”

Banking News, John Cochrane, 09/10/2013

So, when all the infrastructure building was going strong, before 1970-80, was banking unregulated with any loan allowed, any interest rate allowed, and stock offering allowed?

Or was bank regulation before 1980 claimed to be stifling investment?

"requires navigating a thicket of environmental, zoning and aesthetic regulations"

I'm unpersuaded that a significant part of the cost of infrastructure upgrades has anything to do with a thicket of regulations. The sewer system in our town is 100 years old and needs to be replaced. The cost will enormous not because of regulations but because it is just extremely expensive to dig up every sewer line, storm and sanitary, along or under every street in the village, haul out the old pipes, and then reconnect new larger pipes. A lot of that kind of work is expensive manual labor. The materials aren't cheap.You need to make sure the old system keeps running while you replace it with the new one. Since the old system was installed, many different pipes and cables have been laid around them: gas, telephone, cable, etc. It can be time consuming and difficult to work around them. By contrast, when they laid the original sewer, it was all farmland. It was easy to build. The problem is not so much regulations, but the inherent difficulty in working in heavily built up areas.

Bingo. Well, kinda. The 'regulation' here is more of the mandate to stop using the cheapest way to install such infrastructure, i.e., through mass demolition and clearing. It turns out that the alternative ways are complex, and there is where the regulation lies.

It's not true that "it was all farmland". Rather, it was all slums, and governments have lost the will to expel people from homes by fiat and then destroy their house.

This country's towns and cities are much younger than those in Europe, however, and yet our infrastructure costs are much more expensive. 200-500% more per mile for analogous transit projects, for example. So I'm entirely unpersuaded that it has to do with "the inherent difficulty in working in heavily built up areas." If that were true, then the USA would not be so, so much more expensive than Europe.

How much does it cost to replace a sewer system in a 100 year old suburb in Europe? Do you have some numbers?

I have numbers for rail and transit, which has to go through the same infrastructure in even older cities, and do the same kind of utility relocation and various concerns when building bridges and tunnels. US costs are astronomically higher.

Note that if you follow the links there, you'll see separate pages for US and other developed country costs and so forth. The Jubilee Line in London and the Amsterdam North-South Line were widely criticized for being extremely expensive and going far over budget-- they're still cheaper by factors of 5 or larger than equivalent NYC projects.

I don't want to delve into every possible kind of public works projects. I just want to stick to my initial example. I am skeptical that sewer work in Europe costs 5x less than in suburban Chicago, but maybe I'm wrong.

There are no regulatory issues in replacing our sewer system. There is no new land that needs to be bought or appropriated. The sewer lines all have easements and are mostly under roads and sidewalks. Yeah, if you cut Comcast's cable or Nicor's gas line, you'll have to fix it. But that's not a regulatory issue - that's just basic property rights. Likewise, if you destroy my driveway apron, same story - it will have be fixed. Again, private property rights, not some scary thicket of regulations.

I've done sewer work around my house on an infinitely smaller scale and I know fast costs add up. Now maybe you think all sewer contractors' bids are 5x higher than they should be. If that's the case, you should set up your own sewer construction firm, bid the work at only 4x, and make a killing. My guess is that you'd quickly discover that the sewer replacement business is not a high margin cash cow, but again maybe I'm wrong.

It's a combination of many factors, and so long as the process is messed up, it's impossible to underbid the contracts. And when there's easements and under roads and sidewalks, it's not "basic property rights," and it's not "just going in and doing the work." There certainly is regulatory clearance for performing those sorts of upgrades, aimed at not disrupting existing utilities rather than simply paying to fix them if you cut the line.

Even with basic construction, in New York their Scaffold Law (repeated nowhere else) drives up construction costs, which is why NYC is particularly bad.

It's precisely because the process is so bad that you can't make a killing by competing. It's extremely possible to set up a wasteful contracting process that does not end up in being a high margin business yet is extremely inefficient. This partially happens in the US because of the focus in the contracting process on low margin and cost rather than efficiency, we end up getting low margin yet wasteful projects. (If you spend extra money on projects that use extra labor and capital and have low productivity, you can easily have high revenue/spending but low margin outcomes.)

I don't know about sewers. But I do know that the infrastructure areas I'm familiar with have direct comparisons, and the higher costs in the US are staggering, and explanations about age and so forth don't seem to make sense. There has to be a process issue, but it can't be confined to just one process factor.

"There certainly is regulatory clearance for performing those sorts of upgrades, aimed at not disrupting existing utilities rather than simply paying to fix them if you cut the line." Well, don't we want these kinds of regulations? When I dig a hole on my property, I have to call JULIE, the utility locator service. They have to come out and mark the utility lines before I dig. Isn't that a good thing, cost wise, because it lowers the chance that some idiot's going to cut the power line for the block?

I recall receiving bids to replace a small HVAC system through a reputable company that includes completing all the regulatory processes and it was north of $30k. I then talked to someone that would just install it, under the table like for less than $10k. I knew I would have to sit on both contractors to do what they promised and under budget.

I'd imagine our stronger regime of property rights and the cost of government takings is probably a main contributor to the difference. When each individual in the path of a project can bid up the cost, it becomes much more expensive. I believe Europe doesn't play by these same rules and China certainly doesn't.

Also note that regulation plays a strong part here. The more expensive and time-consuming it is to change the path of a project, the easier it is for each individual to bid up the cost. In many other countries (definitely Japan and in many cases China), the solution to a holdout is to build around or otherwise change the path of a project. In the US that's frequently impossible, because the EIS and other regulatory information requires the path to be declared years in advance and it can't be changed without lengthy and expensive amendments.

In the San Fernando Valley, the water main installed by William Mulholland to bring Owens Valley water to Los Angeles (c.f., "Chinatown," etc.) is now a century old and frequently leaks. It's not likely to survive the next huge earthquake. So, they've been building a replacement water main for, roughly, ever. They've made about two miles progress over the last half decade.

Similarly, Mulholland's dam for the beautiful Lake Hollywood reservoir was built in only 16 months in 1922-23. In contrast, when rains damaged the walking path road around Lake Hollywood in 2005, the road was closed until 2013. On the other hand, Mulholland's original dam was significantly upgrades in the 1930s after his St. Francis dam collapsed in 1928, killing about 500 people. So, there are reasons for going slow.

Sorry, but this is just too amusing to leave uncommented - 'Could we build the Hoover Dam today? We have the technology. We seem to lack the will.'

We also lack suitable places to dam on the scale of Hoover Dam - we have already bullt dams essentially everywhere that even approaches the size of Lake Mead. Unfortunately, a major project showing just what is left in the U.S. to develop in terms of new dam projects is scheduled for release in April, 2014 - The contrast between what is left to develop and what power Hoover Dam generates alone would be instructive in empirically demonstrating that the real problem with dams at this point in the U.S. is that essentially all the biggest projects were completed decades ago.

What we really lack is the will, particularly for something like this - 'Hydroelectricity provides about 7 percent of the nation's power using about 2,500 dams. But those dams are just a fraction of the 80,000 in the United States. Most were built for flood control, to aid in river navigation or to create recreational areas. So they do not have power plants.

The Department of Energy concluded last year that the U.S. could boost its hydropower capability by 15 percent by fitting nearly 600 existing dams with generators.

Most of the potential is concentrated in 100 dams largely owned by the federal government and operated by the Army Corps of Engineers. Many are navigation locks on the Ohio, Mississippi, Alabama and Arkansas rivers or their major tributaries.'

See how all that government infrastructure is being wasted - instead of fracking short lived wells for natural gas, we could build power stations in existing locations.

And about the only people that would be disturbed by such a major infrastructure project would be those heavily invested in the business of generating electricty from burning coal and natural gas.

I'm sure that the such a distinguished research as the Mercatus Center would be delighted to constructively explore just how much more money the federal government could generate in terms of using current dams' untapped potential. With the added benefit of reducing the amount of fossil fuels currently being burnt for electric power. It would even fit into that panel discussion on climate change, though building power stations does not involve any new technology - thus making it an actually practical endeavor, instead of the waiting on what German refers to as 'future music' (Zukunftsmusik).

"See how all that government infrastructure is being wasted – instead of fracking short lived wells for natural gas, we could build power stations in existing locations."

We? There's no common 'we' in this sentence. Oil and gas discovery and production are done by private companies putting their own money at risk. There are no government funds that could be redirected to hydro being spent. As for the hydro -- are there private dam owners inexplicably failing to exploit potentially lucrative electricity-generation opportunities? I rather doubt it -- that kind of stupidity tends to require government involvement (rather like the government sitting on tens of thousands of empty buildings because the thickets of regulations it created for their disposal are too hard to navigate).

And just when did those on the left start worshiping the Hoover Dam and stop believing that hydro-electric projects are enormously damaging to ecosystems? Rather than drilling gas wells, should we find more places like Glen Canyon or Hetch Hetchy Valley to inundate and destroy?

You are not a citizen/taxpayer of the U.S.? Because, of course, you are right - Canadians, Russians, etc. aren't part of the we.

'Oil and gas discovery and production are done by private companies putting their own money at risk. There are no government funds that could be redirected to hydro being spent.'

Well, apart from things like this, of course - 'The Obama Administration has made expansion of domestic oil and gas production a priority, while ensuring that it takes place safely and responsibly. Domestic production from more than 92,000 oil and gas wells on public lands accounts for about 13 percent of the nation’s natural gas production and 5 percent of its oil production. The BLM administers approximately 700 million acres of onshore mineral estate owned by the Federal government and has trust responsibilities for about 56 million acres of Indian lands.' Anyone believing that such activities does not involve tax payer funding (roads come instantly to mind) is welcome to that belief, of course. Along with the belief that the industry actually pays what it owes to the taxpayers -

'And just when did those on the left start worshiping the Hoover Dam and stop believing that hydro-electric projects are enormously damaging to ecosystems?'

Not being on the 'left,' I don't know, actually (my politics are essentially along Piratenpartei lines, though without the basic income component, which just sounds like political pandering). The German Greens are big fans of expanding hydropower - a fifth turbine just went in at Iffezheim, making it not only the largest hydroelectric facility in Germany, but in Europe -

'Rather than drilling gas wells, should we find more places like Glen Canyon or Hetch Hetchy Valley to inundate and destroy?'

Well, that would seem to prove the point that the author was making - 'It would be almost impossible to build that system today.' My point was that there is no need to build any new dams at all - just the will to build power plants at existing dams, instead of opening more public lands to fracking.

Should oil and gas leases (and logging and other mineral leases) on federal land be priced higher? Probably so -- but note that the passage you cited indicates that oil and gas production on public lands accounts for quite a small fraction of the US total (and even there, the main costs are in the exploration and drilling, not in the construction of dirt service roads). In the US the 'greens' have been, traditionally, strong opponents of new hydro projects and even strong proponents of removing existing dams and restoring ecosystems (e.g. Hetch Hetchey). That changed a bit with the felt need to support the Obama administration's stimulus proposals and Rachel Maddow got her freak on for the Hoover Dam -- but it seems unlikely that change in stance will be long-lasting.

I'm skeptical that installing generators in small dams is any kind of easy call. This has been considered here (in Ann Arbor) several times with the 4 city-owned dams on the Huron River. The potential power can't justify the construction and operating costs of the turbines and power lines. I suspect that's often the case with many smaller dams -- that the problem is more financial non-feasibility than boneheadedness.

Lastly, had Europe avoided its own you-can't-build-it-here problems with fracking, German coal use wouldn't be reaching levels not seen for 25 years, and the EU might not be in such a weak position with respect to Putin.

15% of 7% isn't much

Sorry, but this is just too amusing to leave uncommented – ‘Could we build the Hoover Dam today? We have the technology. We seem to lack the will.’
We also lack suitable places to dam on the scale of Hoover Dam – we have already bullt dams essentially everywhere that even approaches the size of Lake Mead.

It never ceases to amaze me how you can read something so clearly written, and completely miss the point being made. Tabarrok isn't asking whether we could build a dam like the Hoover Dam today, he is asking whether we could build the Hoover Dam today if didn't exist.

I don't think those are separate issues.

We live in a world with a Hoover Dam; are we assuming that in this parallel universe, all other dam appropriate places have been exploited *except* the Black Canyon in the Colorado river? In all other remaining dam sites it may be genuinely not worth the bother, and so we have this awkward counterfactual. Well, supposing we had a site as promising as the Colorado river in situ today… who knows?

There's a solid point to be made about the increased cost of infrastructure, but I think it's disingenuous to act as if regulation is uniformly ill-conceived rather than the result of a long, messy, collaborative attempt to price in externalities. China is building tons of new airports, but at a huge environmental cost and under an incredibly more lax expropriation regime.

Hoover agreed to hiking income tax rates as high as 90% to pay for building his Hoover Dam, and to pay for billion in infrastructure spending to create jobs.

Hoover had been trying to get his dam projects funded for a decade or more, but the damn tax cutters would not let him have the money until they were replaced by Democrats in 1930. Note the income tax was implemented to pay for prohibition that eliminated the rather significant tax revenue on beer, wine, and spirits.

Yes, Alex just used the Hoover dam as an example but the challenges he's talking about are building new airports or high speed railroads, replace century old sewers and bridges, etc. Those projects are as "big" as the Hoover dam, but he's not advocating for big dams but the "desire" for infrastructure development & maintenance.

This reminds me "Replacing London's Victorian Water Mains" signs i saw in London couple of years ago.
At that time, I was quite surprised that more than 40% of the pipes were more than 100 years old and still working (though leaking).

Reminds me of a table I once saw, long ago (no idea where, alas) about average age of East German industrial machinery and accompanying data on steeply rising maintenance time (and, i.e., steelply declining production time).

By the way - replacing such stuff is a national passtime in the Netherlands, despite thickets of regulations. There sure is a cultural aspect to this.

Since you're from the Netherlands, I assume you're familiar with Amsterdam's North-South Line, which went far over budget? Would it surprise you to learn that, even at the full over-budget cost, it is 4 to 5 times cheaper per km than the budget estimates for similar NYC lines? And the most expensive proposed NYC line has a budget estimate of 10 times higher than Amsterdam's line, at $4 billion per km? And the actual costs will, as always, overrun those estimates?

Building infrastructure in the US is remarkably more expensive than even other developed countries with old cities.

The magnitude indeed surprises me.

I hate to defend NYC against the epic problems with construction but NYC has twice the density (26k/mile^2) of Amsterdam (13k/mile^2) and five times the density of London (5k/mile^2). And that's the five boroughs. Manhattan is 70k/mile^2.

It's hard to know if an estimate is insane or not without a whole lot more detail. For instance, in Spain, a big reason some areas are underdeveloped is that the costs to make infrastructure there are astronomically higher, even with the same workers: It really is a tougher job. Is some of Amsterdam's work cheaper because the workers are cheaper, or because there are differences in the underlying problem. What might seem like similar problems to a layman might be completely different to an expert.

Last time I visited United States (California), most of the infrastructure was really bad compared to my Nordic homeland. Obviously it was only a small part of the US. They were bad in countries like UK and Ireland too.

Although even here because of cost competition, there has been a decrease in quality of construction. A person I know from the const biz area, says it is because of work ethics is gone in that domain. Customers (like me!) are stupid, and can be used by smart people.

In fact all nordic welfare states have quite high level of infrastructure. I think it has something to do with high level of education, and tight regulations. And also the winter. That's my Stetson guess anyway.

Tight regulation? You said you had visited California correct? They're probably the tightest regulated state in the country, land-use (and many other) wise, and quite possibly the most educated (going by the number of top universities). It might have something to do with California having FOUR times the population of the highest populated Nordic state. When comparing infrastructure from one country to the next, it is very difficult to compare the US with an oil-rich Norway that is sparsely populated.

If building a house is difficult, try building an airport. Passenger travel has more than tripled since deregulation in 1978, but in that time only one major new airport has been built: Denver’s.

Detroit Metro is effectively new -- since 2000, a new midfield terminal was constructed and the old terminals were then torn down and replaced.

I don't think that really gets at the point. It's not about replacing buildings; it's about getting all the permission required to build a brand new airport.

About the building new major airports comment: Hasn't most of the traffic increase source been within & around existing coties & metro areas? In which case makes sense to debottleneck an existing airport's taxiways, add runways or expand terminals & bays. Rather than build a new grassroots airport.

Unless the public owns the gas utility, this is a private market failure when the pipes or gas lines are not repaired or replaced/. Same thing with rail lines, electrical grids, hydro electric plants, etc.

Having listened to the local building authorities, a group of five of them huddled over a pile of paper and prints, conspire to screw over a private homeowner, I would differ. All these things you described are regulated monopolies.

All I can say is that it is working as designed. No one loses their job is nothing is done. Even Obama who blathers on about this stuff doesn't do anything that would change situation, in fact does things that make it worse.

Too bad NJ had such a crappy governor, we could have built a new rail tunnel between NY-NJ.

Well, Christie is just another typical anti-business millionaire.

Nope, the NY-NJ rail tunnel was an example of why we have the problem. Horribly overpriced per mile compared to European or other world comparisons. A big reason why the US isn't building enough infrastructure is because the cost of building infrastructure is so much higher. (And there are multiple drivers of this, not just regulation and permitting, but also the contracting process.)

If you just decide to build rail and other projects even though they cost 200-500% more than comparable projects in other countries, we still won't end up with the same level of infrastructure.

Nonesense, cost per mile? Look at the Chunnel between England and France. Yes these things cost a lot of money but they are insanely cheap. The Lincoln tunnel was built nearly 100 years ago and will probably be here 100 years from now. The graph above demonstrates that these things have such a huge lifespan that they are beyond worth doing.

......and the US government deports mexicans instead of using them to drill tunnels cheaply ;)

High levels of infrastructure requires continuous maintenance works. After a couple years in Switzerland I got used to live in a permanent construction zone. After a new tunnel is finished another tunnel from 50 years ago needs maintenance. Railroad, gas, water and electricity facilities needs maintenance too. It's impossible to drive a few kilometers without seeing some infrastructure work. This kind of projects takes forever since the noise regulations are strict, but the only was to accomplish maintenance works is to start them.

Oh the irony of a post on the 50 Shades of Libertarian blog decrying the increasing disinterest in doing needed large public works projects. Just who do you think is sapping the will of the American public to do big things through collective government action?

Easy, he thinks that US progressives and liberals (among others) are sapping the will of the American public to do big things through collective government action by making it far, far more expensive and time consuming to do big things through collective government action than in other countries. Make something dramatically more expensive, why be surprised when you get less of it?

It's not the libertarians (or the conservatives) who favor Buy America for stimulus projects, who favor Davis-Bacon, who favor long Environmental Impact Statements (that yet never really change what politicians are bound and determined to do). Republicans offered amendments to all those things in the stimulus, duly rejected. It's not libertarians and conservatives who have things like the CEQA. The problem with the contracting process is definitely bipartisan, though.

It's not libertarians or conservatives who favor the Jones Act, which Sen. McCain offered yet another bill to repeal, again rejected.

New York City in particular has its insane Scaffolding Law, which has no equivalent anywhere else, and drives up costs like crazy.

'(or the conservatives) who favor Buy America'

I'm trying to remember the last time a flag pin wearing Republican talked about the advantages of buying Chinese at a political event. I'm sure that the commenters here will have plenty of examples of how Republican patriotism is full of appeals to buy products made outside of the U.S.

Here's the Senate vote on requiring Buy America in the ARRA stimulus. 31 Republicans voted for McCain's amendment to strip Buy America from it. 7 Republicans (mostly moderates like Specter and Snowe) voted to retain it, along with all the Democrats.

Requiring Buy America in infrastructure procurement is a Democratic Party policy.

Interesting - though I counted 9 Republicans, plus two non-voting Republicans. I would never have have considered Brownback or Graham or Grassley as moderates.

Anyone wish to guess why Voinovich or Gregg would be eager to not have to vote?

However, a Senate vote on an amendment is not the same as speaking in front of an audience in Iowa, and saying that buying Komatsu and Volvo construction equipment would be the best way to get America's economy in higher gear.

A public political event where any of those senators who voted for the amendment spoke up for buying foreign steel, for example, would be the sort of evidence I was looking for. Like a Republican in California.

Since one can look at the new Bay Bridge for an example of why buy American might actually have been the smarter idea in such a case - 'The California Senate provided new details Wednesday about construction lapses on the eastern span of the San Francisco-Oakland Bay Bridge, and raised fresh doubts about the long-term reliability of the $6.4 billion project.

The Senate report, prepared by an outside consultant for the Committee on Transportation and Housing, offers background for a Friday hearing to examine allegations of lapses in quality control during a push to complete a structure running years behind schedule and billions over budget.

Among the report’s key revelations:

• Quality control managers found thousands of cracks in welds produced by a Chinese contractor for the span’s signature tower and roadway. Rather than ordering all needed fixes, top California Department of Transportation managers replaced those who discovered the problems.

• Millions of dollars were paid to the same Chinese contractor to speed up work after it fell behind schedule and bridge officials urgently wanted faster results.

• Bridge officials rejected warnings in 2008 that suspect anchor rods for the suspension span were not adequately tested; some of those rods snapped last year.

• Officials frequently told contractors and employees not to put concerns about quality into writing – ostensibly to avoid disclosure under the state Public Records Act.'

Heh, this is truly amusing. What saps the will of doing things through collective action is the attempt. Libertarians don't stand in anyone's way, nor do they pile on costs.

+ 1 on the " 50 shades of Libertarian " moniker.

With all the money they've been making off of those ads with the guy who used to be fat, Subway ought to be able to renovate some of its shops.

You could imagine a significant portion of the working population being permanently employed full time doing this (1%?). One problem is that I suspect the efficiency involved in doing this would be low, and corruption high, but so be it. I suspect enthusiasm for these projects is lacking due to everyone having seen idle road crew at rest working on minor improvements for years at a time. But... it needs to get done somehow. Any proposals for how to get it done better?

It is ironic to see a post decrying the lack of public works projects on a libertarian leaning blog. It also ties in with the post a week or so ago about stimulus sometimes being a bad idea if it's net ROI isn't positive (or if other projects have a higher ROI).

If public infrastructure is so old, one would think the ROI on massive public works projects would be pretty high given marginal principles. The huge return on the newer airport in Denver would seem to bear that out.

Opportunistic libertarianism.

If public infrastructure is so old, one would think the ROI on massive public works projects would be pretty high given marginal principles.

The ROI would be positive. But the nature of US public works projects, from environmental impact statements to Davis-Bacon to inefficient contractors (and contracting processes that encourage them to waste money) to Buy American, drives up the costs and drives down the ROI.

The cost factor in US public works projects is absolutely enormous. It costs 200-500% more per mile for rail projects. Rail terminals are even worse.

Drives down the ROI to the point where the ROI is no longer positive. There is absolutely no appetite to address the cost issues, unfortunately especially from people who claim to be infrastructure boosters but insanely think that the way to get more infrastructure is to push for spending increases only when the cost is three to five times higher than international comparisons. Pushing on the numerator instead of the denominator.

US costs for transit are amazingly higher. If you look at any sort of comparison, you'll see that.

Not really buying it:

1. Labor costs may be higher, but massive projects like building a tunnel under the Hudson river are more capital intensive then labor intensive. Even if the workers are paid more, they are not the bulk of the total cost.

2. Environmental concerns delay projects but again are not usually a huge cost driver. Building a tunnel from NJ to NYC requires a huge amount of capital and labor. Writing a report about the impact of such a tunnel is trivial compared to it. "Measure twice, cut once" probably makes some sense there.

3. I think you're idealizing the past a bit too much. Sure massive projects might have enjoyed lower labor costs 100 years ago, treating workers as more or less disposable. But they also suffered from their own inflated costs due to graft and corruption that would seem brazen to our sensibilities today. They also suffered from incompetenance and shoddiness. How many engineering diasters did the 19th century suffer due to errors, mistakes and lack of knowledge that would never be made today?

4. I think your international comparisons are looking at the cost of building in cities that are in the process of being built up versus the cost of building in an already built area.

It will often be cheaper to build when you have a 'blank slate'. A new subway in NYC will have to be built around many existing massive structures as well as have to navigate the daily traffic of the city. All that will add to costs and it should add to costs.

Look, suppose you have a huge shopping mall that is very popular. Your building engineer tells you the entire roof should be taken off and replaced. To do this you either have to shut the entire mall down for two months (which would be very costly in terms of lost rent) or do it in pieces carefully keeping the disruption to a min. (which makes the construction costs much higher). Both these cases represent a lot more cost than putting the original roof on the structure when it was being built and before it was operating.

In some cases I think your lower costs are hiding the true costs. When the Chinese gov't forces homeowners to sell their villages at cut rate prices to make room for, say, a giant dam, it's not lowering the cost but hiding it. The mall owner who opts for the first method may have a lower bill from the construction company but is hiding the costs in lost sales and rents.

BUT there's another side to that problem. The existing mall is known to be very popular so the new roof is less risky. Once it is done, shoppers will be shopping under it. A new mall is risky, building the roof may be cheaper but it's only a bet that stores and shoppers will come once it's all done.

Take two cities that are growing overnight in Asia. It may be cheap to build a rail tunnel between the two. But you can't be sure anyone is going to use it or if they will end up 'ghost cities'. On the other hand a tunnel between NJ and NYC is going to get used every day by lots of people the moment the ribbon is cut.

Why do people keep calling this blog libertarian?

A related point is that a crumbling infrastructure adds weight to the inequality argument. This seems to be a valid point. One of the real things a society can/should offer to all citizens is a modern and functioning infrastructure. I don't think this should be much of a political argument. A smart policy would be an large infrastructure enhancement effort with some kind of new mangement approach to make it at least reasonably efficient and free from corruption. That may not be possible in practice but it would help the sales pitch.

Co-ops (which were more common and present in NYC before other US cities) and condos (only really legalized 30 years ago) make upgrades even more difficult and full replacement often nearly impossible, since consensus is usually needed to tear down a building. Very different from upgrading an apartment building with one owner.

Build more airports? Most airports are built to serve population centers and as such already exist. Since, unlike China, there are no new cities in the US, any new airports would have to serve existing cities that already have airports. The "new" Denver airport is 25 miles from downtown Denver and could be called the Aurora airport. In fact, many travelers originating or arriving in the southern parts of the Denver area use the Colorado Springs airport instead. The Milwaukee airport attempts to draw passengers from the north Chicago suburbs. DC has two airports, does it need a third? The Baltimore airport is 58 miles from Dulles and the Richmond airport is 106 miles from Reagan. How many airports does the DC area need?

There is the vastly improved at enormous taxpayer expenseJohn Murtha Johnstown-Cambria County airport outside Johnstown, PA but it's basically a military installation since there's little demand for passenger service.

BWI is considered a DC airport - at least by people who grew up in Northern Virginia. You get to it on the BW Parkway, among other routes.

Last time I read about airports, San Diego had to outsource it's airport to Tijuana. Saying NIMBY is not a problem does not make the problem go away.

Oh, no! Tijuana is in a DIFFERENT COUNTRY! But then, if you're flying out of Tijuana, you might be going to a different country. Is that bad, too?

In the 1960s, the city of Los Angeles bought dozens of square miles of land in the high desert of Palmdale for a future super airport to relieve pressure on LAX along the densely populated coast, but the Palmdale Airport has never really gotten off the ground. Regulations have been less the problem than path dependency.

I am not sure if there is a single root cause, but abuse of due process by NIMBYs is certainly a part of the problem, as is gross corruption and incompetence in the management of public works. In the 1970s, the State of California spent a quarter of its budget on infrastructure, now it is almost nothing, crowded out by the financial demands of public employees' unions.

Bruges and St Louis are cautionary tales as to what happens when you neglect infrastructure. The former was a contender for world economic capital, but let its canals silt up and lost out to Ghent and Amsterdam. St Louis was the natural hub for the Midwest, but under-invested and lost out to upstart Chicago.

Yeah, it's difficult for me to identify a single root cause. Certainly there are things that contribute (Google basically blamed CEQA for not considering California cities for Google Fiber last time) but I don't know that any of them by themselves are the one cause. However, in aggregate, it is clear that US costs for infrastructure (in time and money) are much, much higher than almost anywhere else in the world.

Tax cuts tax cuts tax cuts tax cuts.

When has a Republican called for hiking the gas tax or replacing it with a different fund raising method that required transportation users pay at least twice as much??

Reagan hiked the gas tax by 125% on Jan 6 1983. That would be in round numbers a hike from 18 to 40 cents a gallon. Did Republicans writing the surface transportation bill in 2005 hike taxes?? No, they talked of cutting the gas tax, even as they allocated general tax revenue that they were cutting to fund infrastructure spending.

Republicans hate public infrastructure spending because it requires taxes or fees. But they hate private sector pricing for use of infrastructure, No US corporations will invest in operating toll roads because they know taxpayers will not even allow them the profits public utilities earned before 1980 - 8-10% ROIC. Lease toll roads or parking spaces to a private corporation, requiring them to invest in infrastructure, and immediately the tolls and such increases they negotiated are being rolled back.

TANSTAAFL but conservatives are desperate to get free lunches.

But conservatives and Republicans have been promising free lunch for so long that voters expect free lunches from government, and even Krugman knows he must promise free lunches just to keep up with conservatives.

Note how Alex is a free luncher: "We seem to lack the will."

If Alex wasn't a free luncher he would simply say "We lack the will to hike taxes."

If we want better infrastructure, simply hike taxes. Justifying higher taxes will focus the minds of the politicians voting for them to define the benefits for building infrastructure in every segment, workers benefit from taxes from more jobs, and businesses benefit from better infrastructure and more business.

"We seem to lack the will"? No, what we lack is not will, but political consensus. And for better or worse,"[a] true 'majority position' doesn’t exist in our religion, economics, culture or lifestyle. Why should our politics be any different?"

Correct. Even among the market-dominant majority ethnic, half of us hate and despise the other half. Multiply that by five.

I can't even laugh (or cry) when I hear people talk in all seriousness about future manned missions to the Moon and Mars. We've already lost the civilizational capacity for space shuttles.

Consider an alternative view; that neither "future manned missions to the Moon and Mars" nor "space shuttles" are very much needed. Then consider the progress that's been made on things many might find of much greater value. And if such progress could have been made if "half of us hate and despise the other half. Multiply that by five." Put differently, how much does the lack of political consensus (or even will) really matter? My view: not much.

You seriously misunderstand the deal with the civilian space program, started by the way by Eisenhower, along with "plowshares" the civilian nuclear program. It was all just a veneer over military spending to create international approval or at least acquiescence to massive tax and spend on space and nuclear for war.

We pushed a treaty that prohibits military use of space, but allows civilian space use so we have spy satellites hidden by all the GEOS satellites and the ICBMs to launch them to hide the development of better nuclear tipped ICBMs.

Note how the only reason for Iran to have a civilian nuke program and civilian space program is to launch nukes at the West to trigger WWIII and MAD.

But again, liberals tax and spend and do so to accomplish great things requiring great shared sacrifice. FDR and Democrats redirected the entire US economy to victory. Bush tried to boost the private consumption economy to boost support of sacrifice of the few in under resourced wars with no objectives other than the meaningless "victory" as if in war, victory is like in a football or basketball determined by the score at the buzzer.

No, there is a consensus. What we see is the result.

Why spend money on infrastructure when larger and larger amounts of public moneys have to be set aside to pay workers who no longer work, i.e., public funds dedicated to paying ever increasing pensions to retiring & retired baby boomers? This is about demographics as much as it is about the public fisc or the public will.

Well, many of the retirees were forced into retirement as the tax cuts to put money in your pocket to privately invest in better infrastructure slashed their jobs with no alternatives for those workers. Meanwhile, younger workers can't get jobs building infrastructure because those who got tax cuts used them to pump up the price of existing assets while fighting any attempt to employ labor building more assets which would drive up prices while driving down asset prices from the new assets competing with the old.

Bottom line is lots and lots of people are paid not to work because government investment is bad and the private sector refuses to invest if that will cut profits.

Well,in NYC, it is a higher priority to be bossy about salt and soda.

And the people are too busy feeling outraged that they can't buy disgustingly oversized unhealthy soft drinks instead of paying attention to issues of decaying infrastructure and government waste.

One group is appropriately minding its own business, and one is not.

So, paying a lot more for health care makes building infrastructure cheaper?

It is not true that the US has the 7 busiest airports. Only 1, 5, 7 and 9 among the top Ten. And the way Dubai's is growing it will probably surpass Atlanta in a decade or two.'s_busiest_airports_by_passenger_traffic

2010, when I wrote, by aircraft movement's_busiest_airports_by_aircraft_movements

Aircraft movement is more important for air traffic control (a small plane takes up the same slot). Passengers going through might be more relevant for other part of airport infrastructure. Lots of ways to measure busiest airports.

This argument seems strange to me. What makes U.S. public infrastructure projects so expensive are the protections our system offers private property owners and the basic nature of representative democracy.

Consider Alex's example: Denver's new airport was built on ranch land well east of the city. In the years since that airport was built, Denver and its suburbs have grown until an airport that was once considered to be in Kansas is now pretty suburban. Farmland is cheap, buying up thousands of private homes so that giant airplanes can roar over other private homes is very, very difficult.

At the same time Denver was building DIA, Seattle was exploring options to expand Sea-Tac. One of the options that was seriously considered was putting a new airport east of the mountains and having a high-speed rail line connect to Seattle. That plan was nuts, but there was simply no place to put an enormous new facility in the Seattle metro area that wouldn't involve tearing down a mid-sized city. Expanding Paine Field - an existing airport north of Seattle - was and remains a possibility, but it faced massive opposition from the wealthy suburban communities near that airport. In the end, Seattle added another runway to SeaTac - at enormous expense and after great controversy.

All of which is to say, if you have empty land, building infrastructure is easy. It's replacing existing infrastructure that's hard. EIS statements are a pain and can be a barrier to new dams or whatever, but those aren't the cost drivers for infrastructure upgrades.

EIS statements are a pain and can be a barrier to new dams or whatever, but those aren’t the cost drivers for infrastructure upgrades.

An EIS interacts with the route and holdout issues you mention. In some other countries (Japan, and yes China) it is more common to route around holdouts. The earlier that the exact route has to be planned out in an EIS and approved, and the more difficult it is to change it, the harder it is to route around holdouts without using eminent domain. Japan has weaker eminent domain than the US, but builds more infrastructure, by routing around.

But yes, they're not the sole cost driver by any means. The US has many things that make infrastructure more expensive.

Clearly, the solution is to have Open Borders, because adding a few hundred million people to the population will make it much, much easier to get everybody on board to maintain the infrastructure needed for current population. As for adding infrastructure for all the additional people, well, good luck with that ...

It seems to me the bulk of the massive infrastructure projects were built in a period of generally open immigration policies.

because adding a few hundred million people to the population will make it much, much easier to get everybody on board to maintain the infrastructure needed for current population.

Infrastructure tends to have very high fixed costs and small variable costs. For example, the GW Bridge's costs don't go up very much when more cars use it so yes more people would make it easier to maintain infrastructure since you'd be spreading the costs out over a larger base.

As for adding infrastructure for all the additional people, well, good luck with that …

Why? New bridges, rail lines, stations, tunnels and so on are built all the time. England and France built a massive tunnel between themselves even though their populations aren't growing very much.

"the basic nature of representative democracy." is also one of the factors that makes for example India struggle to improve infrastructure compared with China, although its true there are many other significant factors.
The recent tragedy in Mumbai where an attorney refused to vacate a crumbling building ( and manged to get a court order preventing the eviction) probably would not have occured in a non-democracy , where she would have been simply thrown out.
The zeitgeist also matters ; could we have built the Inter-state highways now that we did in the 50s even if we have the Funds ?

The same people who deny the funds, conservatives, would block the property takings. Only when they can profit from private takings do they enthusiastically support jack boot thugs forcing individuals off their land, eg Keystone XL which involves taking private American land for private profit by a Canadian corporation.

This topic dovetails with a previous post on empty federal buildings. When private infrastructure becomes obsolete it's demolished and repurposed. The Ford auto plant in St. Paul, MN is being torn down and the property will be used for other purposes, as has been the case with many outmoded manufacturing facilities. Incidentally, it had a power production dam on the Mississippi River which will continue to operate. Railroads have abandoned unused roadbed and shops all over the country. This isn't the case with government property, which either struggles along with minor or no success (Williams Gateway Field, Mesa, AZ) or requires exorbitant maintenance expense to service small numbers of users (lots of rural highways).

Lots of private infrastructure sits idle and abandoned. It costs taxpayers in many cases in unpaid taxes and in public costs to deal with the hazards it creates. But if the taxpayers try to take that abandoned property to repurpose it, the owners claim it as their own and demand they profit from the public funded development.

Ah, I forgot about the "uncollected taxes as cost" canard.

Very glad to have the folks here think about this problem. Very strange that seemingly more-regulated places in the EU build more cheaply than we do. Some cases are examined here:

So, the Chunnel was built at a low predictable cost?

And cut and cover in much of NYC is rather difficult; it either involves cutting through granite, or cutting through rubble/landfill which is generally unstable. Paris is built on "plaster of Paris".

Note that all the costs go to pay wages and benefits which in the US, and most things cost more to workers than the same or better quality cost in the EU. Health care costs more in the US, Housing for workers costs more. Transportation costs more. Workers in France are unionized. France has shorter work hours,

"Our ancestors were bold and industrious. They built a significant portion of our energy and road infrastructure more than half a century ago. It would be almost impossible to build that system today. Could we build the Hoover Dam today? We have the technology. We seem to lack the will. Unfortunately, we cannot rely on the infrastructure of our past to travel to our future."

I can sum it up simply.

Before 1970, We the People were willing to sacrifice for capitalism:

Paying high rates of return on private capital like utility infrastructure, power lines, telco equipment, gas lines, water lines, passenger service by train, bus, and plane, in exchange for universal service of high quality that was ensured by elites: government officials like judges and regulators.

Paying "high" taxes to pay for the public capital that could not be reasonably be provided universally by charging uniform rates to all for uniform quality service, rail lines, roads and bridges, sewer lines, dams and levies, airports, schools, colleges and universities, research institutions.

A lot of the projects in the past were justified in their implementation on the sacrifice of the few for the good of the many. Thus the Hoover Dam was built by taking the property of thousands of people, forcing them deeper in poverty ever since. The Interstate was built right through working class communities, often destroying their culture, because that was cheaper and faster.

I'm betting Alex sees the Big Dig as an example of the inability to get things done, but it is an example of doing thing right, fixing the scar made in the 60s when the Interstates were built without regard to the people. The big failure of the Big Dig was in trying to do it on the cheap, but that was the thing that made the Big Dig necessary. The Big Dig is a project without regret in the future, while the Interstate building into Boston led to immediate regret and that regret lasts beyond the Big Dig that has removed the biggest scar.

But all these things are expensive, and since conservatives started focusing on economics, all they see are the price that must be paid, not the wages that are paid. To a conservative, it seems that wages are a bad thing. Thus wages must be eliminated from the economy so that the roads, bridges, water and sewer, electricity, airports, power lines, gas lines, railroads are free of any cost. No wages, means no workers, means no families, means no people, means no one protesting the road or airport built quickly without regard to the people living under it.


To get back to the America that Alex pines for of 50 years ago will require paying much higher prices.

On the plus side, it will rebuild the middle class and life many out of poverty and reduce income inequality.

Let's start with a 125% gas tax hike like Reagan signed Jan 6, 1983, hiking the Federal gas tax from 18 to 40 cents per gallon.

Then mandate universal fiber to the home service at strictly regulated rates just as universal telephone land lines were from the 30s to the 80s.

After that, it will be easy to pass carbon taxes eventually rising to $1000 a ton intended to create a sustainable energy economy which will create tens of millions of jobs just to dodge the carbon taxes.

Capitalism requires labor devoted to build capital instead of for consumption, and paying a fair return on the investment in that labor. Conservatives only want to pump up the price of capital by making it increasingly scarce. Transportation capital is more scarce than three decades ago. Utility capital is more scarce that three decades ago. Prices are higher, but service is lower. A huge deficit in high cost labor is required to reverse the trend of the past three decades.

But my guess is Alex objects to the regulations prohibiting slavery and killing workers.

I think there is a major disconnect between the world that we have created for ourselves over the past 50 years and the world that we want.

I think people like the America of big spaces and prosperous suburbs and a huge and growing middle class and a feeling that they are in control over their own destiny, for the most part.

But they became passive and did nothing while those in charge of doing what was best for America and Americans did what was best for themselves, their friends, their company, their industry, their financial supporters, etc. They also did nothing as mass migration, both legal and illegal, gave us close to another 100 million people we wouldn't have otherwise had.

I expect we will continue to see this disconnect stall out a lot of things, both good and bad. Then the day will come when Americans realize that the we're going to have another 100 million people (mostly immigrants or the descendants of recent immigrants) by around 2050. Combine that with the massive loss of middle class jobs, the increase in housing costs vs. the stagnation and/or lowering of wages for many people, and by 2050 I assume Americans will be fixated on who to blame and what to do about the big mess that America's turning into.

Of course by 2050 most of those whose decisions created the mess -- and who profited by adding people, cutting taxes and lowering wages -- will be gone.

It's all really quite unfair to future Americans. What we are dong to them is exactly the opposite of what was done for us.

Alex has a solution for all the problems aggravated by America being increasingly crowded: Open Borders!

Comparing Infrastructure costs with those of other nations is unprecise, I think. What is included in a countries infrastructure basket? Wouldn't it be better to compare the types of infrastructure (eg cost of water-pipes, roads, railroads etc.)? This it seems would make it easier to look for blatant discrepancies and what causes them, then just the broad assumption that too much of x or y is going on.

Also there is the question to be asked of what do you expect from those investments in new construction. What is it you really need and want?

One example: US American streets, roads and especially highways are in such a bad shape, compared to when you are used to drive in the Netherlands or Germany. But then, does anyone really need those high quality pavements? Seeing chuckholes being filled up by a guy with a steaming can in his hand seems to be medieval but also pretty cheap. Additionally it seems that your cars have been built around those pitted roads, as they seem cheaper and to have more suspension. I assume, driving a German-built Ford on american highways, instead of an US-built Ford would leave me with a totaled car within a week.

"We seem to lack the will."
- Bullcrap. Quit victim blaming. The problem isn't that people lack the will, its that others will stick them in concrete cages for daring to try.

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