Light rail megaprojects cost too much and deliver too little
When the transit train comes into town, you won’t be there. But someone will, so watch out.
Here in Ottawa, we watch with weary resignation headlines like “City says western LRT expansion delayed for up to a year” as our much-vaunted light rail hits another bizarre hurdle . Of course, it’s a big project. But it’s not like subways are a new thing, so why didn’t they see it coming?
It’s particularly annoying to read, “The Western Extension may be the most technically tricky part of the $4.6 billion, three-way Phase 2 project” because the “O-Train” has already encountered technical delights like wheels that were “not perfectly round” and cars tested in the wrong type of snow. So we could be in a lot of trouble when they get to really tricky things like doors that won’t open or trains that derail or stations that smell like sewage.
No wait. We already had all these headaches. And at the risk of adding nasty jubilant sounds to the list, I’ve always opposed Ottawa light rail, including telling then-Mayor Larry O’Brien almost 15 years ago , that as a boy I wanted a train like the cool kids, but they cost too much. so much so that we didn’t buy any. (He understood, unlike former Ontario Minister of Health George Smitherman when I told him the joke about the USSR invasion of the Sahara.)
So yes, I am smart. Partly because I read books on economics. Including Bent Flyvbjerg, Nils Bruzelius and Werner Rothengatter’s “Megaprojects and Risk: An Anatomy of Ambition” in 2006, three years after its publication. And again, from the rooftops, how many city councilors do you think you’ve done that? Or would he care?
Light rail has powerful ideological momentum because smart sets are convinced that “liveable” cities require crowding people into skyscrapers, filling residential neighborhoods until all streets ban canyons in concrete and get us out of our cars. That we shleps don’t want to live that way is no obstacle to their grand utopian vision. But there is another problem.
Megaprojects consistently cost too much and produce too little because “failure” from the perspective of users and taxpayers looks very different for the two groups within. Who has ever been punished for all the misfortunes of the O-Train? Only citizens.
I understand that economics books may not fit your idea of summer fun. But like in horror movies, once you get started, it’s hard to look away as the horrific ending unfolds inexorably. And while Henry Hazlitt reduced all of economics to a single sentence about considering the effects on everyone over time, not just the benefits to immediate winners, I can do it in two words: “Incentives matter”.
A huge amount of public policy consists of people deliberately ignoring this principle, thinking that the “laws” of economics are like those of municipal zoning and can be changed or removed at will, rather than like those of physics that you bite if you ignore them. (I would mention here how Canadian healthcare deliberately avoids rewarding people who satisfy patients, but that would take us too far, perhaps to the United States, where patients and practitioners flock while politicians chuckle.) But when you get the incentives wrong, the weird gaffes and weak excuses work like clockwork.
So, if you only read one passage from “Megaprojects and Risks”, make it this: “The cost overrun today is of the same order of magnitude as it was ten, thirty or seventy years” and while “No learning appears to be taking place in this important and very costly sector of public and private decision-making” in fact “strong incentives and weak disincentives for underestimating costs…may have taught proponents of projects what there is to learn, namely that underestimating and overspending pays off”.
They pay off because these “mistakes” deliver precisely the intended benefits to entrepreneurs and politicians. The money keeps flowing into business because once you start you can’t stop, and the penalty clauses are deliberately small enough to be an acceptable PR cost of doing business. And mayors and councilors are praised for their vision when projects kick off, helping them get elected or appointed to more prestigious and lucrative positions, or retire with comfortable pensions, before ballooning bills roll in. expire.
“Megaprojects and Risk” makes some useful suggestions for solving this problem, such as requiring private capital without public guarantees. But no solution will be implemented until people realize that such debacles are not the result of random and unpredictable incidents like winter snow and salt in Ottawa. So if you think I’m a dogmatic loudmouth, answer me this:
Why did I know two decades ago, when not all the wise knew, that Ottawa’s light rail would be an expensive, unstoppable nightmare? And that yours will be too?
The opinions expressed in this article are the opinions of the author and do not necessarily reflect the opinions of The Epoch Times.