This podcast gets into some very important issues around cost benefit analysis and why they are a fraud. And why investing in infrastructure is like a Ponzi scheme, many of our “investments” done over 40 years ago are coming due so we have to pay for both replacing current infrastructure and creating new infrastructure.
From his conclusion:
… the way we spend money today on infrastructure responds to our preferred lifestyle choices but provides no financial return. We are spending enormous amounts of money on a American way of life that cannot be financially sustained. At this point in our development nearly every project we do in this model costs us vastly more money then we will ever recoup in added tax revenues. Our economy is stifled and because of our extraordinary efforts we can’t revive it, largely because we are choking on a infrastructure platform that sucks wealth instead of creates it. We have used private and public leverage and a variety of perverse incentives to create thousands of local Ponzi schemes, each providing the illusion of growth and prosperity, it is not real and we as a people inherently know that. Despite our efforts to deny reality by using bogus analysis that convert nominal social benefits into monumental but fictitious financial gains, the emperor has no clothes. But understand the emperor is not the city of Staples, it is not local economic professionals, engineers and planners or even politicians, the emperor that has no clothes is us, the American people. It is we who value the 45 seconds saved on a wider road over the money to invest in our schools, it is we who value the ability to live far away from where we work, more then we value having parks and quality public spaces, it is we who want invest in a platform for easy growth in strip malls and big boxes rather the configure our communities for a slow but far more resilient economy. It is we who value our private space more then building communities we want to be part of. And it is we who do not want to pay the enormous costs associated with our choices. …
Some of the figures presented:
Project $9.85M
Total benefit $55M
Time Saving $47M for a couple of minutes
Distance Saving $6.5M for 3/4 of a mile
Savings 94,000 gallons of gasoline (Government loses $632K)
Maintenance $8k per year ($780K, $45K per year just for resurfacing)
$5M interests costs, not accounted for.
I would like to put my spin on the time savings issue, there is no doubt that some would be willing to pay a $5 toll to get to work 15 minutes faster but how many would like being required to pay an additional $10 a day just to get to and from work, even if they saved 15 minutes each way? How many would support tolls in both directions in order to go shopping, picking up the kids or a doctor visit? Assigning a top dollar amount based on what some would pay sometimes is not the same as what all would pay all the time. The society benefit should represent what we as a society would be willing to pay for and these figures come no where near that. If anything this cost benefit analysis is saying put a toll on this overpass and the government could make $47M and still save the public $6.5M but the reality probably is that so few would actually be willing to pay a toll that such a project would not be worth doing as a toll bridge. That is the discontinuity here, there is no real monetary benefit and the true social benefit as perceived by society is not anywhere near the costs of the bridge.
Time and time again I am overwhelmed by the lack of honesty in the road/traffic engineering professions. We need these professions to adopt new tools and metrics that reflect the reality and economics of the times.
Link to podcast https://www.strongtowns.org/storage/podcasts/111110_emperor.mp3oldId.20110208082055438