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The document is an ebook titled 'Flexible Urban Transportation' by Jonathan L. Gifford, which critiques current transportation planning in the U.S. and proposes a more flexible approach to address economic, social, and environmental challenges. It emphasizes the need for transparency, stakeholder inclusion, and adaptability in planning processes. The book also discusses historical context, planning methods, and institutional challenges related to transportation systems.

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16 views92 pages

(Ebook) Flexible Urban Transportation by Jonathan L. Gifford ISBN 9780080440538, 0080440533 Sample

The document is an ebook titled 'Flexible Urban Transportation' by Jonathan L. Gifford, which critiques current transportation planning in the U.S. and proposes a more flexible approach to address economic, social, and environmental challenges. It emphasizes the need for transparency, stakeholder inclusion, and adaptability in planning processes. The book also discusses historical context, planning methods, and institutional challenges related to transportation systems.

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connect
FLEXIBLE URBAN TRANSPORTATION

By

Jonathan L Gifford
George Mason University, Arlington, USA

2003

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Museum, Baltimore.
CONTEN
Preface ix

1 Transportation and the Economic Vitality of Communities 1

The Urban Transportation Dilemma 2


Transportation Planning in Context 6
Infrastructure and economic growth 7
Structural changes 9
Changing government roles and responsibilities 11
The Need for a New Approach 13

2 Order, Efficiency, and the Struggle against Chaos 17

Order and Efficiency in the Italian Renaissance 17


Chaos and the Search for Order 19
The American Renaissance 21
The Progressive Era 22
Scientific management 23
Standardization 23
Public administration 25
City Planning and the City Beautiful 26

3 The American Highway Program to 1956 29

The First-Generation Highway Program 30


The 1920s 31
The early Depression: 1930-1936 33
The late Depression: 1937-1941 34
Planning the Interstate System 35
Toll roads versus free roads 31
Urban versus interregional highways 39
Design standards 40
Limited mileage 43
Cost estimates, financing, and the highway trust fund 44
Beltways 44
Institutional arrangements 46

4 The American Highway Program since 1956 49

Building the Interstate: 1956-1991 50


The 1956 Highway Acts 50
The “Golden Age” 51
vi

The Freeway Revolt 53


Process, design, and values 55
Interstate 66, Fairfax and Arlington Counties, Virginia 56
Interstate 70, Glenwood Canyon, Colorado 60
Franconia Notch, New Hampshire 63
“Finishing” the Interstate 65
The Post-Interstate Era 66
The Intermodal Surface Transportation Efficiency Act
of 1991 (ISTEA) 69
National Highway System Designation Act of 1995 74
Transportation Equity Act for the 21st Century (TEA-21) 75

5 Transportation Planning Methods 79

The Institutional Context of Transportation Planning 80


The Role of Analysis in Transportation Planning 83
Decision-Making Concepts 85
Indicative planning 85
Margin of safety analysis 87
Benefit-cost analysis 88
Distributional equity 89
Sources of uncertainty 91
Irreversibility, non-pecuniary impacts, and other limitations 95
Probabilistic risk assessment 96
Life-cycle cost analysis (LCCA) 98
Least cost planning 99
Investing under uncertainty 100
Varying construction cost 102
Varying demand 103
Increasing uncertainty over demand 104
“Bad News Principle” 104
Scale versus flexibility 106
Environmental applications 107
Investing under uncertainty: summary 107
Participatory decision making 108

6 The Evolution of Transportation Planning 111

Highway Planning Prior to World War I1 111


Metropolitan Transportation Planning 112
Urban travel modeling and the Interstate program 118
National Environmental Policy Act 118
Alternatives analysis 119
ISTEA I19
vii

Air Quality Planning 122


Period I : 1970-1990 122
Period 11: the 1990s 124
Transportation planning and the control of air quality 128
National-Scale Planning 130
Highway needs studies 131
Condition and performance reports 134
Economic productivity studies 137

7 Challenges to the Neoclassical Economic Paradigm:


Complexity, Adaptation, and Flexibility 139

Increasing Returns 140


Sources of increasing returns 142
Properties of increasing returns systems 147
The Austrian School 151
Choice under uncertainty 152
Competition as learning 153
Capital structure 154
Implications for Infrastructure Planning 156

8 The Need for a New Approach 159

Four Fallacies of the Current Approach 160


The exogenous goal fallacy 160
The predictive modeling fallacy 161
The efficiency fallacy 163
The public involvement fallacy 163
A Reinvented Transportation Planning Process 164
Control 164
Flexibility 165
Control and flexibility 167
Adaptive discovery 169
Chapter Appendix: Bibliography on Concept of Flexibility 173

9 Transportation Planning: A Flexible Approach


for the Twenty-First Century 175

Stability and Agility 176


Reinventing Transportation Planning 177
A commitment to honesty 177
Intelligence: a source of factual information 180
Decision support 182
Design and implementation 184
Design and procurement 185
Outreach and community involvement 186
Monitoring 188
Performance indicators 189
Monitoring flexibility 190
Assessing financial and economic viability 194

10 Reality Check: Institutionalizing Flexible Transportation Planning 197

Going Cold Turkey 198


The National Campaign 198
Consortia and Informal Voluntary Organizations 199
TRANSCOM 201
E-ZPass 201
The Data Sharing Model 203
A Local, State, and Regional Implementation Strategy 205
Metropolitan planning organizations 205
Informal voluntary organizations 206
The role of the states 207
Flexible Planning at the Federal Level 208
Identify and address uncertainty in program plans and analyses 208
Shorten the time horizon for project analysis 211
Adopt incentives based on measurable outcomes 212
Facilitate sharing of information 214

11 An Agenda for Action 217

Local, State, and Regional Actions 217


Establishment of an intelligence function 218
Develop a decision support function 219
Design and implementation 220
Conduct Monitoring 221
National Actions 221
Deregulate the metropolitan transportation planning process 222
Revise federal policies to focus on measurable outcomes 222
Streamline the environmental approval process 222
Shorten the time for project cost-benefit analysis 223
Support a national or regional data interchange standards process 224
Reorient national planning around macroeconomic analysis 225

12 Conclusion 227

Index 233
PREFACE

This book is a critique of transportation planning as it is practiced in the United States today and
a proposal for a new, more flexible approach. The U.S. is now facing profound challenges to its
economic competitiveness and social equity, to public safety and security, and to the integrity of
its environment. The ability to create transportation systems that contribute to addressing those
challenges effectively requires a planning process radically different from the process in place
today. Meeting the nation's challenges effectively requires flexibility, honesty about what does
and does not work, transparency, and inclusion of a broad range of stakeholders. The current
process is rigid, dishonest—the process, that is, not the professionals who work in it—opaque,
and exclusive.

This call for reform is in some ways both naive and imperfect. The current transportation plan-
ning process is deeply ingrained in institutions and procedures that direct substantial funds to
well-entrenched interests. It is unlikely that a new approach can displace the status quo any
time soon, and any real change in practice that the proposed reform might engender will in-
variably raise questions that the book fails to address. Nonetheless, I offer it in the spirit of
constructive criticism on a matter of great societal urgency.

The motivation for writing this book goes back two decades to my doctoral dissertation on the
planning and design of the interstate highway system and its impacts on American cities. In
that work I asked, how could a program as widely welcomed and well-intentioned as the Inter-
state program in 1956 have unleashed such a furious rejection in so many cities only a decade
later? The answer lay in the nature of bureaucratic politics and the perils of implementation and
unintended consequences.

This book takes the logical next step and examines the difficult and humbling question of what
can and should be done to remedy the transportation planning crisis. The book describes how
transportation planning has reached its troubled present state, and prescribes a way forward.
Many of the ideas and proposals presented here are not wholly new. Indeed, the proposed ap-
proach builds on what is best about transportation planning today. It seeks to relax some of the
procedural and societal constraints on discovering the proper balance between transportation
improvements and other objectives of the society those improvements are intended to serve.
Yet while promising signs of improvement are apparent here and there, much about the current
practice of transportation planning reflects the best thinking of the 1950s, frozen in the amber
of regulations, consent decrees, and procedural checkpoints. These frustrate attempts for re-
form, with the consequence that the transportation system fails to serve society as well as it
could.

The book has been a labor of many years, and I owe a debt of gratitude to many. At George Ma-
son University, Louise White helped inspire the writing. Jim Pfiffher offered valuable advice and
counsel. Roger Stough and the School of Public Policy provided extremely generous encourage-
ment and financial support. Graduate students Sanjay Marwah, Danilo Pelletiere, and Odd
Stalebrink have provided indispensable research assistance. For several years, Mary Clark pro-
vided essential administrative support, as well as great working companionship. Many colleagues
debated and discussed ideas presented in the book. And the university itself provided an intellec-
tual setting in which I could develop and complete the manuscript.

Outside the university, I am indebted to my editor, Chris Pringle and his able and patient staff
at Elsevier Science, to Richard Rowson, who provided invaluable editorial advice, to Catherine
Kreyche, who copyedited the manuscript and supervised its preparation, and to Thanigai Ti-
ruchengodu for his assistance with computer graphics. Last but not least, my good friend Bob
Vastine provided warmly appreciated support, prodding, and encouragement over the long
course of its development. To all, a sincere and heartfelt thank you.

Of course, the normal disclaimers apply.


TRANSPORTATION AND THE
ECONOMIC VITALITY OF COMMUNITIES

A century and a half ago, in 1847, the author's ancestors fled the poverty, harsh chmate, and
rocky terrain of their native Norway and settled in central Iowa, twenty miles north of Des
Moines—a land, they found, "flowing with milk and honey." A few decades later, in 1874,
came a narrow-gauge railroad, which began service between Des Moines and the town of
Ames, fifteen miles north. The settlers established a town next to the rail line and called it
Sheldahl, after Osmund Sheldahl, the author's great grandfather, who had donated the land.
Five years later the Northwestern Company purchased the line and upgraded it to standard
gauge. Sheldahl prospered, so much so that at one point it even supported eleven saloons.

Another five years later the Chicago, Milwaukee, and St. Paul Company announced plans to
build an east-west line that would pass only a quarter mile north of the center of Sheldahl.
Competition with the Northwestern, the town hoped, would bring more favorable rates. But the
planned route required two river crossings and traversed some difficult terrain. New surveys
identified a more favorable route, but it passed one and one-half miles north of Sheldahl. The
town sent an emissary to the railroad to advocate the original route, but all he got for his efforts
was a free ticket home.

A remarkable thing happened after service began on the new line. The residents and merchants
of Sheldahl literally picked up their town and moved it. They laid a trail across the prairie and
moved more than fifty buildings to the new crossing. Each building was jacked onto wheeled
"trucks" and pulled with the aid of circular horse-power. Immediately ahead of the building
itself the trail was planked with heavy boards, which were continuously resupplied from the
rear. It was slow work, often requiring a week or even ten days for one building. The horse-
powered apparatus, while it required frequent stops for resetting, provided tremendous mech-
anical advantage, allowing many of the larger buildings, including the grain elevator, to be
moved the full two miles with a single horse.
2 FLEXIBLE URBAN TRANSPORTATION

In the end, Sheldahl lost more than half of its 347 residents. Many of those who stayed be-
hind harbored hard feelings against those who left. But Slater, as the new town was eventually
called, prospered and today has one of the largest grain elevators in the state.'

The ten years from boom to bust in Sheldahl are a poignant example of how transportation in-
frastructure affects the economic vitality of communities. As in Sheldahl, transportation infra-
structure is a powerful determinant of the economic and social well being of all cities, towns,
and communities. Transportation infrastructure provides access for companies, factories, and
farms to the work force and supplies they need to produce their products and services and dis-
tribute them to their customers. And it provides access to work, church, shopping, and recrea-
tion for families.

These impacts add up from city to city and town to town such that transportation infrastructure
decisions are important determinants of social well being at a national level as well. Seldom are
the economic implications of a particular decision as stark as they were for Sheldahl in 1884.
But when transportation infrastructure is at cross-purposes with the needs of a community,
economic and social well being can suffer.

The nature of the relationship between infrastructure and quality of life is complex, however.
The demand for transportation infrastructure arises out of private and collective decisions by
households, firms, and units of government whose motivations are not always well or easily
understood by those who plan transportation infrastructure. Moreover, transportation infra-
structure arises out of decision processes, largely in the public sector, that are influenced not
only by technical and engineering considerations but also by the harsh tug of partisan, paro-
chial politics.

It is not surprising, then, that "disconnects" occasionally arise between transportation infra-
structure (the supply side) and community needs (the demand side). Indeed, what may be sur-
prising in an era of skepticism about politics and political institutions is that the system works
as well as it does.

This book is about the growing disparity between the supply and demand for transportation in-
frastructure, its consequences for social well being, and proposals for change that would bring
facilities and demand into closer accord.

T H E U R B A N TRANSPORTATION DILEMMA

Transportation in most American cities reflects a dilemma. On the one hand, traffic demand
has increased dramatically over the last quarter century due to prosperity and population
growth. The supply of highways, on the other hand, has in most places grown only minimally.

' Don Fatka, 'Trom Norway to Story County" (January 1970); and James A. Storing, "The Town That Moved,"
The Palimpsest (State Historical Society of Iowa, February, 1939), cited in "A Town Is Formed." Both items in
"History Book: Sheldahl, Iowa," ms.
Transportation and the Economic Vitality of Communities 3

The detailed reasons for the stagnation in new supply vary from place to place. But at a general
level, it is fair to say that proposals to build new or expand existing highways fail the test of
implementation; they somehow fail to muster sufficient support to overcome the costs and bar-
riers to implementation.

Figure 1-1
U.S. Disbursements for Highways as a Percentage of GDP: 1945-1998

1940 1950 1960 1970 1980 1990 2000 2010

Source: GDP: U.S. Bureau of Economic Analysis <http://www.bea.doc.gov>;


highway disbursements: U.S. Federal Highway Administration, Highway Statistics (various years).

The public consensus for expanding and improving urban transportation infrastructure has
eroded significantly in the last several decades. Its erosion is evident in the opposition to new
and expanded urban highway projects, despite worsening congestion and seemingly inexorable
increases in public demand for automobiles and road space. Its erosion is also evident in flat or
declining budgets for highway construction and maintenance and in the deferred maintenance
of existing facilities (Figure 1-1).

Why is this a dilemma? Increasing traffic without commensurate increases in supply almost
necessarily increases the congestion and delays that travelers face. "Excess capacity" existed in
some places twenty-five years ago, even at peak hours. And most highway facilities and transit
services have excess capacity between 10 p.m. and 6 a.m. But transportation demand exhibits
strong variation by time of day because travel is a means to participate in other social and eco-
nomic activities that also ebb and flow by time of day. Most areas have long since used up any
excess capacity that existed at peak hours so that increased demand is accommodated by
spreading the peak to longer and longer periods.

If travel confers net benefits on the traveler (and who but the traveler is in a position to dispute
that assessment?), then society is better off unless the costs not borne by travelers, such as
4 FLEXIBLE URBAN TRANSPORTATION

noise and air quality, are so great that they outweigh the benefit of the trip to those travehng.
(Congestion costs are borne by other travelers and hence are internal to the travelers' deci-
sions.) But the assertion that it is impossible to build one's way out of congestion misses the
point. The presence of congestion indicates that the value of travel afforded by a facility or ser-
vice exceeds the costs to the traveler of making the trip, including dealing with congestion.

A larger question is whether a mobile society is better off than an immobile society. Clearly it is,
to a significant degree. Mobility confers choice from a range of spatially dispersed activities. The
cheaper, faster, and easier it is to travel, the greater the field of activities available.

Public opposition to large infrastructure projects is nothing new. The construction of the Erie
Canal in the early nineteenth century precipitated thousands of complaints and lawsuits claim-
ing damages suffered as a result of its construction and operation.^ What is new is that public
opposition today is more often successful in stopping, delaying, or modifying the design of
many major projects.

Building urban transport infrastructure facilities requires power—power to condemn and take
private property, power to award and enforce franchises and contracts, and power to tax or levy
tolls. The construction of the grand boulevards of Paris between 1852 and 1870 required wide-
spread demolition to open large corridors and achieve a harmonious and technically efficient
configuration of streets and vistas. Baron Haussmann could only execute such a plan with the
power and authority of Napoleon III behind him.^ In the U.S. between the 1920s and the 1960s,
the man responsible for the construction of the lion's share of greater New York City's public
facilities was "power broker" Robert Moses."*

In a free society, the exercise of such power requires public support. There have been times
when the public supported major infrastructure improvements: times of crisis, times of over-
whelming public demand, times of widespread belief in the solutions being offered. But that
support is less often present today. The question is why, and what to do about it?

If travel confers such great benefits, why has expanding the capacity to travel through the provi-
sion of highways and other facilities and services so often failed to pass the test of implementa-
tion? One explanation is that there is no point in building new supply because traffic simply ex-
pands to fill it up. It has become almost axiomatic that, "You can't build your way out of conges-
tion." This is in many respects a wrong-headed view. People travel because they find it produc-
tive to do so. To be sure, there is some recreational travel, that is, situations where the travel is
an end in itself And recreational travel in some locales causes congestion. (Consider the
congestion of cars cruising Main Street in small towns on a Saturday night.) But generally
speaking, people travel because they find that the cost and inconvenience imposed by travel-

^ Carol Sheriff, The Artificial River: The Erie Canal and the Paradox of Progress. 1817-1862 (New York: Hill &
Wang, 1996).
^ Howard Saalman, Haussmann: Paris Transformed, Planning and Cities (New York: Braziller, 1971).
"* Robert A. Caro, The Power Broker (New York: Knopf, 1974).
Transportation and the Economic Vitality of Communities 5

ing are more than offset by the benefits conferred by participating in the activities at the end
of their trips.

Another explanation for the dechne in broad pubhc support for urban transport infrastructure is
increasing pubUc concern about social and environmental impacts. The catalog of social and
environmental costs is extensive, ranging from poor air quality (local, regional, and interre-
gional), to land use problems, to community separation, to (for highways) erosion of viable
markets for public transit, to military interventions in the Persian Gulf.^ Growing public con-
cern about these issues could derive from a number of factors. One factor could be that appre-
ciation for the environment and habitat may be "income elastic," that is, as incomes rise, the
value individuals place on non-subsistence amenities grows. Another factor could be that
public awareness of these costs has grown over the last several decades, and public willingness
to accept them has declined. Yet another factor could be that environmental elitists have "hi-
jacked" decision making and seek to use congestion to force Americans to give up their cher-
ished lifestyle, which is so energy and land intensive.

A third and related explanation for the erosion of public support is that the demand for high-
ways reflects large direct and indirect subsidies that have biased transport users in their favor.
Such subsidies include dedicated gas taxes, general fund support, as well as a number of ser-
vices such as policing and street cleaning that are not typically charged to the highway account.
These subsidies have caused highways to be priced below cost, according to this line of reason-
ing, and consumers have rationally acted to exploit the subsidies, driving the demand for high-
ways above economically efficient levels. A related point is that the congestion costs of driving
during peak periods are external to the traveler, leading to over-consumption of peak period
travel.

A fourth common explanation is a decline in public trust in the institutions charged with building
urban transport infrastructure, and a commensurate refusal to accede to their decisions. The def-
erence to technical expertise that once shielded decisions from public challenge and scrutiny has
eroded. Listead, society defers to sentiments of "not in my backyard" (NIMBY), or more em-
phatic sentiments of "build absolutely nothing anywhere near anyone" (BANANA). Procedural
requirements for environmental assessments and public participation have led to what one author
has termed "demosclerosis," the inability of a democratic society to act decisively on important

Some allege that the real culprit is the perversity of the American people. They want all the
benefits of mobility without the cost and inconvenience of building new facilities, and they re-
fuse to confront the patterns of land development, vehicle ownership, and usage that give rise
to traffic growth.

^ Mark A. Delucchi, The Annualized Social Cost of Motor-Vehicle Use in the United States, 1990-1991: Summary
of Theory, Methods, Data and Results, report UCD-ITS-RR-96-3 (1) (Davis: University of California, Davis, In-
stitute of Transportation Studies, June 1997).
^ Jonathan Rauch, Demosclerosis: The Silent Killer of American Government (New York: Times Books, 1994).
6 FLEXIBLE URBAN TRANSPORTATION

While there is some truth in each of these explanations, they all tend to place the responsibility
for eroding public support outside the transportation supply system. This book argues that a
large part of the blame lies not with shortsighted politicians and ignorant, irrational voters but
with the infrastructure community itself Infrastructure suppliers have simply failed to deliver
facilities that are publicly acceptable.

The erosion of public consensus for urban transportation infrastructure reflects public dissatisfac-
tion with the facilities being tendered for consideration. What urban highway suppliers have been
providing has not offered the combination of operational features and environmental and com-
munity impacts that the public is willing to accept. Suppliers have failed to refine and adapt their
designs to provide features and services that users are willing to support. Absent such support, po-
litical decision makers have withdrawn financial and political resources from the institutions
that supply infrastructure.

Out-of-scale, poorly conceived, and insensitively implemented projects, especially under the
auspices of the Interstate program, caused a backlash against freeways that has hampered pro-
gress on many highway projects for the last three decades. In short, the infrastructure community
ignored its customers, and the consequences have been enormous. The corollary of this observa-
tion is that the infrastructure community can again bring forth projects and ideas that capture the
public's imaginafion.

It would be a mistake to conclude that the public rejects urban highways and favors more pub-
lic transit. Public behavior clearly refiites that conclusion. With few exceptions, market share is
down on all modes of transport other than driving alone. The public is more than willing to use
what suppliers have provided. What alternative do they have? Staying at home? But as urban
transport projects—especially urban freeways—have been deployed in urban areas, the public
reaction in many instances has been firm and decisive opposition.

The problem, then, is a failure of infrastructure suppliers to conceptualize and design facilities
that command widespread public support. The remedy must be to discover what kinds of facili-
ties the public will support.

The fime may well be right for a new approach. Public support may have reached its nadir in
the 1990s and begun to recover. Congress has recently increased transportation funding signifi-
cantly, and will soon be considering reauthorization of the federal surface transportation pro-
gram. It is critical not to squander the opportunity by offering up the same old ideas. It is es-
sential to embrace a customer orientation, to discover what customers value and will support.

TRANSPORTATION PLANNING IN C O N T E X T

The current state of urban transportation planning is the product of a century-long tradition. It
reflects the evolution of thinking about the sources of economic growth, the structure of the
economy, and the role of government.
Transportation and the Economic Vitality of Communities 7

Infrastructure and Economic Growth

"Getting the transportation system right" to support growth of the economy is an appeahng ob-
jective. Poor infrastructure can clearly hurt the economy, even though many societies have main-
tained high levels of economic output over the short term when their infrastructures have been
destroyed by natural disaster or war7 But the relationship between infrastructure investment and
economic output and productivity has only recently become the matter of formal econometric
study.

Society's views about the linkage between infrastructure investment and economic growth and
the appropriate role for government in the promotion of infrastructure development have
changed considerably in the last two centuries. Soon after the creation of the republic, propos-
als emerged for federal sponsorship of road and canal improvements intended to improve ac-
cess across the Appalachian Mountains, where population was growing rapidly. One of the ear-
liest projects was the National Road from Maryland to Ohio, constructed between 1822 and
1838. The National Road had been built with the support of Senators Henry Clay (Kentucky)
and John C. Calhoun (South Carolina), who were concerned that introduction of steamboat
service on the Mississippi and Ohio rivers would imperil access from east coast cities to (then)
growing western markets. But federal support for the National Road and other similar "internal
improvements" soon ran afoul of greater concerns about states' rights and limiting the author-
ity of the federal government, and funding ceased in 1838. Road and canal access across the
Appalachian Mountains would thereafter proceed as a state-sponsored or state-chartered enter-
prise.

The state-sponsored Erie Canal connected New York City to Lake Erie and had profound im-
pacts on the spatial distribution of products. When it opened, the cheapest route for bulk com-
modities from Philadelphia to Pittsburgh was via New York. The canal's stunning success
prompted many states to launch their own canal initiatives. But the subsequent failure of other
projects like the Chesapeake and Ohio Canal caused a backlash against further state support.

Federal support soon returned with a vengeance, however, to sponsor railroad expansion with
land grants, loans, subsidies, and tariff remission on rails. The land grants were by far the most
valuable. By one account, the federal government gave 158 million acres of land to the railroads,
an area almost the size of Texas. Even after the forfeiture of almost 42 million acres due to fail-
ure to frilfill the grant conditions, the total area was still 15 percent larger than the state of Cali-
fornia. States, counties, and municipalities also aggressively sponsored railroad projects, includ-
ing state land grants to railroads of more than 50 million acres, and hundreds of millions of dol-
lars in direct subsidies and subscriptions of railroad stock.^

^ Cf Konvitz's work on war economies and the strategic bombing survey, which concluded that during World
War II, the abiUty of communities to survive serious disruptions to their basic infrastructure services often far ex-
ceeded mihtary planners' expectations Josef W. Konvitz, The Urban Millennium: The City-Building Process from
the Early Middle Ages to the Present (Carbondale: Southern Illinois University Press, 1985).
^ See David Haward Bain, Empire Express: Building the First Transcontinental Railroad (New York: Viking,
1999). for a discussion of the race for the transcontinental railroad and the importance of federal subsidies. For an
8 FLEXIBLE URBAN TRANSPORTATION

Explicit calculations of the economic returns from such investments played only a minor role
in decisions about supporting infrastructure. Rather, the benefits of infrastructure development
were taken for granted, and the policy debate revolved around how such expansion should be
capitalized and what roles government and the private sector should play. The Interstate
highway system, planned and constructed from the late 1930s until the 1980s, may have been
the last of these great government public works projects.

Beginning with the Flood Control Act of 1936, decisions about publicly financed projects be-
gan to reflect examination of the relative benefits and costs of a project in recognifion of com-
peting demands for limited resources. Benefits were enumerated in terms of time savings and
cost reductions. With the development of benefit-cost analysis came refinements to assess the
environmental impacts of projects and the "external" costs that infrastructure users imposed on
society in the form of, for example, noise and tailpipe emissions.^

In the 1980s, economists began to examine the linkage between transportation infrastructure
investment and the productivity of private investment at the level of the individual firm. Good
highway access, for example, can allow a company to use just-in-time inventory management,
whereby production inputs arrive at the factory "just in time" to be used on the production line
rather than tying up capital while being stored in costly warehouses.'^

A burst of research into infrastructure investment impacts began in 1989 with a series of papers
by Aschauer.'' This body of research paints a complicated portrait. It provides no clear indica-
tion of whether the U.S. has been spending too much or too little on infrastructure in general or
highways and transit in particular. Aschauer's 1994 review essay on the topic called not for
more investment, but for institutional structures that would permit state and local governments,
which own almost all infrastructure capital, to determine their own optimal levels of invest-
ment.'^

More recent work on this subject suggests that the returns from highway capital investment are
roughly comparable to the returns from investment in private capital, about 11 percent, al-
though the returns were much higher—on the order of 35 percent—during the 1950s and 1960s

older account, and acreage estimates, see S. E. Morison and H. S. Commager, The Growth of the American Re-
public, 1930, 4th ed. (New York: Oxford University Press, 1950), 11:112.
For a comprehensive discussion of costs for highway travel, see Delucchi, The Annualized Social Cost of Motor-
Vehicle Use in the United States, 1990-1991: Summary of Theory, Methods, Data and Results.
'" Richard R. Mudge, "Assessing Transport's Economic Impact: Approaches and Key Issues," paper presented at
the Transportation and Regional Economic Development, November 6-8, 1994, Airlie House, Warrenton, Vir-
ginia.
' David A. Aschauer, "Is Public Expenditure Productive?" Journal of Monetary Economics 23 (1989): 177-200;
David A. Aschauer, "Public Investment and Productivity Growth in the Group of Seven," Economic Perspectives
13, no. 5 (1989): 17-25; David A. Aschauer, "Does Public Capital Crowd Out Private Capital?" Journal of Mone-
tary Economics 24, no. 2 (1989): 171-88.
'^ Edward M. Gramlich, "Infrastructure Investment: A Review Essay," Journal of Economic Literature 32 (Sep-
tember 1994): 1176-96.
Transportation and the Economic Vitality of Communities 9

when the Interstate system was being built. These results suggest that highway investment is
about where it should be.^^

But that conclusion is subject to a number of important caveats. First, these estimates reflect
only benefits to producers of goods and services and exclude all benefits to consumers, in-
cluding timesavings and improved accessibility. While such benefits are real, they legitimately
fall outside the scope of the productivity measurement system.

Second, the data on highway capital stocks used to estimate the model is seriously deficient.
The model uses the book value of highway capital stock, which is its initial cost minus depre-
ciation. The preferred methods for measuring capital stock are either replacement value or
market value, the latter of which reflects the net present value of future services provided by
the asset in question. Also, the depreciation schedules used to estimate book value have not
been updated for decades.

Third, the model assumes that highway capital stocks are a good proxy for the services that
flow from highway investments. But, clearly, widening a congested highway section might
yield significantly different benefits than opening a new highway section that connects two
previously poorly connected points. The apparent drop in returns from highway investment
from the 1960s to the 1970s could either reflect a shift in investment from new construction to
widening and rehabilitation or a realization of diminishing returns from highway investment—
how much of each is an empirical question. ^"^

Whether shortages of transportation infrastructure investments are limiting productivity growth


thus remains a question that is difficult to answer. But the challenge of transportation infrastruc-
ture investment goes much further than simply increasing spending through existing institutions
and programs. For that will not improve productivity if it generates projects that are economi-
cally sound but impossible to build for political reasons, or are politically attractive but eco-
nomically unsound.

Structural Changes

Concurrent with the growing understanding of the relationship between infrastructure and
economic growth, U.S. society and its economy are experiencing important shifts. The indus-
trial mix has shifted away from heavy manufacturing towards services, which generate very dif-

'^ M. Ishaq Nadiri and Theofanis P. Mamuneas, Contribution of Highway Capital Infrastructure to Industry and
National Productivity Growth, Prepared for the U.S. Federal Highway Administration, Office of Policy Develop-
ment, Work Order No. BAT-94-008 (September 1996); M. Ishaq Nadiri and Theofanis P. Mamuneas, "Highway
Capital and Productivity Growth," in Economic Returns from Transportation Investment (Landsdowne, VA: Eno
Transportation Foundation, Inc., 1996), Appendix A. See also Marlon G. Boamet, "Highways and Economic Pro-
ductivity: Interpreting Recent Evidence," Journal of Planning Literature 11, no. 4 (May 1997): 476-86; Marlon G.
Boamet, "Infrastructure Services and the Productivity of Public Capital: The Case of Streets and Highways," Na-
tional Tax Journal 50, no. 1 (1997): 39-57; Marlon G. Boamet, "Road Infrastructure, Economic Productivity, and
the Need for Highway Finance Reform," Public Works Management and Policy 3, no. 4 (April 1999): 289-303.
'^ Arthur Jacoby, personal communication with the author.
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