Infrastructure

Automakers under pressure to reinvent the industry

Posted on by j.giglio

Automakers face unprecedented technological changes and market trends that will ultimately force them along with the Cleveland Browns and the Democratic Party to reinvent their business models. Sources of disruption include electric vehicles; connectivity; autonomous vehicles, including trucks; changing patterns of car ownership and use; and on-demand ride services.

Car companies face an array of new competitors. Besides their traditional rivals, new market entrants including Google, Apple, Tesla, Uber, and Lyft, are fielding new technology vehicles.

Technology is but one of the threats that connected, automated and autonomous driving are introducing to the industry. Connected vehicles are able to “talk” with one-another through radio frequency devices or cellular technology.

General Motors plans to have connected vehicles on the street by the end of the year. The 2017 Cadillac CTS sports sedan will offer technology that allows sharing information about driving conditions like weather, speed, sudden braking and more. Other automakers are expected to follow suit.

Automated and autonomous driving is more complicated. Automated cars use on-board sensors and systems to aid the driver, while autonomous vehicles actually do the driving. It is unclear whether fully autonomous vehicles are 10 or 15 years away.

Autonomous vehicles may get the attention, but the notion of cars talking to one another is the real deal. Vehicle connectivity has garnered great interest from the U.S. Department of Transportation. The Holy Grail of connectivity is vehicles talking with one another without human intervention. The feds have bet that such communication will prevent millions of crashes that result in thousands of fatalities. Last December, USDOT proposed rules requiring that all new cars and small trucks contain technology allowing them to broadcast data to other vehicles within a 984-foot radius about their speed, location and direction.

The proposed rules will standardize how one car talks to another and warns drivers, and eventually autonomous vehicles, about potential dangers. The car- maker determines what to do with the data, be it automated braking or a visual dashboard warning. At an intersection, vehicles would decide if you have enough time to make that right on red and who gets to go next at a four-way stop.

According to the National Highway Transportation Safety Administration, the vehicle-to-vehicle (V2V) equipment and supporting communications functions would cost about $350 per vehicle in 2020. If the rule is adopted, the feds say all new cars would have the technology in four years.

The rule would not require existing vehicles to be retrofitted. As technology evolves, automobiles will likely become more connected to people’s home and mobile devices, and integrated into the internet of things.

Deployment of V2V technologies faces a number of hurdles, such as data security and privacy concerns. If V2V communications get hacked, the possibilities for traffic accidents increases.

Then there is the question of the underlying technology that would enable V2V communication. The feds mandate the use of dedicated short-range communications (DSRC). Many believe DSRC is obsolete and that newer technologies, such as 5G cellular wireless to power smartphone communication, will be released before DSRC market penetration is achieved.

Moreover, critics argue that cellular has already built infrastructure in the form of cell towers, obviating the need to for state and local governments to roll out dedicated short-range receivers on roadside infrastructure.

The other half of the communication network is vehicle-to-infrastructure (V2I). USDOT plans to issue guidance on V2I communications, which in theory should help transportation planners integrate the technologies to allow vehicles to “talk” to roadway infrastructure such as traffic lights, stop signs, and work zones to improve mobility, reduce congestion, and improve safety.

No matter how the technology battle sorts out, the car of the future will be connected. Our transportation system is on the cusp of a transformation, with technology bridging the gap between vehicles and intelligent roadside infrastructure, creating a network that works like the internet and can prevent collisions, keep traffic moving and reduce environmental impacts.

Originally posted: January 21, 2017

Infrastructure Yes, But Not Just Any Infrastructure

Posted on by j.giglio

The American public is routinely bombarded with messages about the need to spend vast sums of money on infrastructure, drumming the subject into the public consciousness, promoting an often rehearsed-sounding catalog of new capital projects. The need is indeed great, but so is the importance of spending wisely. That means emphasizing the lifecycle management of infrastructure assets.

President-elect Trump says his plan to spend $1 trillion on infrastructure projects over 10 years would be paid for by leveraging public-private partnerships and encouraging private investment through tax incentives. Infrastructure spending is a priority Trump shares with congressional Democrats, who have said they believe they can work with him on the Augean task of renewing America’s infrastructure.

What is often overlooked is that infrastructure spending is not just about new construction, but the maintenance of existing assets. Timely lifecycle management and maintenance is needed to extend the service lives of infrastructure assets in a state of good repair and significantly reduce overall costs. The rationale is to avoid the high cost of reconstruction and replacement that results from deferred maintenance.

Political leaders frequently say that stewardship of infrastructure assets is essential for economic growth. But the evidence suggests that many of them don’t believe it. They are predisposed to defer maintenance because their concept of the future extends no further than the next election cycle, and initial timeframe for infrastructure assets to show the effects of irreversible deferred maintenance is much longer than their likely terms in office.

Consider, for example, that large sections of the Washington D.C. transit system are out of service because maintenance has been shortchanged over decades. Service quality declines substantially when maintenance is deferred. Here in Boston, MBTA maintenance has been underfunded for so long that it will take years to eliminate a $7.3 billion maintenance backlog even though the T plans to devote $870 million to the cause this year.

Also, public officials all too frequently understate the true costs of infrastructure projects by focusing on what they cost to build and ignoring operation and maintenance.

Another factor contributing to the failure to maintain infrastructure assets is that highway funding arrangements, for example, traditionally favored capital expenditures for new construction. As originally established by Congress, the Federal-Aid Highway Funding Program specified that Federal Trust Fund grants would cover up to 80 percent of the cost of new construction and subsequent reconstruction or replacement.

But state and local governments had to bear operating and maintenance costs. When highway links inevitably wore out before their time, state and local governments only had to worry about coming up with 20 percent of the total sum from their capital budgets since federal construction grants covered the rest, so maintenance was not a priority.

All but forgotten in this dubious calculus were costs incurred by motorists who had to struggle with increasingly decrepit highways, as well as plenty of congestion when highway lanes were closed for restoration; an inconvenience, any driver knows, that always last much longer than advertised.

Although later reauthorization bills made federal funds available for rehabilitation, renewal, and reconstruction at levels comparable to new construction, the damage had already been done. Today the advanced deterioration of the nation’s highway system is testament to the consequences of deferred maintenance.

The price tag for renewing America’s infrastructure is astronomical, and comes at a time when a federal funding regime dependent on insufficient fuel tax revenues is least able to afford escalating construction and maintenance costs.

Going forward with a big infrastructure package and setting aside, for the moment, the issue of finding the cash to do it, there needs to be an emphasis on the lifecycle management of infrastructure assets. The health care industry understands that it is far less expensive to keep a patient well than to treat them once they become sick; the same is true for our nation’s infrastructure.

Originally Published: December 10, 2016

Infrastructure spending must look forward

Posted on by j.giglio

Many economists and politicians are once again peddling the conceit that billions of dollars in infrastructure spending (aka investment) will create new jobs, raise incomes, boost productivity and promote economic growth. After all, a report card from the American Society of Civil Engineers gave America’s infrastructure a D+ grade and claimed that an investment of $3.6 trillion is needed by 2020.

But before we accept this idea as gospel, we should remember that the future isn’t likely to look like the past.

Americans are reminded that a large part of President Roosevelt’s New Deal to “Save Capitalism in America” was massive federal investments in economic growth projects like rural electrification, the Tennessee Valley Authority, the Boulder and Grand Coulee Dams, and other monumental hydroelectric generating facilities. Not to mention hundreds of commercial airports like La-Guardia and JFK in New York City, thousands of modern post offices, schools and courthouses.

The investments culminated in the 41,000-mile Interstate Highway and Defense System, begun in the 1950s under President Eisenhower (the Republican New Dealer”) because of what he had learned from his military experiences leading the allied armies in Europe during World War II.

It is further claimed that Americans have been living off these federal investments ever since. Their contribution to decades of job growth and increasing national prosperity has been so enormous that Americans have come to take them for granted as cost-free gifts from a beneficent God, like the unimaginably bountiful resources of crude oil discovered under that legendary East Texas hill called Spindletop, which came exploding out of the Lucas Number 1 well in 1901 with a roar that shook the world.

The $828 billion stimulus plan President Obama signed in 2009 focused on “shovel-ready” projects like repaving potholed highways and making overdue bridge repairs that could put people to work right away. Still as Gary Johnson noted in 2011, “My neighbor’s two dogs have created more shovel-ready jobs than the Obama stimulus plan”.

Let’s not kid ourselves, spending for these projects scarcely represented “investment in the future.” Had we been managing infrastructure assets sensibly, they would have been little more than ongoing maintenance activities that should have been funded out of current revenues, like replacing burned-out light bulbs in a factory.

One problem with initiating a massive new capital investment program is figuring out where the dollars to fund it will be found. Projections for escalating federal deficits and skyrocketing debt are bound to raise questions about the federal government’s ability to come up with the necessary cash.

For starters, it’s time to recognize that the future will be quite different from the past, particularly when it comes to transportation infrastructure. Large projects may be rendered obsolete and the burden of stranded fixed costs left to the next generation.

Disruptive technologies such as electric or hybrid, semi-autonomous or self-driving vehicles, and changing consumer preferences, especially among urban millennials who are more interested in the on-demand riding experience than driving, is a cause for optimism about the future of America’s infrastructure condition.

These new patterns of vehicle ownership and use and the emergence of privately funded technologies are changing the way people and goods move, and transforming the transportation industry in both the public and private sectors. They offer the potential for dramatic improvements in traffic congestion (due to improved safety and reduced spacing between vehicles) and reducing motor vehicle accidents and fatalities.

They can also generate environmental gains from smoother traffic flow, promote productivity growth as reduced congestion improves access to labor markets, and improved utilization of transportation assets such as existing highway capacity with higher through put without additional capital investments.

These changes create an opportunity for a new generation of political leaders to present the public with a modern vision for transportation, the economy, and the environment, not one that harks back to an earlier time.

Originally Published: Nov 12, 2016

Obama free trade isn’t so free for US

Posted on by j.giglio

The fight for fast track legislation to allow President Obama to negotiate the secretive Trans-Pacific Partnership trade deal is over. After pulling out all the stops to push the deal through Congress, the President signed legislation giving him the authority to negotiate the trade agreement and put it before Congress for a straight up-or-down vote with no amendments allowed.

Americans are told that free trade is the best strategy for advancing global economic development, reducing poverty and achieving world peace. There is a lot to be said on behalf of the utopian dreams of free traders if you ladle enough frosting on the cake to compensate for its shortcomings. But if we want to help the American middle class -the stated goal of virtually  every politician -we would pursue different policy priorities.

To say that everyone benefits from free trade is misleading. Trade creates winners and losers and every American deserves to know the details buried in these deals. The benefits of the North American Free Trade Agreement and other trade deals have not been shared as broadly as promised.

Economists, businessmen and politicians, the most devoted acolytes, say technological advances lead to increased productivity, which means fewer workers are needed to get the job done. Yes, we have substituted capital for labor. But we have also substituted cheap offshore labor for American workers and the result is that Americans are losing jobs, their wages are stagnating and the middle class is coming apart at the seams.

How countries trade and whether they benefit from it are important questions. Starting with Adam Smith, economists have emphasized specialization and exchange as essential to increasing productivity and raising living standards.

The economic argument for free trade relies on the principle of comparative advantage developed by David Riccardo in 1817. His quaint theory, which built on Smith’s work, remains the cornerstone of free trade economics. So what in simple terms is comparative advantage?

Let’s assume that Lady Gaga, the world-famous entertainer, also happens to be a world- class typist. Rather than both entertaining and typing, she should specialize in entertaining, where her comparative advantage is greatest and she could maximize her income. This key insight is still endorsed today by the overwhelming majority  of economists.

Americans who lose their jobs are becoming less rich so people in foreign countries can be less poor. In the aggregate, people are better off, but domestic workers bear the cost. It should be clear by now that on the home front, free trade contributes to rising inequality, wage stagnation, and lost jobs .

The gains from trade are often widely dispersed, while the losses are concentrated. The extent to which offshore outsourcing is responsible for some of our current labor market woes has become highly contentious in recent years.

Perhaps it is time to adopt a national strategy that can make the American economy grow fast enough to produce decent jobs for every member of the American family who wants to work. How about if we start by investing in our broken infrastructure so it can generate economic growth instead of hamstringing it, and educating our children so they become world leaders in something besides sports?

Then we just might become internationally competitive again, and restore our economy to full employment while we’re at it

originally published: July 11, 2015

Healthy pork: Earmarks may help solve transportation problems

Posted on by j.giglio

The American Society of Civil Engineers recently estimated that traffic bottlenecks will cause a $1 trillion loss in sales over the next eight years. The report makes the point that America can no longer put off dealing with the growing backlog of transportation projects whose costs have long outstripped the dollars the existing transportation funding mechanism generates.

It should be noted that these are the same people who published the 2013 report card that gave America’s infrastructure a grade of D+. They obviously have never heard of grade inflation.

With the current highway bill set to run out of money by May 31, the current report comes as federal lawmakers are debating a new transportation funding bill. Congress has struggled to come up with a transportation funding bill that funds needs beyond those that can be addressed with revenue from the 18.4-cent-per-gallon federal fuel tax, which has not been increased since 1993.

While the infrastructure community is holding its collective breath for Congress to agree on a bipartisan solution, perhaps it is time to revisit the use of limited earmarks to lubricate the legislative process.

Earmarks are congressional directives that money be spent on specific projects, which are often derided as “pork barrel” projects. They basically ended in 2011 after the public outcry about a $223 million earmark to fund the construction of a “bridge to nowhere” in Alaska.

Critics argue that earmarks are basically used to buy votes, curry favor with special interests and help politicians get re-elected by showing constituents they are bringing home the bacon even when America is broke. For sure, there are plenty of people who say that earmarks are pork and the money is being wasted.

To further add to the demonization, they claim it’s ad hoc policymaking at best and illegal graft at worst. For them, earmarks are like a four-letter word and are reflective of congressional corruption, even if they help legislators overcome ideological differences and pass major legislation by earmarking money to buy key votes from recalcitrant colleagues.

Like it or not, earmarks and horse trading are part of the human condition and for ages were part of the legislative process at every level of government. Trading for votes in Congress, not to mention lubricating the process with funding for special projects that the legislators in question consider important, has always been an essential element of American democracy. Since when has the average politician made a virtue out of surrendering his or her career for putting the country’s interest first?

Let’s not get hung up on appealing to the better angels of human nature. Legislators put pragmatism over principle. As that prolific writer Anonymous said: They understand that when you have to choose between voting for the people or the special interests, stick with the special interests. They remember; the people forget.

Stained-glass, Pollyanna-ish types may cringe and complain that this is little more than bribery, the distribution of taxpayer dollars based on political considerations rather than merit. If the use of such a pejorative term makes them feel nobler, so be it. You get merit in the afterlife; here in the present you get politics. As former House Speaker Tip O’Neil once quipped, “I’m against any deal I’m not in on.”

Far from being ashamed of earmarks, proponents argue that lawmakers are a better judge of what benefits their districts than unelected bureaucrats. They ask if we really believe that the bureaucrats responsible for fiascos like the Veterans Affairs scandal and the screwed-up Obamacare rollout should control allocating taxpayer dollars.

Would it really be a mortal sin to reintroduce some limited bribery to grease the legislative process and smooth over differences that preclude in this case the transportation funding shortfall? In the current environment of gridlock, it may be exactly what the country needs. 

originally published: March 14, 2015

The MBTA’s snow job: Lack of accountability

Posted on by j.giglio

Amid endless discussion about the MBTA’s damnable inattention to maintenance and its indulgent over expansion, accountability has not been mentioned as one of the causes of the T’s meltdown. Lack of accountability may in fact be the organization’s biggest weakness.

A raw fact of life is that the public sector is awfully good at ducking accountability. It’s no wonder then that people feel increasingly distrustful of political institutions. And the governor has now created the obligatory commission to assess the MBTA’s problems and make recommendations for fixing them, a Sisyphean task to be sure. One can only hope they will address the question of why this essential, non-discretionary service has consistently failed to be accountable to its customers.

In the meantime, thousands of disgusted customers are demanding refunds for a service that was not rendered. They want the MBTA held accountable for failing to keep their promise to provide the safe and reliable service that, to many, is just as basic as access to water, education and health care.

At the heart of accountability is a promise that obligates you to a course of action. When you are paid for a product or service, you are accountable for delivering it. If you don’t fulfill your promise, you are expected to take responsibility for failing to deliver on it and expected to compensate the other party. This creates a modicum of credibility; a promise made is a promise kept.

Sure, the MBTA board of directors is not responsible for creating private gains, their quasi-public structure means the MBTA has no owners to whom the board is primarily accountable. But they are accountable to taxpayers and customers for creating societal benefits and satisfying the promises made to their multiple constituencies.

If board members are confused about how and why they should be making good on this promise, the new commission should figure it out for them. Commission members should also keep in mind that they cannot expect the MBTA board of directors to perform surgery on themselves. The commission would be wise to recall Einstein’s words that you can’t fix today’s problems with the folks who created the problems in the first place.

One obvious imperative for the nice people on the MBTA board is to acknowledge their failure to deliver a basic service. The stewards at the MBTA can’t make up for lost wages and all the other collateral damage done to the average Joe and Jane. But if they are serious about customer service and want to be viewed as legitimate, they should move at the speed of light and provide customers with refunds for the services those customers haven’t received. What’s to discuss? Just do it.

Even better still, going forward, a money-back guarantee would make public transportation much more attractive to customers and also be the acid test for accountability. And why not a money-back guarantee, it is routinely used by successful private firms that distribute goods and services though the marketplace.

Of course, this principle can only be implemented after Hercules has cleaned out the Augean stables at the MBTA. To expect anything less is to be as amateurish as the folks who are currently in charge.

originally published: February 28, 2015

Intellectual dishonesty and the MBTA

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The bacchanal of charges, counter charges, accusations, and recriminations concerning the MBTA’ s highlight-reel non-performance  over the last several weeks is redundant. In sum, you would be right to conclude that a lot of people had a lot of years to get a job done and failed to do it, and that failure haunts the region in numerous ways.

Of course the public is told that this crisis is the equivalent of a “Sputnik moment,” a blessing in disguise, a wake-up call for elected officials to redouble their efforts to reimagine and modernize the MBTA.

Let’s hope so.

One is reminded that after Winston Churchill’s electoral defeat in 1945, his wife tried to cheer him up. “It might be a blessing in disguise,” she told him. “At the moment,” he replied, “it seems quite effectively disguised.”

A cynic might be forgiven for insisting that the recent MBTA crisis reminds us that there is much is to be said for intellectual dishonesty. She would argue that part of the criminal neglect of the T is that we are much more likely to enjoy an adequate supply of the public goods and services that are so vital to the commonwealth’s welfare if we can convince ourselves that someone else is paying for them. Whenever the cost is coming out of our own pockets, we inevitably try to cut corners, do things on the cheap, and ultimately deprive ourselves of much that we really need.

One definition of intellectual dishonesty is ignoring reality when it interferes with what we want to believe about the way the world works. This is what government enterprises do when they pretend that operating and maintenance are not part of the true costs of providing a public service and are not truly accounted for in the price charged for a public good.

The public is as much to blame for this as elected officials who underestimate true project costs.  People’s expectation of receiving more services from government than they are willing to pay for leads to those officials to provide numbers that have all the accuracy of a Brian Williams anecdote. Taxpayers want more for less and elected officials lack the courage to tell them flatly there is no free lunch.

For example, when former Gov. Deval Patrick announced a nearly $1 billion federal grant to finance the MBTA’s $2 billion Green Line extension, little attention was paid to the fact that the commonwealth still has to foot another $1 billion in construction costs. Still further there is little if any discussion at all of how the project’s life cycle operating and maintenance costs will be covered.

People seem to have forgotten that public transit has to live in the real world and the biggest real-world concern these days is how to pay for it. In simple terms, this comes down to a choice between taxes or user fees – fares in the MBTA’s case.

The deterioration of the MBTA is testament to the consequences of deferring maintenance to disguise the true cost of providing the service. In the T’s case, maintenance has been deferred for decades.

The public is misled about the true life-cycle costs of public transportation assets. It is being economical with the truth to continue to believe you can pay for the overhaul of the MBTA or any other public provider of public transportation without either charging fares that reflect real life-cycle costs or increasing taxes to include operations and maintenance.

Hopefully, elected officials will finally catch the joke, end the intellectual dishonesty and truly embrace the hard work of cutting the MBTA’s financial and managerial Gordian Knots beyond the mere telling of words.

originally published: February 21, 2015

The Highway Trust Fund is crumbling; maybe it should

Posted on by j.giglio

The federal Highway Trust Fund, which provides transportation funding to the states, is projected to run dry in August. But with a technology-driven revolution underway in the way Americans use surface transportation, applying yesterday’s solution and simply replenishing the fund won’t solve the problem.

According to the Obama administration, if the fund is exhausted, states will be forced to put off 112,000 highway construction and 5,600 transit projects, resulting in the loss of 700,000 jobs. When dealing with the government, there are always plenty of zeroes to go around.

The traditional source of revenue for the trust fund is the federal fuel tax of 18.4 cents per gallon, which has not been increased in over two decades. Given that it’s an election year, an increase is not only dead but already decomposing.

One reason the federal fuel tax doesn’t generate enough revenue is more fuel-efficient cars. But that isn’t the whole story. Surface transportation is in the midst of a quiet but profound transformation because technology is fundamentally improving urban mobility.

Technology advances make it easier for people to navigate public bus and rail transportation. Personal ride-booking and car-sharing services are available in nearly every major city, resulting in an interactive transportation network that generates fewer vehicle miles traveled.

As is always the case, technology is outpacing traditional institutions’ ability to adapt. Customers and markets have embraced the digital revolution. The country is witnessing the emergence of an integrated surface transportation network where each transportation mode no longer operates as if it exists in a separate universe.

Technology is in place that allows cities to operate roadway, rail and water transportation modes that complement each other. This gestalt shift represents a fundamental challenge to the traditional approach of the road gang pouring more and more concrete. This is all happening in the name of market solutions, the kind that would make Adam Smith smile.

The proliferation of innovative mobility tools has major implications for traditional approaches to planning, funding, and delivering surface transportation. Recent lifestyle changes, especially among the millennia! generation, are transforming the surface transportation marketplace. It is hard to resist the temptation to conclude that it is time to deliver the eulogy for traditional surface transportation planning and funding.

History- specifically the Japanese Navy’s strategic failure at Pearl Harbor- can teach us something about not letting business as usual blind us when it comes to the need to overhaul surface transportation in the U.S. The Japanese Navy’s officially sanctioned model for everything it did was the British Royal Navy. Standard histories of the Royal Navy emphasize its victories in spectacular naval battles like Trafalgar during which Royal Navy warships attacked and destroyed opposing warships.

Thus, Japanese naval thinking focused on attacking the U.S. Pacific Fleet’s battleships while they were moored at Pearl Harbor. Lost in the shuffle was any serious consideration of trying to cripple Pearl Harbor’s ability to function as a forward naval base. The Japanese were intellectual prisoners of a past that they believed would shape the future.

So it was that, in a brilliant display of tactical management, six aircraft carriers furtively approached the Hawaiian Islands just before dawn that fateful Sunday, launched their planes into the rising sun, caught the U.S. Pacific Fleet with its pants down and wrought havoc in spectacular fashion. On paper at least, this rivaled the triumph at Trafalgar, the Japanese Navy’s benchmark of success.

But as the sun set on Dec. 7, Pearl Harbor’s all-important fuel storage and ship repair facilities remained untouched by Japanese bombs, allowing it to continue serving as a forward base for American naval power in the Pacific. In reality, Japan’s tradition-bound naval leaders chose the wrong targets at Pearl Harbor.

Tradition is often the worst guide when it comes to doing anything really important. Things that have survived long enough to be venerated are often obsolete. American surface transportation is beset by a host of traditions that have helped produce the problems we face today. We must free ourselves of them if we’re to come up with a truly effective vision for what transportation should look like in the future.

originally published: July 12, 2014

We need to think of our roads as cows

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Academics have filled volumes on the differences between what they call public and private goods. Too often the distinction seems to come down to ownership: If something is owned by society as a whole, it is a common good. If owned by one or more individuals, it is a private good.

Common goods are things like public schools, parks or roads that are owned by all of society. The responsibility for operating and maintaining them is (usually) assigned to government and supported by tax revenues.

This is the standard pattern for metropolitan roadway systems in the United States. They are built and maintained by a mixture of municipal, county and state governments that fund most of the cost from general tax revenues. They are often supplemented by “user taxes” levied on the purchase of motor­ vehicle fuel, which implies that motorists pay based on how much they use the roadways.

But even when a roadway network is supported by fuel taxes, there remains a disconnect in the minds of motorists between the act of driving on roadways and paying for them. This is quite different from commodities distributed through the marketplace, where a consumer must buy and pay for some quantity of a commodity before being able to consume it.

The result is an instinctive sense among motorists that roadways are free.

A useful metaphor popularized by biologist Garret Hardin in 1968 illustrates the basic problem. Imagine a community that has a publicly owned pasture where local farmers can graze their dairy cows without having to pay any user charges. Under these circumstances, each farmer seeks to graze as many cows as possible in the pasture because each additional cow will increase milk production but not feeding cost.

This only works so long as the number of grazing cows remains within the pasture’s feeding capacity. Once the farmers exceed this limit, the pasture’s viability begins to break down. The cows consume its grass faster than it can replenish itself with fresh growth, resulting in less nourishment for each cow.

When farmers are faced with cows that are producing less milk to sell, their logical response is to add still more cows to the overused pasture. When all the farmers do this, the result can only be an increasingly dysfunctional pasture and declining milk production for everyone.

In Hardin’s words: “Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit – in a world that is limited. Ruin is the destination towards which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons.”

Severe traffic congestion is a modern example of the tragedy of the commons. Hardin’s metaphor illuminates a broad range of socioeconomic questions about why congestion afflicts so many metropolitan areas.

It illustrates the inevitable tendency to overuse common goods that are perceived to be free. It explains why this tendency leads to a condition in which supply never catches up with the demand. It describes how the widespread availability of free public goods can significantly influence the underlying economics of many private activities that come to depend on them. And it demonstrates the relative ease with which an entire society can be locked into counterproductive behaviors.

The most sensible solution to the tragedy of the commons may be to charge farmers grazing fees. This immediately confronts them with a series of critical business judgments about how to maximize their milk revenues, such as how much to spend feeding pasture grass to their cows or whether to feed them corn or other grains instead.

When all forms of cattle feed are distributed at prices that reflect supply and demand, the business of milk production becomes more rational. Perhaps the same is true for metropolitan roadway systems: directly charge motorists for roadway use and the economics of building, operating and maintaining roadways change rapidly- and for the better.

originally published: March 4, 2014

How (not) to address America’s transportation infrastructure

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Americans have been told with monotony that intelligent investment in transportation infrastructure will help grow the economy and create good paying jobs from both sides of the political divide. Still it’s plain by now that between sequestration and budget cutting to deal with America’s deficits, the country will not do the unthinkable and move aggressively to acquire the additional transportation capacity we need to grow the economy. So we have to consider other courses of action.

In simple terms, we have only three options.

Option 1: Do nothing. Forget about spending huge sums of money to build the new transportation capacity our economy needs. Learn to live with what we’ve got, and stop bellyaching about bottlenecks that diminish our mobility.

Leave earlier in the morning to accommodate a more time-consuming trip to work; have dinner an hour or two later in the evening after the kids are in bed. Make fewer discretionary trips. Spend more time at home watching TV. At least this way we’ll be able to keep more income in our own pockets instead of paying it out in higher prices and taxes to support transportation.

Of course, this assumes our incomes won’t shrink as transportation bottlenecks choke off economic activity, leaving a smaller pie to be divided among more people as the nation’s population increases.

The do-nothing option will force us to pay higher prices for consumer goods and services because of the added costs congestion imposes on their producers. Our reaction to higher prices will likely be to buy less. With consumer spending accounting for 70 percent of the nation’s economy, the result will ultimately be a lower standard of living.

Sharp entrepreneurs will exploit this decline of American society. As Rhett Butler told Scarlet O’Hara in “Gone with the Wind,” “There are as many fortunes to be made from the decline of a society as from building one.”

Let’s keep our fingers crossedthat we can be among the lucky few.

Option 2: Have the federal government move aggressively to deliberately shrink the nation’s economy to a level where its mobility needs can be comfortably met by existing transportation capacity.

The assumption here is that a formal national policy of planned shrinkage can spread the inevitable pain more equitably among the American people. The main focus of this policy would have to be the nation’s top 100 metropolitan areas because that’s where most of the economic action is. They generate three quarters of the nation’s gross domestic product and are home to two thirds of the people. Their dominance as economic engines means the effect of shrinking their economies will spill over to the rest of the nation, placing all but the very rich on a low-cal diet of reduced living standards.

On the other hand, think of the money we’ll save by not paying for elaborate new transportation programs, even if most of the savings quickly run through our fingers to pay the extra costs imposed by a society in decline.

Option 3: Convert our top 100 metropolitan areas into true 24-hour societies so we can make use of existing transportation capacity now lying idle during the hours when most people sleep.

By spreading economic activity more evenly throughout the day, we can effectively acquire new transportation capacity without spending billions to build it. Just like factories that operate three shifts per day so the money invested in their plant and equipment can generate profits around the clock.

Roughly half the people living in each of these 100 metropolitan areas would have to switch from living during the day; working, shopping going to school or religious services and seeking medical attention at night.

Of course, the social engineering needed to accomplish such a transformation would be overwhelming. Some heroic regulation and policing would no doubt be needed to assure the right balance (as defined by government planners) between the day and night-time populations.

But just think how cheaply we could obtain additional transportation capacity this way. It’s for the best, right?

originally published: March 19, 2013