Tuesday, June 16, 2020

US Transportation Infrastructure: Manage Supply or Demand?

Much of the public discussion over US transportation infrastructure proceeds from the belief that it faces a supply problem which needs to be fixed by updating the old and building more of the new. Thus, the prescription is for spending more on roads, bridges, and mass transit. One common claim is that US transportation is "crumbling" (to use a word that often arises in this context). Other claims are that  additional transportation spending will reduce traffic congestion and improve economic growth.   

All of these claims are highly disputable. Gilles Duranton, Geetika Nagpal, and Matthew A. Turner lay out the issues in their essay, "Transportation Infrastructure in the US." The essay was written for a conference held at the National Bureau of Economic Research last November. The conference proceedings are going to be published in a book, Economics of Infrastructure Investment, edited by Edward L. Glaeser and James M. Poterba. But for now, the working paper versions of the essays and in some cases the galley proofs for the conference volume are available online. The Duranton-Nagpal-Turner essay is currently available here, and also available as NBER Working Paper #27254 (revised June 2020). 

What about the claim that US highways are in declining condition?

There's something called the Highway Performance Monitoring System, in which the Federal Highway Administration collects annual data from various state highway authorities. There is something called the International Roughness Index, which basically drives a vehicle over the road and measures bumpiness. "As part of HPMS, state highway authorities measure IRI on every segment of the interstate highway system, more-or-less, every year." Looking at available data from the 1992 to 2007: "The improvement in the condition of interstate highways has been almost monotonic."

What about the claim that US bridges are in declining condition?

There's a National Bridge Inventory. Looking at the data from 1990-2017, "the condition of bridges remained about the same, the number of bridges increased slowly, and bridge traffic increased modestly."

What about the claim that US mass transit is in declining condition?

There is a National Transit Administration, which maintains a National Transit Database. It shows that mass transit is heavily concentrated in a few cities. "New York accounts for about 40% of all transit rides in the entire country. Chicago is second, with 6%, followed by DC, Los Angeles, Boston and
Philadelphia. In total, these six districts account for about 60% of all transit rides in the country. ...The New York subway system carries about 71% of all subway riders and about 31% of all public transit riders in the whole country. ... The stock of public transit motor buses is younger than it was a generation ago and about 30% larger, although ridership has been about constant. The mean age of a subway car stayed about the same from 1992 to 2017, but at more than 20 years old, this average car is quite old. Subways carry about twice as many riders as they did a generation ago."

In short, there's is of course an ongoing need to update transportation infrastructure. But overall, the quality of US transportation infrastructure is not in decline. The authors write: "Massive increases in infrastructure are not required reverse the decline of us transportation infrastructure. Not only is this infrastructure, for the most part, not deteriorating, much of it is in good condition or improving. ... On average, most US transportation infrastructure is not crumbling, except (probably) for our subways."

But of course, one might argue that even if US transportation infrastructure is not literally getting worse, there might be large social gains from additional spending. For example, one might claim that more transportation spending will lead to improved economic growth or less traffic congestion.

On the issue of improved economic growth, Duranton, Nagpal, and Turner cite an array of evidence that improved transportation benefits those in close proximity. But much evidence suggests that transportation improvements lead to a geographic rearrangement of economic activity, not to additional gains for the area a whole. There is a broader case based on big-picture historical data that long-run growth benefits when society has sufficient infrastructure investments in transportation, electricity, communication, and water/sewage. But investing in these areas doesn't offer a quick boost to economic growth rates.  

On the issue of transportation infrastructure and congestion, the authors refer to the evidence that it's very hard to build your way out of congestion. For example, the six cities which account for most of US mass transit--New York, Chicago, Los Angeles, Boston, Washington, DC, and Philadelphia--all have extensive systems of both roads and mass transit. They also experience heavy traffic congestion. 

Overall, the authors suggest that gloominess about transportation infrastructure may not be primarily about its physical condition, but about displeasure over congestion. They write: 
The condition of infrastructure has, for the most part, improved over the past generation.
However, highways and subways per person have decreased, even as travel per
person has increased. Thus, while the condition of the infrastructure has improved or
stayed constant, it is serving much more demand, and so the speed of travel has decreased
and the experience of drivers and riders is worse. We speculate that the sentiment that infrastructure is deteriorating derives from the fact that users’ experiences are deteriorating
with increased congestion, and that this deterioration is largely independent of physical
As economists have argued for some time, people make choices when they commute: specifically, choices about the time, the route, and the mode (like whether to take a car or mass transit). When you build additional transportation capacity, some of those who were taking other times, other routes, and other modes will shift over, and the additional capacity quickly becomes congested, too. Thus, it's quite difficult to build one's way out of congestion: it would mean building enough capacity so that everyone who might choose to travel at a peak time can do so without hindrance--even if all those highway lanes and mass transit vehicles are near-empty at other times. The public policy answer to traffic congestion is instead to focus on the demand side--for example, by charging higher tolls and prices during peak-load times.

Here's the full Table of Contents for the Economics of Transportation Infrastructure volume: 

Table of Contents
Introduction: Edward L. Glaeser, James M. Poterba (bibliographic info)

1. Transportation Infrastructure in the US: Gilles Duranton, Geetika Nagpal, Matthew A. Turner (bibliographic info) (download) version of March 3, 2020 (Working Paper version)
Comment: Stephen J. Redding (bibliographic info) (download)

2. Measuring Infrastructure in BEA's National Economic Accounts: Jennifer Bennett, Robert Kornfeld, Daniel Sichel, David Wasshausen (bibliographic info) (download) version of March 3, 2020
Comment: Peter Blair Henry (bibliographic info)

3. Can America Reduce Highway Construction Costs? Evidence from the States: Leah Brooks, Zachary Liscow (bibliographic info) (download) version of March 3, 2020
Comment: Clifford Winston

4. Procurement Choices and Infrastructure Costs: Dejan Makovšek, Adrian Bridge (bibliographic info) (download) version of March 5, 2020
Comment: Shoshana Vasserman (bibliographic info) (download)

5. Digital Infrastructure: Shane Greenstein (bibliographic info) (download) version of March 3, 2020
Comment: Catherine Tucker (bibliographic info) (download)

6. When and How to Use Public-Private Partnerships in Infrastructure: Lessons from the International Experience: Eduardo Engel, Ronald D. Fischer, Alexander Galetovic (bibliographic info) (download) version of March 3, 2020 (Working Paper version)
Comment: Keith Hennessey (bibliographic info) (download)

7. A Fair Value Approach to Valuing Public Infrastructure Projects and the Risk Transfer in Public Private Partnerships: Deborah Lucas, Jorge Jimenez Montesinos (bibliographic info) (download) version of March 3, 2020
Comment: Richard Geddes (bibliographic info)

8. The Macroeconomic Consequences of Infrastructure Investment: Valerie A. Ramey (bibliographic info) (download) version of June 16, 2020
Comment: Jason Furman (bibliographic info)