A day in the life of Fox News

[Tupac Shakur]

One question I have is why, even in the NE, there has never been even a whisper about private projects financing the railroad. Is the problem simply one of eminent domain, or are there deeper issues which render high-speed rail inferior to car + air?

Has there ever been a private infrastructure project similar in scope to a Boston-DC high-speed rail corridor? Seems pretty daunting.

[KrazyHorse]

DaShi

Well, yeah.

If not enough people are willing to purchase a service for a high enough price that this outweighs the total cost of the project (with the relatively high discount factor that usually accompanies new investment) then the project shouldn't be done (outside of certain public goods, which a railroad is most certainly not)

[KrazyHorse]

Has there ever been a private infrastructure project similar in scope to a Boston-DC high-speed rail corridor? Seems pretty daunting.

Restrict it to DC NY to start What is the projected cost? Remember that a company like MS just BOUGHT Skype for 9 billion straight up. RJR Nabisco was 20 billion plus in 1989. How much could you collect from a real capital raise?

[Tupac Shakur]

Amtrak projections on a DC-Boston high-speed rail...

This initiative would involve at least $4.7 billion in annual investments over the next 25 years for a price tag of over $117 billion.

http://secondavenuesagas.com/2010/09/28/amtrak-unveils-pie-in-the-sky-plans-for-ne-high-speed-rail/

Seems gold-plated, but I imagine even the bargain price-tag would be a doozy.

BTW, interesting Economist post I found on eminent domain...

Eminent domain but not for trains

[KrazyHorse]

1) multiply that by 0.65 for just DC-NY
2) you probably want to apply a higher discount factor than libor to the investments, because it can be called off if things are spiralling out of control.

Call it 50 bill NPV. It's big, but not un-doable for private enterprise

[DaShi]

Well, yeah.

If not enough people are willing to purchase a service for a high enough price that this outweighs the total cost of the project (with the relatively high discount factor that usually accompanies new investment) then the project shouldn't be done (outside of certain public goods, which a railroad is most certainly not)

But would the costs always be prohibitively high? As the NYTimes article points out, in China they are planning methods to make the trains cheaper so they can charge lower fares (slower speeds and fewer upscale cars). Couldn't the government start a high speed rail program and later privatize it allowing companies to bypass the startup costs and the public to have the benefits of the rail system?

My search for analysis on high speed rail systems only really came up with this: http://www.apta.com/resources/reportsandpublications/Documents/APTA_HSR_Investment_Paper.pdf which is very positive on the benefits of such a rail system. Their analysis tends to look beyond fares for generating economically positive outcomes, which, if true, to me puts it more in the realm of public good.

[Tupac Shakur]

Call it 50 bill NPV. It's big, but not un-doable for private enterprise

Let's start bulldozing some houses in Jersey.

[KrazyHorse]

Let's start bulldozing some houses in Jersey.

All over it

[Tupac Shakur]

[KrazyHorse]

But would the costs always be prohibitively high? As the NYTimes article points out, in China they are planning methods to make the trains cheaper so they can charge lower fares (slower speeds and fewer upscale cars). Couldn't the government start a high speed rail program and later privatize it allowing companies to bypass the startup costs and the public to have the benefits of the rail system?

Why does the gov't have to start it? Why is it that private investors don't do t for themselves? My fear is that a political project has more wishful thinking and less fiscally sound analysis behind it. Where is the problem here that public intervention is supposed to solve?

My search for analysis on high speed rail systems only really came up with this: http://www.apta.com/resources/reportsandpublications/Documents/APTA_HSR_Investment_Paper.pdf which is very positive on the benefits of such a rail system. Their analysis tends to look beyond fares for generating economically positive outcomes, which, if true, to me puts it more in the realm of public good.

1) No. No, no, no, no, no. Having an "economic impact" beyond the fares HAS NOTHING TO DO WITH MAKING THIS A PUBLIC GOOD. Economic impact studies aren't worth the paper they're vomited onto.
2) The other part of this analysis (reduced negative externalities from other forms of transportation) SHOULD BE SOLVED BY TAXING THE NEGATIVE EXTERNALITY, NOT BY GOVERNMENT COMMAND AND CONTROL OF THE ECONOMY. It's a perverse argument to say that the government can't be trusted to solve negative externalities through well-understood, straightforward solutions (i.e. Pigovian taxes on gasoline and road use taxes/tolls) but CAN be trusted to determine how much/what kind of rail traffic we need relative to road/air traffic

[DaShi]

Why does the gov't have to start it? Why is it that private investors don't do t for themselves? My fear is that a political project has more wishful thinking and less fiscally sound analysis behind it. Where is the problem here that public intervention is supposed to solve?

1) No. No, no, no, no, no. Having an "economic impact" beyond the fares HAS NOTHING TO DO WITH MAKING THIS A PUBLIC GOOD. Economic impact studies aren't worth the paper they're vomited onto.
2) The other part of this analysis (reduced negative externalities from other forms of transportation) SHOULD BE SOLVED BY TAXING THE NEGATIVE EXTERNALITY, NOT BY GOVERNMENT COMMAND AND CONTROL OF THE ECONOMY. It's a perverse argument to say that the government can't be trusted to solve negative externalities through well-understood, straightforward solutions (i.e. Pigovian taxes on gasoline and road use taxes/tolls) but CAN be trusted to determine how much/what kind of rail traffic we need relative to road/air traffic

The US government has invested in many things with the sole purpose of improving the nation's economic strength that the private industry was either unwilling or incapable of doing so on its own. Common examples are transportation networks, like rail and roads, and marketable R&D. High speed rail is attractive to China because it offers both. Green tech too. Private industries may deliver these technologies more efficiently, but aren't always the best at developing them. The pharmaceutical industry is one of the most research intensive private industries, but it is beholden to government subsidies and protection in the form of patent rights that allow them temporary monopolies to cover their R&D costs.

[giblets]

One question I have is why, even in the NE, there has never been even a whisper about private projects financing the railroad. Is the problem simply one of eminent domain, or are there deeper issues which render high-speed rail inferior to car + air?

I think someone in this thread made the claim that cars and airlines are subsidized by the government.

edit:

It's main thrust is that construction of HSR in China has slowed because not enough people are buying the high priced sleeper accommodations and instead buy regular tickets. From the Economist piece we know a regular 2nd class ticket sells for $9 while a sleeper cabin sells for ~$300. Is it any wonder no one wants a sleep cabin on a relatively short trip? Either way, WTF should HSR make money without subsidies? Airlines get subsidized up the ass with government built airports, government subsidized loans to buy aircraft, tax breaks to help airlines, and a million other things while cars get subsidized even more. Hell, user fees for cars (registration fees and gas taxes) only pay about 25% of road maintaince before we even count the MASSIVE costs tax payers pay to actually build those damn freeways so that right there is a huge subsidy. Why the double standard? Why does every other form of transportation get subsidies but rail is magically supposed to do everything on its own? That seems like a double standard to me and hopefully everyone else who hasn't been sniffing glue.

[Tupac Shakur]

Pigovian taxes on gasoline and road use taxes/tolls

[MikeH]

For rail here the issue normally needs gov't involvement because they almost always require legal powers for forced purchases of land. To go anywhere useful you have to go over stuff that's already owned by people.

[Dinner]

I think someone in this thread made the claim that cars and airlines are subsidized by the government.

edit:

They are indeed. I mean it would be hard to drive your car without all those taxpayer funded roads and freeways paid for out of general funds (user fees don't even pay for maintenance by themselves much less construction costs) just as those airplanes wouldn't be so convinient without all those taxpayer funded airports (again landing and departure fees don't cover all the massive costs) nor would flying be as safe or easy without the taxpayer funded airtraffic controller network. Let's not even get into how much manufacturers have gotten in bailouts, subsidies, government backed loans to promote sales, help by national politicians going on foreign trips urging other countries to buy our planes or cars or even just giving away or selling at discount prices cars, planes, trucks, etc... to other countries as foreign aid. The subsides take the form of funding infrastructure, direct cash payments and financial benefits, and lastly use of public resources to promote private sales and PR.

Yet trains are supposed to magically get buy without a penny of help and pay to build all their tracks (no free or subsidized roads or airports for them), and pay all the maintenance by itself, and pay for the track management system to prevent crashes without help, and market itself without help, etc... That isn't a very level playing field but it's obvious why that is because airlines, aircraft makers, trucking companies, and auto companies all don't want the competition so they lobby to block it. Hell, even shipping companies get to use government owned and paid for ports, to use warehouses which often get public funding or were originally built by the military but turned over to civilian use, they get to use canals paid for with public money, the harbors and rivers they use get dredged with public money, and lots of expensive and complicated systems of locks, levees, weirs, dams, and aqueducts are used to make sure the water is deep enough & that private ships can use the channels. Lastly, let's not forget that even the much lauded by the right private freight rail companies got massive subsidies in the form of free land, tax breaks, special favors in the law, help with operating costs, help in building infrastructure so the goods shipped by rail can easily be sent on to their final destination once they get off the train, and no doubt even direct cash payments over the years.

Why should HSR be any different and of course it will have difficulty competing when the other modes of transport are so subsidized yet HSR supposedly shouldn't be.