Glaeser Takes an Unserious Look at High-Speed Rail

Ed Glaeser is a very good economist, and his papers are indispensable reading for those interested in the workings of urban areas. But he is also a strident conservative, whose popular writings frequently challenge conventional progressive wisdom (and my own views).

glaeser1_200.jpgHarvard University economist Ed Glaeser (Photo: NPR)

I was interested, then, to read that he would be writing a three-part examination of the economics of high-speed rail (HSR) at the New York Times’ Economix blog. I understood that Glaeser would not approach rail from a position of overwhelming support, but I imagined he would provide a fair and rigorous analysis, worth taking seriously.

I hate to pass judgment just one part into the three part series, but so far his effort is highly disappointing.

Let’s begin with the first and most obvious complaint — Glaeser chooses to examine a potential link between Dallas and Houston.

This strikes me as a worthwhile link to have, but it is is notably not part of the administration’s announced plan for a first go at construction of HSR systems around the United States. And it is manifestly not one of the top priority corridors for creation of true HSR, running at speeds of at least 150 miles per hour.

Why would he choose this corridor to examine? Why not begin with the most natural place to construct true HSR — the Northeastern Corridor — or the state moving fastest toward building its own true HSR network — California?

Well, Glaeser was able to use Dallas’ low share of commuters taking transit to knock the corridor’s estimated ridership down by half. Transit’s share of commuting in Los Angeles is nearly three times that in Dallas. In San Francisco, transit’s share, at 32.2 percent, is more than seven times larger than in Dallas. Presumably this difference had something to do with his choice.

This is a bad beginning for Glaeser, but it actually gets worse. He presents a formula for determining whether the direct benefits of rail are worth the costs:

Number of Riders times (Benefit per Rider minus Variable Costs per Rider) minus Fixed Costs. 

That seems simple, does it not? Perhaps a little oversimplified? But it must be so, says Glaeser:

I’m simplifying, but a formula needs to be simple if interested parties
can seriously debate the numbers, and the only way that America is
going to get to the right answer on public investments is if numbers
trump rhetoric.

But it matters which numbers we’re considering, and omission of
important variables that planning experts take seriously is not the way
to conduct this debate.

The simple fact is that Glaeser’s stripped-down formula obscures far more than it reveals. Again, as I mentioned at the beginning, I am hesitant to judge this series a mere one part in, but the way he has begun here is simply irresponsible.

What are his long-term assumptions? How quickly does he think the population of the Dallas and Houston metropolitan areas will grow? What will that population growth do to the number of people living within easy reach of a train station? How will that population growth interact with planned expansions of local transit systems?

How sensitive are his projections of changes in oil prices? Do they take into account the effect of changing demographics on demand for various kinds of housing and transportation?

And perhaps he will come back to it later, but for now Glaeser has left out any consideration of land-use issues. What effect will construction of high-speed rail lines have on land values, and how much of that will come back to the government as tax revenues?

And most importantly, to what extent will construction of the corridor shape future development? This kind of an analysis is a mainstay of economic geography.

Construction of rail lines to the midwest in the 19th century completely altered the value of midwestern land with access to those lines. That land then developed, creating demand for the rail lines.

Construction of a downtown-to-downtown HSR line that’s competitive with flying will significantly increase the return to locating near the rail terminal. This will encourage development around the line and business based on the line, which will provide demand for the line. Certainly the construction of the interstate system has provided some guidance for us here.

And that brings us to a final point (which, again, Glaeser may ultimately address): What is the proposed alternative?

Is it doing nothing? Then at what point does the rising cost of congestion justify construction of something? Let’s say an alternative is new airport capacity; well, how do the costs and benefits there work out, and how does that math change with oil at $150 per barrel?

Or perhaps an alternative is new highway capacity. Can we see a cost-benefit analysis for that, and how that varies with oil prices, congestion levels, and so on? If we assume that drivers will need to pay the full maintenance cost of the highway network already constructed via a user fee (and currently they’re coming up well short), what does that do to expected demand for rail?

Even if you accept the numbers that Glaeser uses (and one shouldn’t automatically do so), you’re left with almost nothing — an amateurish, back-of-the-envelope analysis for a corridor that’s not even part of the current Obama administration plan. What is this supposed to prove, exactly?

Perhaps he’ll do better in part two of the series. He can’t do much worse.

  • Rob

    Glaeser uses the success of Southwest Airlines in the Dallas-Houston city pair as a basis of comparison, but the reality is that few cities are connected by air infrastructure in the same way that those two are. Since SWA uses Love Field (6 miles from downtown Dallas) and Hobby (9 miles from downtown Houston) rather than Dallas-Fort Worth and Bush (both about 20 miles away) the route is more convenient than virtually all other city pairs. Plus, flights are scheduled to take off at about 30 minute intervals; meaning that service is more frequently scheduled between Dallas and Houston than it is on some local bus routes in those cities. I’m not sure of other city-pairs with air travel scheduled at that frequency, I imagine there aren’t many.

    It seems obvious that running the analysis on a city-pair with awkward airport locations and less frequent service would be a good place to start.

  • maria

    Rob, while I understand your argument, I don’t think it applies. Southwest (and other airlines) is advocating for high speed rail to serve as a feeder to the airports it serves. This would allow Southwest to have a larger customer pool which in turn would allow them to upgrade services and increase profits. Also, eliminating regional travel at our airports would reduce airport congestion, free up gates for next generation craft, and also serve as a commuter providing much needed relief to our highways. It’s cleaner, not tied to oil, and if designed right… on time and fast. In a world where connections are increasingly important, it’s a good idea to free up our airports for more long haul travel while still allowing regional travel to be fast, clean, and convenient.

  • Ian D-B

    This is a pretty weak critique. You simply note a bunch of simplifications in his model. You need to explain how making the model more complex would actually change the conclusions. It wouldn’t be that difficult. Just redo his math using a different share of the population taking mass transit.

    Your last sentence claims Glaeser couldn’t do much worse. Worse would be if he hadn’t written down any model at all and had just thrown together a bunch of random speculation with out any quantitative calculation, what you did here.

  • Mitch

    Maria, I believe Rob’s point about Southwest was simply to point out another way that the Houston/Dallas examination isn’t a good one. Much more interesting, I think, would be looking at the Northeast Corridor where Amtrak service is already competitive with air travel or a San Francisco/Los Angeles route.

    Ian, I disagree that offering an alternative analysis “wouldn’t be that difficult” for all the reasons laid out above. This is a highly nuanced calculation where the outcome is greatly affected by even small changes to just one or two assumptions. The criticisms Ryan made are important and should be taken seriously.

  • Note that it is also the case that Dallas/Houston is sufficiently close to justify a Regional HSR corridor. However, a Regional HSR corridor, even if electrified and built for the 125mph standard at the outset, would have substantially less capital costs than an Express HSR corridor … $1b to $2b would certainly be adequate.

    And swap $12b for $2b in the Fixed Costs part of the formula, and even under Glaeser’s over-simplified formula where all Fixed Costs have to be justified by first party benefits, the case is much easier to make.

  • garyg

    Ryan Avent,

    Why would he choose this corridor to examine? Why not begin with the most natural place to construct true HSR — the Northeastern Corridor — or the state moving fastest toward building its own true HSR network — California?

    Er, how is the Northeast Corridor “the most natural place to construct true HSR?” I can think of several reasons why political and economic obstacles to “true HSR” may be greater in the NE corridor than for a Dallas-Houston line. The NE corridor already has HSR-lite rail service (the Acela), but there is no direct rail service at all between Dallas and Houston. The relatively small improvement in travel times of “true HSR” over the Acela may not be worth the huge investment that would be required for new ROW and track. The potential benefit of going from no reail service at all to “true HSR” may be much greater than the potential benefit of going from HSR-lite to “true HSR.” Texas is mostly flat, land is cheap, and there is much less existing development. So land cost, environmental and NIMBY obstacles to “true HSR” may also be much weaker in Texas than in the NE. The same kind of considerations would apply to a comparison between Texas and California.

    Well, Glaeser was able to use Dallas’ low share of commuters taking transit to knock the corridor’s estimated ridership down by half. Transit’s share of commuting in Los Angeles is nearly three times that in Dallas. In San Francisco, transit’s share, at 32.2 percent, is more than seven times larger than in Dallas. Presumably this difference had something to do with his choice.

    Your argument here is also totally confused. Yes, on the basis of transit’s share of commutes, we would expect higher ridership on a SF-LA route than a Dallas-Houston route. But San Francisco has a smaller workforce than Dallas, which would tend to erode that effect. And the proposed HSR route for SF-LA is 432 miles, almost twice the route length for Dallas-Houston. So the construction, maintenance and operation costs for a SF-LA line would be much higher than for a Dallas-Houston line. So SF-LA would probably need a much higher ridership than Dallas-Houston for the benefits to exceed the costs. Is the higher share of commutes in SF and LA enough to provide that additional ridership? You don’t even try to answer that question. Given that Glaeser’s analysis suggests that Dallas-Houston fails the cost-benefit test so egregiously (costs exceed benefits by between 3-to-1 and 6-to-1), it does not seem plausible that your quibble about commute shares would invalidate his basic conclusion.

  • garyg

    And that brings us to a final point (which, again, Glaeser may ultimately address): What is the proposed alternative?

    The question Glaeser is considering is whether HSR makes economic sense (whether the benefit exceeds the cost). His (provisional) answer is that it doesn’t. The “alternatives” here are “build HSR” and “don’t build HSR” and the analysis suggests that the latter alternative is the better one.

    Is it doing nothing? Then at what point does the rising cost of congestion justify construction of something?

    At the point where the benefit of that thing (from congestion reduction and/or whatever else it may be) exceeds the cost. If the cost of building anything would exceed the cost, then yes, the best alternative is to build nothing.

  • Graham Katz

    Glaesser is right to point out that it is prohibitively expensive to build a HSR connection between two isolated cities. But everybody knows that. What he ignores is the economics of networks, and this is what is relevant to HSR service. In a well-connected network the number of connections served goes up exponentially with the number of nodes connected. If your train stops at only two cities, you serve only two travel markets (from A to B and from B to A), but if you stop at four cities, you serve twelve travel markets (A to B, A to C, B to C, etc.). The Texas T-bone (connecting Houston-Austin; Dallas-San Antonio, etc.), while costing only about 50% more than a hypothetical Houston-Dallas only connection, would serve more than 200% the travel demand – and thus have over 200% the ridership.

    It is by having well connected networks that serve a large proportion of the travel market that countries such as France, Japan and Germany can have such high ridership levels in intercity rail travel (100 million passengers in France, 120 million in Germany, over 300 million in Japan).

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