Predictions

I have a lot of readers who come from a rationalist or Effective Altruism background, and some more who come from an economics background, and both communities put a lot of stock in the idea of correct predictions about current events. The idea is that scientists have to make testable predictions about the results of their experiments, and therefore social scientists must equally make predictions about the state of the world. It’s become relevant in the corona crisis and is also relevant to my and Eric Goldwyn’s construction cost project in a specific way, so I’d like to talk about the complexities of what it exactly means to get things right.

Recession

Consider the following prediction: the economy is overheated and a recession will come soon. It’s a vague prediction. One can fill in details to make it strictly testable – “the German economy will have >6% unemployment in 2 years” – but what exactly is the point of one detail or another?

The real answer is that different classes of people have different uses for the prediction of recession, and therefore depend on different details. The investor wants to sell stocks near the peak. The Nasdaq went from 2,200 at the beginning of 1999 to a peak of 5,100. To the investor, knowing that there was a bubble at the beginning of 1999 would not have been useful – cashing out then would have meant missing on a stock market doubling over the year. It would take until about the onset of the 2001 recession for the Nasdaq to fall below January 1999 levels. To the successful investor, it is critical to know the exact timing of the peak to maximize income, and in pursuit of that goal it’s fine to miss some recessions, let alone to miss other important details like the length of the recession and the unemployment rate.

In contrast with the investor, the skilled worker has different concerns, like unemployment. In that environment, knowing that there’s going to be a recession is useful even if the timing is vague – such a worker can save more money, delay major purchases, avoid quitting a stable salaried job to start a small business, and maybe shift to a more recession-proof job even if it means taking a pay cut. Knowing how deep the recession will be is important as well, and remains important knowledge even as the recession takes place – the worker needs to know how stressed to be about savings running out if there is prolonged unemployment. All of this is equally valuable to the prospective immigrant who needs to make a decision on whether to emigrate.

The investor-worker duality is especially important for economists, and to some extent to rationalists who try to follow popular economists. They have money to invest, and often work as advisors to finance firms that pay them for investor-relevant information. But they are also researchers, who can respond to an impending recession by acquiring recession-relevant skills, like studying the history of depressions and conducting empirical research about unemployment and anti-poverty interventions. These are such big research programs that the exact timing of the recession doesn’t really matter, whereas its depth and length matter. An economist who can answer questions like “what is the impact of unemployment programs on long-term welfare?” is useful in a general period of economic weakness even if the papers appear a year into the beginning of the recession.

Predictions and construction costs

Before we started our current project, I had been writing about construction costs here, in comments, and on social media going back to 2009-10. I had some theories over the years, of which some would be confirmed by additional data and others wouldn’t:

  • The theory that common law leads to higher costs, based on high costs across the US, Singapore, the UK, Australia, Canada, India, and Bangladesh. I no longer believe this theory holds up; in the developed world, important edge cases disagree with the theory, including Quebec (expensive) and Israel (about average), and moreover Canadian and Singaporean costs only exploded in the last 15 years.
  • The theory that costs are consistent across projects in the same country, especially the same city; I’m pretty sure I brought it up even in the early 2010s, when I was saying Chinese costs seemed pretty average to me, but the starkest formulation is from 2019. This has subsequently been confirmed when thanks to Yinan Yao our knowledge of Chinese costs grew from two lines in Shanghai to more than 5,000 kilometers’ worth of lines across all major Chinese cities.
  • The theory that costs in developing countries are higher in ex-colonies than in never-colonized countries (like China and Iran) and distantly-colonized ones (like all of Latin America). As stated, there are counterexamples: I will report on our ongoing research into Arab construction costs, thanks to Anan Maalouf, but so far this is indicating that costs in never-colonized Saudi Arabia are pretty high. Call it half a correct prediction because Saudi Arabia is atypical enough I would not lump it a priori with China, Turkey, Mexico, or Iran.

With all that said, I am not too worried if my theories aren’t all confirmed by finding additional data. The reason is that this is not an experimental science but an observational one with a small, finite amount of data, so it’s much more important to have coherent mechanisms that can lead to actionable changes than to be able to predict every country’s construction costs from partial data.

In this case, the mechanisms posited in the 1.5 theories that do not stand up to additional data seem useful. The colonial theory is that high cultural cringe levels and weak state capacity lead ex-colonies to privatize planning to first-world (or Chinese) consultants, who use methods that are not appropriate for local conditions. On account of that explanation, I kept saying ex ante that I refused to make a prediction regarding Thailand, because it was never colonized but also has much more cultural cringe than China and uses first-world consultants; Thai costs are higher than Chinese ones but lower than ex-colonial ones. Saudi Arabia is similar – for all its bluster about rejecting Western governance norms, it craves first-world acceptance and the trappings of modernity, and extensively uses contractors from more developed countries. So the upshot regarding the importance of domestic state capacity and methods tailored for local urban geography and wages remains useful.

Likewise, the high costs across the Anglosphere remain a useful fact. Even more useful is the history of Singapore and Canada, which only aligned with British and American costs starting in the 2000s. The cost explosion in Singapore, Montreal, Toronto, and to some extent Calgary and Vancouver is a recent event, in accessible English-speaking cities; Stephen Wickens just wrote a long report about the Canadian cost explosion, which is of value in teasing out what happened. Even better, the persistent low costs in Scandinavia, Southern Europe, and South Korea provide ready-made sanity checks in knowing what to look for.

Timing issues

In one sense, I made a critical error that poses a serious threat to the project: I got the timing of the recession wrong. When applying for this grant throughout 2019, my assumption was that the American economy was overheated and would soon experience a demand-side recession, leading to stimulus – but that the contraction would be slow enough that the stimulus would come in 2021. With a jobs program announced in 2021, preliminary versions of our report would already be out, the full report with detailed case studies would be out later that year in time for agencies to request funding, and there would be enough time for agencies to implement our recommendations by the time of actual construction.

This may still happen, but the timeline is much less certain. People are talking about stimulus with infrastructure money now. I can promise a report with some actionable recommendations in 2021, but I can’t promise what costs I can promise, nor can I promise what investment to focus on. Our report centers on metro tunnels, but if there’s another push for high-speed rail then we’ll need to be able to adapt metro-based recommendations to a somewhat different context, in which high American costs may have different roots.

What’s more, based on what everyone knows in the United States, costs are so high there’s no point in planning for more. Maybe New York thinks it can finagle $40 billion in stimulus money; this can do a lot at Nordic costs, but unless New York thinks right now that this is possible, it won’t even try to plan more than a few lines like Second Avenue Subway Phase 2 and Gateway, each costing more than a full order of magnitude more than it would in Scandinavia or Southern Europe.

I am not that worried in the long run. There is ongoing investment in enough of the US for whatever we come up with to be relevant to at least some extent. And here too, a cost comparison with the cheaper parts of Europe would be instructive to many a German rail advocate or civil servant. I don’t expect to be in the situation of an investor who bet everything on a company that went bankrupt, just perhaps in that of one who missed a big stock market rally. Ultimately, don’t worry about me, worry about the virus this year and the unemployment rate of potentially the entire world in the next few years.

148 comments

  1. john

    Honestly, I your timing probably isn’t as far off as it seems. In this political climate, with a second wave probably coming soon in states that are hastily reopening without any adequate public-health measures in place, a hyperpartisan and dysfunctional government, and a massively consequential election around the corner, no big functional detailed infrastructure stimulus is likely to pass this year. Any big stimuli this year are likely to be focused first on saving existing businesses, hospitals/health care system, and state/local public services from collapse; next on boosting industrial capacity for needed supplies, unclogging supply chains, and some kind of workforce for things like contact tracing and maybe cleaning. And that’ll be after the second wave finally punctures *most* people’s quick recovery fantasies, and after Obstruction Mitch is done spitballing ideas from his wishlist to find out what concession(s) Democrats and states will cave to (i.e. end of May maybe, and split into multiple bills ground painfully through the Congressional sausage mill over the summer and fall.) Infrastructure might get worked into campaign promises (“Big, beautiful bill!!”), but an actual bill will likely go through sometime next year, if at all.

    • Herbert

      There’s still the possible curveball of one of the gerontocratic nominees catching Covid19 and dying before the election.

      I know the U.S. has had an election where a candidate after the results were in (1872) but to my knowledge none where a candidate died… Are there any publicly available contingency plans for such a case?

      • adirondacker12800

        You would have to delve into the election law of each state and bylaws of each party, in each state. Generally there is a cut off date when the paperwork has to be completed so the printers can print the ballots. Having a candidate on the ballot who is dead is not unusual. Keep in mind that elections for U.S. president are not direct elections. You are voting for electors who then cast a vote.
        https://en.wikipedia.org/wiki/Faithless_elector

          • adirondacker12800

            probably not because candidates die, get indicted, convicted, caught in bed with a live boy, dead girl and donkey etc. quite often. there are procedures in place. Most people won’t like them but there are procedures.

          • Herbert

            It has never happened for the presidency. And the U.S. system is the only one I know that doesn’t consider death or disgraceful resigning of the leader immediate grounds for reelection…

      • RossB

        I’m not a fan of videos, but here is one that explains it: https://fivethirtyeight.com/videos/what-happens-if-a-nominee-dies-before-the-general-election/

        Basically if it happens before the election, then it is up to the party. If it happens after Biden picks the V. P. nominee, it is likely that person will be the nominee. If it happens after people vote, but before the electoral college votes, it could get weird, but I think the electoral college will still just vote for the V. P., even if they are breaking local laws (I would expect a pardon by the president or a governor). If Biden dies after the electoral college meets, then the V. P. becomes president (20th amendment).

  2. SB

    Regarding high construction costs in Saudi Arabia and Thailand:
    Saudi Arabia is terribly run but the money isn’t a problem as long as price of oil is above zero (wait a second…)
    Thailand’s high cost might be due to constant military coups.

    • Herbert

      It’s also bad for developing a good science minded civil service if there’s a purity police punishing wrongthink…

      • Eric

        Many countries have a “purity police punishing wrongthink”. China, Thailand, Iran, Turkey come to mind without particularly high construction costs. Even Western countries might qualify if you include blatantly racist statements as “wrongthink”… which is obviously different from Saudi prohibitions, but does show that your statement needs reformulation.

        • Herbert

          After the death of Mao, one could get away with a surprising amount of critical thought in China.

          Iran’s theocratic regime is notably NOT supported by the population, meanwhile the people of Saudi Arabia are often cited as a big hindrance to secularizing reforms…

          Turkey still has active and legal opposition parties even tho the suppression of the HDP in the Kurdish areas is taking on dictatorial elements, but then so was the coup d’etat that forced poison water on Flint…

  3. michaelrjames

    Of all the cases I would be most interested in understanding why it happened in Singapore. With such tight central control, it seems they lost control, or is it that they are so globalised that they could not prevent this infection by western practice?
    I speculate about the timing representing Singapore getting seriously rich (Crazy Rich Asians) and political and commercial power being passed to the next generation who grew up rather oblivious to the struggle which all the old guard had personally experienced, and as a result TNG are both more entitled, more personally greedy and less concerned with general welfare.
    ……………

    in never-colonized countries (like China and Iran) and distantly-colonized ones (like all of Latin America)

    Maybe, but the case of China is a bit singular, in that some significant bits were colonised via the Treaty Ports, plus Hong Kong and Macau. Shanghai simply wouldn’t exist without the British, and Shanghai has been at the heart of most momentous change in China from the communists to post-Mao industrialisation. And in a reinforcing loop: Shanghaiese industrialists fled to Hong Kong after the revolution then later returned with their HK expertise, global knowledge in banking, finance etc.
    But ok, I guess you are saying that, while China may have been totally humiliated by the Treat Ports they were never subjugated in the way countries were by the British empire, and saw it as a mere blip in their own self-determined history.

    • Benjamin Turon

      I don’t think that the Communist Party of China sees British Imperialism as a “mere blip” of history. If not for the Japanese Invasion of the 1930-40s, the British would be the go-to villains of Chinese cinema and TV. As it is, there are plenty of Chinese propagandist pop-culture on the Opium Wars, even Jackie Chan martial arts films. That is why in part the leaders in Beijing are so incensed by the young people of Hong Kong waving the Union Jack at protests. I’ve even seen BBC TV interviews where British journalists seem more ashamed of past colonialism of China then citizens of Hong Kong.

      • Benjamin Turon

        British and American investment in China was at least as great as that in Latin America, that is why the UK, US, and Japan went to war over China in December 1941. The China Lobby in the 1930s was as big as the Israeli Lobby is today in Washington, supported by Wall Street, Christian Churches, and Henry Luce’s Time-Life media empire. They pushed for a embargo and sanctions to force Japan out of China, and the result was instead Pearl Harbor.

      • michaelrjames

        By blip, I mean it almost literally. If you make a plot of the glorious 5,000 years of Chinese history the British/Treaty Ports period will be barely noticeable. I certainly don’t think they will ever forget the humiliation nevertheless there is a certain mutual respect arising from both the marvel of Hong Kong and then later the marvel of Shanghai. Both of these were teensy villages prior to Brit takeover.
        But I agree about HK and those flags: what are the protestors thinking? Especially as the Brits actually abandoned them (while relocating the most important thing HSBC hq to London).

        • Benjamin Turon

          Actually MichaelRJames, what they on the streets of Hong Kong are thinking is that they want to live in a society that has the rule of law, representative democracy, free speech, and a free press — where elected leaders can be held to account for their failures. Right now to them, the Peoples Republic of China is the colonial power imposing its will upon them. I always thought that Beijing would do better with a policy of benign neglect, which in some ways seemed to have been the policy of the Westminster towards Hong Kong. I’m glad and inspired to see the protesters fight for what we in the Western Democracies thoughtlessly enjoy, wishing that we in Britain or the United States could live up today to their aspirations. Its a bit like the Wizard of Oz, with Dorthy Wong finding Donald Trump or Boris Johnson behind the curtain in the Emerald City. Still, I rather live under their incompetent governance then the iron-fisted rule Xi Jinping. If I lived in Hong Kong, being a selfish coward that is were I’d be decamping to, which is why I respect and admire immigrates, it takes a lot of courage and fortitude to leave your homeland. Well, for them there is Canada and New Zealand!

          • michaelrjames

            Yes, I think we all know all that. It’s just a paradox that their recourse is the flag of a deeply-flawed democracy distinctly on its downers, and one that only ever looked at Hong Kong as either a nuisance, consuming HM resources, or a source of pillage. It is indeed an absolute marvel that benign neglect allowed such a thing to flower. The protestors are showing vastly more initiative and gusto than the appalling Brexit farago or covid farago. Indeed when I see the HK protestors in their struggles it mists me up a bit, and I think I’ve written so on this very blog.

          • Herbert

            It’s a popular tactic throughout history that at the very least a splinter faction uses something applied to them as an insult with pride. Look at the Geusen, the Levellers or the Diggers…

            I think it is eminently likely that CPCh propaganda painted the protest movement as “Imperialist British puppets” or some such and some among them embraced that moniker rather than rejecting it…

    • yuuka

      I must presume it’s because of a few changes in policy in the past 15 years.

      Firstly, I understand there’s been significant pressure to save land, because land = money. Even though all land starts out as government-owned, I have to assume that there’s some sort of internal accounting between the Singapore Land Authority and the LTA when it comes to “acquiring” land for development projects. This may also explain the extensive use of deep mining, whereby large cut and cover structures would increase land acquisition cost incurred by the LTA, as well as reducing the attractiveness of said land parcel to private developers when they’re eventually done with it.

      Secondly, the Circle Line stages 2-5 were built differently from the rest of the system, with stations built somewhat on the cheap and largely sharing similar designs, as well as being built under massive contracts consisting of a few km of tunnel and a few stations, much like the initial MRT development.

      Recent developments also go back to the NEL practice of having “unique” stations and small work packages consisting of a single station and surrounding tunnels, which would also add to project management costs and prevent economics of scale from happening. The NEL cost $4.6 billion in 2003 dollars, so adjusting for inflation I don’t see Alon being very happy with that either.

      Thirdly, highly conservative project budgeting. Recently I seem to recall them throwing around a $25 billion price tag for TEL, which (IIRC) is a drop from the previously-budgeted $35 billion or so. I have to assume that there were a lot of contingency funds that weren’t used and subsequently returned to government coffers.

      • michaelrjames

        I have to assume that there were a lot of contingency funds that weren’t used and subsequently returned to government coffers.

        In Singapore I don’t know but the whole point of contingency funds in the Anglosphere is to merely pump up the cost and ensure those funds are available to be used/transferred to the various parasites running the project. And then some. I believe it is high time for the nonsense to stop and for there to be zero contingency funds. Big projects always overrun but let’s at least make everyone involved, the companies, consultants and not least the politicians in charge (who change during a project). The thing about politicians is that they consider the contingency funds a “sunk cost” so don’t fight about their use. Every dollar beyond the bones of the construction should be fought against. The absurd increase in cost of London CrossRail, even as it is almost finished, is in contingency funds! Bloody ridiculous and a mere fig-leaf to funnel yet more funds, for nothing really, to the usual suspects.
        Contingency funds is the equivalent of “curing obesity by loosening the trouser belt”.

        • michaelrjames

          Arrggh. Meant to write:
          let’s at least make everyone involved, the companies, consultants and not least the politicians in charge (who change during a project) … sweat for every extra dollar they claim the project needs.

        • adirondacker12800

          think of all the juicy work for people who type things for a living that would come out of it !

    • Herbert

      Latin America (with the exception of islands) gained independence from Spain before railroads existed. This led to many negative outcomes, but I don’t know whether it also had positive consequences.

      That said, Spanish colonial overlords were probably the worst lot a global south region could get… At least the French and the British had railroads built…

    • Alon Levy

      Sure, and Iran was briefly occupied by Britain and Russia at the end of WW2, and Argentina was economically a British colony, and Turkey famously did its modern nation- and state-building in such an atmosphere of Westernization that Kemal’s name because a byword for this kind of political cringe. But like China, they retained domestic state-building institutions (as did the UAE and Qatar, which were British protectorates), whereas the ex-colonies started from the imperial colonial laws and civil service regimes. It’s a huge difference.

  4. Benjamin Turon

    Perhaps the high costs in America and Britain, which spread to other Anglo countries is due to the employment of big multi-national consulting firms like WSP, which is a Canadian firm, perhaps explaining increasing costs there. Its like something out of “Lord of the Rings”, with darkness falling over the Kingdoms of (native English speaking) Man. Time to flee to NZ. After the CaHSRA debacle, WSP looks like the head vampire parasitic leeches of infrastructure consulting firms..

    As for China and Iran never being colonized, there might be a lot of disagreement on that assertion from the people of those nations. Perhaps never “fully or effectively colonized” might be more appropriate. But Shanghai became a pretty British looking city by the 20th Century, with missionaries, gunboats, and Standard Oil everywhere till Mao conquered the Mainland.

    Then again, back during the Age of Imperialism the British and Americans built infrastructure very well, so perhaps learning from your Western overlords was not an issue, back then. Interestingly at the time the Americans built at a cheaper cost than the British, as you can see from the railroads in Hokkaido compare to the railways in Honshu. The American consultant saved the Japanese coal mining company a lot of money by building a “good enough” bare bones American railroad that got the job done effectively; with American locomotive that broke down more often but could be readily repaired by Japanese labor with minimum equipment, yet imported British steel rails because they were cheaper than US rails. His competence and honesty got him a statue and a long-term relationship has Japanese Railway’s “Man in America” for importing railway equipment and material. .

    The Japanese adopted the best practices from both in creating there excellent system as they arguably surpassed both the UK and USA. You might disagree with freight, but that mostly in Japan is an issue of geography, and today US railroads import heavy Japanese rails for their sections of track seeing the heaviest wear. I wish the Japanese would colonize of America. Perhaps Texas Central will be a good start.

    • Benjamin Turon

      On the issue of the Anglo-Sphere’s problem of infrastructure project management, there seems to be a parallel in military procurement of major weapon systems and platforms. For now decades there as been much coverage of Pentagon projects that go way over budget while failing to perform, and while the F-35 Joint Strike Fighter is the posterchild, the US Navy’s procurement of new warships is likely a even bigger SNAFU.

      The current issue of the US Naval Institute’s ‘Proceedings’ has an essay by Commander Jim Moses, USN (Retired) that reads like a list of complaints from a state DOT worker. The basic gist is that the Navy historically designed its own ships, but after the end of the Cold War that function was mostly outsourced to private contractors. On top of that the Navy ended the practice of building few prototype ships, before embarking on a mass order.

      The result has been the Navy buying large numbers of awfully expensive ships – specifically the Littoral Combat Ships and Zumwalt destroyers – that are full of defects while failing at their intended mission. Another result has been the navy building more Arleigh Burke destroyers to fill in the gaps, a ship designed by the Navy itself in the 1970-80s.

      Commander Moses recommends that the Navy Department bring back in-house ship design, while nurturing career design and engineering experts within the sea service. The need to be rapidly promoted in rank to avoid being tossed out has led in the Navy to a lack of expertise and institutional knowledge, since under current rules a Lieutenant Commander who spends 20 years as a design engineer is not possible, as it once was in the various bureaus. If your naval career is not moving up the ladder, you get thrown off it.

      This in in contrast to the past were in the Navy people remained in the same job for decades – think Admiral Rickover of atomic submarine fame. It’s not unusual decades ago to see one commanding officer to see a project through from conception to completion, now its like a game of musical chairs, with everyone pointing to their predecessor or successor for the blame of why the project failed and/or cost too much.

      On a side note, both the US Navy and the Royal Navy use to build their own ships in their own naval dock yards. Overall, the naval dockyards in the UK from the Victorian Era through WWII built warships of identical design faster and cheaper than their private counterparts. Private yards played an important role in ship building – the Royal Navy often splitting orders between navy and private yards – but with a “public option” there was private-public competition in building ships to “public designs”, and perhaps that help keep their costs down, since their ships couldn’t cost far more than those built in government yards.

      As an amateur student of railway history there seems to be parallels between building a railway and building a ship. Right now, the United States is unbelievably bad at doing both, and I think there are common reasons, including the outsourced privatization of design functions that was done for decades by in-house career experts within government agencies. as I said before, state DOT employees complain about outsourcing all the time. The explosion of outsourcing in the federal government has led to enormous build up of wealthy private firms around DC, but it obviously doesn’t seem to have led to more effective government.

      They Don’t Build ’Em Like That Anymore: The ability to prototype was once possible because the Navy had greater “control” over shipbuilding decisions and therefore its warfighting capability.
      https://www.usni.org/magazines/proceedings/2020/may/they-dont-build-em-anymore

      • john

        Oh dear God, I’d forgotten about the Zumwalt…

        The Army also closed down its last in-house weapons-system-design operations in the mid-1990s, and switched entirely to contractors.

        And hoo, boy, DoD’s contractor-parasite complex makes American transit’s problem look puny. There was a comprehensive internal review of U.S. military procurement and development systems (focussed on cost and effectiveness) during the Obama years, which didn’t really make news until it was completed around…2015ish? And that’s because the very official who had authorized it and promoted it for years suddenly cancelled plans to publish it, and actually took the extra step of getting the entire report and all ancillary materials, and all documents related to it, classified at the highest level he could get, with a lot of huffing and puffing when questioned by the press that there were “flaws” and “errors” and sensitive information. Rumors flew at the time that something like 25% of all procurement and development spending (or was it 25% of the entire DoD budget?) was waste, errors, and profiteering, rumors that were strenuously denied by that official.

        • Brendan

          Seems familiar to reports I’ve heard from the Canadian Federal Public Service, where, say, the Harper Era cuts lead senior, knowledgeable civil servants to leave and then when Trudeau came back in and reflated the government many of these people had to be brought in as private consultants at enormous expense

          • Herbert

            In Germany there are many reports that “the Army is ill equipped and their stuff is falling apart”. I think tho this is deliberately “leaked” by interested parts to raise military spending or make such a raise more palatable. Germany is not spending the 3% of GDP that some NATO thing seems to mandate and if you asked me, Germany SHOULD spend 0 on its military… And that is not all that uncommon a thought in Germany…

          • Brendan Dawe

            I would not be surprised, but I don’t have direct reports on that topic. Gordon Campbell when he was premier was a huge enthusiast for the sort of technocratic cleverness that PPP was perceived as in the oughts though.

      • michaelrjames

        Commander Moses recommends that the Navy Department bring back in-house ship design, while nurturing career design and engineering experts within the sea service.

        Absolutely, and exactly what I and others have been saying about big public transit projects (in the Anglosphere).
        Like many of its “allies” Australia got bullied into buying about $80bn worth of F35s. Then by a quirk of an age of indecision (by Labor as well as Cons) and of all things, under Tony Abbott, an actual independent enquiry led us to a deal with the French (against Japan & German tenders) for a non-nuclear submarine, which technically seems to have been the correct decision. It is to be a Barracuda redesigned to be diesel powered, versus its nuclear original. Lifetime costs keep rising until some now claim it will be $200bn (they will be fitted with US armaments & navionics to be operationally compliant with our Indo-Pacific big brother). The original concept was quite good: (re)build a sub building operation here (in South Australia, historic home of naval shipbuilding) but it seems the French have other concepts and want to do most of it on their home soil and just have an assembly plant here!

        It is a reflection of our deep inadequacy and failure of nerve, to be so dependent on others for such things. Some pollies and defence geeks believe interoperability (ie. total dependence) with the US is paramount. Some of us would say the exact opposite (and this was before Trump, that just proves our point). Everything, simply everything, is outsourced including often the actual decision making (which is why the sub decision was so odd). The weird thing is that the current-gen of subs, Collins class (itself an upsized Swedish model IIRC, fair bit in the Jap subs too), went thru the usual agonising build and then retrofitting when stuff didn’t work as advertised. It is in Oz defence lore! But in the end the Collins has been rated very good by Australian Naval types (and American navy who like its quietness, something unachievable by their monstrous nuclear subs) yet the pollies cannot come to terms with any of this.

        Because it is obvious what should have happened–decades ago re indecision about the next new sub–is that they should have done a major new model based on the Collins and everything we had learned doing it, ie. in-house. Of course the indecision has led to a partial loss of this expertise but if they are spending $90bn (lifetime $200bn) on the French option … that buys an awful lot of rebuilding; plus it could be done to create a “permanent build” into the future. Into this confusion are the types who insist we should simply lease a bunch of Virginia-class nuclear-powered subs at a claimed fraction of Barracudas’ cost and overcome the lack of a home nuclear capability by having them serviced by the US (true that their nuclear generators never need refueling but must need servicing from time to time). We would become even more just a deputy-sheriff to the US.

        Right now, possibly under cover of covid-19 distraction, they are trying to get the French contract cancelled. (They would probably do it if any alternative was obvious, other than home-build which is the last thing to occur to a Conservative Australian government who are the most significant reserve of cultural cringe remaining.) What they should do is play ultimate hard-ball with the French and propose a genuine tech transfer to Oz along with a role for the French in future builds and in fact expanded co-operation in Indo-Pacific affairs. As usual–in the Anglosphere–leadership is utterly lacking.

    • Alon Levy

      Japan is actually an excellent example of growth in a never-colonized country. Meiji Japan sent students to various Western countries to train as technical experts so that they could adapt British, German, and American industrial innovation to the Japanese context. This was implemented by Japanese corporations using Japanese managerial techniques, culminating in the postwar salaryman system.

      Contrast this with what’s going on in India: India is inviting foreign corporations from much richer countries, namely Japan, to come over and oversee rail construction. The design is done by Japanese engineers, and the high-speed rail system specifically is a turnkey Shinkansen, not even modified for the wider Indian loading gauge. Most metros and the high-speed rail project run on standard gauge rather than broad gauge because appearing Western is more important than compatibility with the mainline rail network. Would Indian students who trained in Japan as rail engineers come to the same conclusion? Probably not – they’d see how crucial metro-commuter rail compatibility is to the functioning of an efficient rapid transit system, and they might well see the Shinkansen not as “3.36-meter wide trains with 5-abreast seating” but as “noticeably wider trains than the legacy ones,” the latter arguing in favor of 3.66-meter wide trains with 6-abreast seating like the Indian suburban trains.

      • Herbert

        Interestingly enough many countries tried to copy Meiji Japan and badly failed for one reason or another.

        Before there was Islamism, there were several Arab led attempts to “learn from the west” which all failed one way or the other…

        • Alon Levy

          Yeah, Egypt was trying to modernize even before Japan. However, unlike mid-19c Japan, it was a low-wage, low-literacy country, so starting up a domestic industrial revolution was much harder. Lacking enough surplus to finance industrialization, it ended up borrowing money on the international markets, and when it couldn’t pay, the British gunboats arrived.

          • Lee Ratner

            Japan also benefited from the fact that Emperor Meiji was really just a ceremonial monarch for the most part despite all the power he had on paper. The real policy making work was done by a highly motivated and unusually highly talented clique of ex-Samurai and Court Nobility. Egypt was really ruled by the Mohammed Ali dynasty and nearly of all them came to the thrones as adult men, so Egypt’s fortunes depended a lot on the ability of whoever the Khedive was at the time. Japan had more popular, 30 million compared to 4 million people in Egypt, and around a third of Japanese were literate when Meiji started. Japan’s geography, archipelago, made it a lot harder than Egypt’s geography of a straight line down the Nile river.

        • Lee Ratner

          The Ottoman Empire also attempted to modernize with some but not a lot of success. Thailand managed to remain free of colonial control, mainly by giving away a lot of non-Thai occupied territory they held, but due to a low population and big land area became a nation of small-holding peasant farmers rather than an industrialized nation like Japan. Ethiopia stayed free for the most part but didn’t really modernize to the extent that Japan did. Korea and Vietnams’ attempts at modernizations did not work out for a variety of reasons.

      • Tonami Playman

        One difference is that except for the Turnkey Shinkansen, most of the foreign corporations than are involved in the design and construction of different portions of metro systems in India are manned by Indians in those corporations. Japan might have benefited from the fact that the proliferation of maximum profit extraction of contractor from state was not as prevalent when the Japanese were absorbing expertise. What we have in India’s case is a lot of Indians in these foreign corporations are absorbing the profit extraction status quo that is more common in recent times.

        The head of Delhi metro was adamant about building the metro with 750V DC and standard gauge from the get go if not for the pressure from Indian Railways for compatibility with it’s mainline hence the current setup of 25KV AC electrification and broad gauge for the first 3 lines. Once Indian Railways influence was reduced, he switched back to standard gauge but kept the 25KV AC electrification.

        Other Indian Cities adopted Delhi’s 25KV AC electrification except for Kolkata, Bengaluru and Kochi, but they went with Standard gauge track layouts. Kolkata is a big mess due incompetence from Indian Railways which runs it, the first line was Broad gauge( although it runs narrow 2.9m wide trains on it), but the more important East-West line which would have been perfect for through running commuter trains is now being built as standard gauge running 3.2m wide trains. The local turf battles between Indian Railways and the municipalities is also a contributor to poor and expensive decisions.

        For the Mumbai to Ahmedabad High speed rail Indian Railways just wants to get it built and are not requesting any modifications from Japan since Japan has a track record and what not. It also has fears of track pollution from non HSR trains if the network was compatible with the current mainlines. Using standard gauge ensures full segregation. Not a wise choice if you ask me, but that’s what Indian Railways wants.

        • Herbert

          In the “why can’t Germany be like other countries” literature out there, Japan is often pointed to as a shining beacon because their hsr is segregated from freight and local trains…

        • yuuka

          If the regular complaints about BART using Indian gauge hold any water here, perhaps the use of standard gauge tracks for the metros allows for lower systems acquisition costs.

          Then again, in Japan you have Keio and the Toei Shinjuku Line literally being the only users of 1372mm gauge in the world, and their rolling stock acquisition costs aren’t that off the wall…

          • Tonami Playman

            Going by rolling stock prices here, here, here, and here

            There’s no price difference between the broad gauge cars built by the Mitsubishi-BEML JV and the standard gauge cars built by Hyundai ROTEM-BEML JV. Though there’s a slight premium for the broad gauge Bombardier Movia units.

            BART could have easily piggy backed off of Delhi’s Bombardier broad gauge order or if they felt a metro car designed for India was below them, then the Bombardier Movias for Toronto metro built with broad gauge bogies instead of Toronto’s standard gauge ones. Both the Delhi and Toronto Movias have four door longitudinal seating configuration for maximum passenger capacity, but BART decided a custom built option from Bombardier was best for them with space wasting origami seating and only 3 doors.

            The only worthy complaint for BART’s use of Indian gauge is the high cost of extensions. The cost of the metro cars is not a worthy excuse. All the major manufacturers design their vehicles to be modular and can be mixed and matched with any track gauge bogie.

            Delhi metro also made the excuse of lower procurement costs as one of the reasons for switching to standard gauge after the first phase, but that excuse does not hold water looking at what the costs are today. I can buy their other excuse of standard gauge allowing for tighter turning radius hence saving on construction and land acquisition costs compared to broad gauge.

          • yuuka

            >Both the Delhi and Toronto Movias have four door longitudinal seating configuration for maximum passenger capacity, but BART decided a custom built option from Bombardier was best for them with space wasting origami seating and only 3 doors.

            I suspect this may be more due to a restricted loading gauge, given the hexagon shape of both the original trains and the new Bombardier ones. So if you’ve got to redesign the body anyway might as well just build it to the spec you already have – 2 of the 3 door cars are aligned the same as the current 2 door cars.

            They could arguably have done the same with Crossrail and all-longitudinal seating, but it’s probably unpopular owing to longer trip lengths on BART…

          • Tonami Playman

            I was not aware of the unique loading gauge. Then it suggests that the high cost of rolling stock has more to do with this than the use of Indian gauge.

            In regards to the seating. The argument for seating has always been a weak one. Looking at the seat plan of the original cars, they initially had 56 seats per car in a transverse arrangement which were later reduced to 48 seats to increase standing capacity and reduce crowding. Looking at the newer fleet, they have 52 seats in the mixed arrangement.

            Now compare to the E235 series which has 51 seats in a longitudinal arrangement while having 4 doors. a standard arrangement throughout most of the rolling stock in the Kanto region for metro and commuter cars. The Kanto region rolling stock with longitudinal seating and 4 doors only loose 1 seat per car to BART’s new fleet while having more standing room. And compared to BART’s old fleet, it only looses 5 seats per car in the original configuration and actually has 3 more seats in the updated configuration.

            In regards to the door location. None of the stations have platform screen doors yet, so it’s not much of a disruption switching to different door locations. Once the fleet is replaced, they can install the PSDs to the new 4 door format.

          • Herbert

            For what it’s worth “we can build tighter curves, making it cheaper” was historically a main reason to build narrow gauge lines (to this day, the German word “Schmalspur” is sometimes used as a prefix to denote something inferior or minor). Of course there were also regulatory issues. Many German states did not allow for standard gauge lines to be built to anything except mainline standards…

      • df1982

        Is metro-commuter rail compatibility crucial to the functioning of an efficient rapid transit system? Most of the cities I’m familiar with (London, Paris, New York, Berlin, etc.) don’t have it, and don’t seem to be overly hamstrung by this. On the contrary, it can help in keeping a clean demarcation between different lines serving different functions, rather than succumbing to the temptation to start interlining everything. It can also keep construction costs down by not having to build underground lines to mainline standards (so smaller tunnels, shorter station platforms and so on).

        HSR is a different kettle of fish and should be compatible with legacy mainline.

        • Alon Levy

          What? All the cities you’ve named have vast regional rail networks, and in Paris and Berlin those networks have almost as much ridership as the metro system. In London the regional rail network is somewhat weaker (but there’s track-sharing between some regional lines and the Underground), but this is locally viewed as a drag on regional connectivity, leading to a lot of money spent on Crossrail. In New York the regional rail network is even weaker, treated as something different from urban rail, and this is a huge drag on suburban transit usage.

          • fjod

            These cities all have regional rail, but it’s almost entirely segregated from their metro systems and (at least in London and Paris) you can’t run regional trains in metro/tube tunnels. Just to take one example of incompatibility, in Paris the metro runs on the right and regional rail on the left. So they might be the same gauge, but they’re not really ‘compatible’ with one another in any meaningful sense – at least not in the same way you’d see in Tokyo for example.

          • Alon Levy

            First, in London there is some track sharing between regional rail and the Bakerloo line, and there used to be mainline trains on the Metropolitan line.

            And second, Paris and Berlin have separate systems for the Métro/U-Bahn and the RER/S-Bahn, but the RER and S-Bahn are functionally urban rapid transit that extends deeper into suburbia and makes fewer stops. I’d take S-Bahn more than the U-Bahn where I lived until 3 weeks ago even though I almost never went outside the Ring, let alone outside the city, just because it was more convenient for the urban trips I was taking.

          • df1982

            But they’re not interoperable and don’t share tracks, with the exception of a few segments in London (and these precisely cause operational problems for the Underground). They might have the same track gauge but not the same loading gauge. Berlin takes it a step further and has a three-tier network, with tracks generally segregated from each other (and in addition the U-Bahn has two loading gauges, Kleinprofil and Großprofil). Yet far from this being a problem for Berlin it encourages adhering to the principle of separation of uses, and avoiding having intercity trains run along S-Bahn tracks, for instance. Sure, S-Bahn serves certain metro-style trips well, but this is mostly irrelevant to the question of interoperability.

          • Alon Levy

            There are no intercity trains along S-Bahn tracks, no. Nor are there intercity trains on Tokyo commuter rail tracks, or (I think) on Seoul subway tracks (which include commuter lines).

            The interoperability issue is a problem and not a boon. Paris would’ve extended M1 to the suburbs if it could; it instead had to build the RER at great expense. And in Berlin, there’s some duplication in the western outer neighborhoods, a legacy of when the S-Bahn was operated by the East while most of the U-Bahn was operated by the West.

          • Herbert

            The most absurd of those “parallel lines” is U8 which never quite got to Märkisches Viertel but does parallel an S-Bahn line run by the “evil east”…

          • Andrew in Ezo

            @Alon- re. intercity trains on Tokyo commuter tracks, there are in fact a few JR East intercity services left that do use the suburban network in Tokyo, though this practice is typically facilitated by quad-tracking the mainline, with a pair of tracks reserved for local all stops services, and the other pair for rapid suburban services and the limited express (intercity) services. One prominent example is the Joban Line between Ayase and Toride- quad tracked ~50 years ago, the local tracks handle approx.14 tph on the AM peak (these trains interline with the Metro Chiyoda Line), and the express tracks 18 tph AM peak, plus a 2 tph (all day) intercity service- these trains don’t interline but rather continue on JR-E tracks to Ueno Station or (via the Ueno-Tokyo LIne) Shinagawa Station.

          • threestationsquare

            London is actually one of the bigger users of mainline-metro compatibility; in addition to Bakerloo from Queens Park to Harrow & Wealdstone, the Metropolitan shares tracks with mainline trains between Harrow-on-the-Hill and Amersham, and the District shares mainline tracks between Gunnersby and Richmond. Last decade the East London Line was upgraded to permit mainline trains at significant expense, and Crossrail is of course very deliberately mainline-compatible.

            (Berlin also still has a tiny bit of S-Bahn/RegionalBahn track-sharing at Birkenwerder.)

            Japenese cities of course make a lot of use of mainline-metro compatibility (particularly indirectly; metro trains share tracks or thru-run with inner-suburban trains which elsewhere share tracks with outer suburban trains which elsewhere share tracks with regional/rural trains and freight). Seoul and Hong Kong also do this a bit, as do Australian and British cities. But elsewhere I think it’s pretty rare? In addition to Paris and NYC, major/high-ridership transit cities with absolutely zero track sharing between their urban core metro lines and anything mainline include Beijing, Shanghai and all other Chinese systems, Moscow and all other Russian systems, São Paulo, Mexico City, Cairo, Singapore, Istanbul, Delhi, Madrid, Taipei, Tehran, Buenos Aires, Santiago, Milan, Munich, Barcelona, Vienna, Stockholm, Hamburg… many of these cities also have frequent thru-running commuter trains, which are clearly valuable in general, but that’s a different question from compatibility with the most local metro lines.

        • adirondacker12800

          the subway is compatible enough with the LIRR that the subway uses the LIRR tracks for speed tests. When you have 8 tracks of demand that it’s segregated into two sets of four tracks isn’t very important.

          • GojiMet86

            Just going to point out that those tests were done in the mid-70s. If there had been more open-mindedness in those days, maybe the division between the two today wouldn’t exist. Instead any subway rolling stock is prevented from running on the LIRR.

          • adirondacker12800

            Both sets of four tracks are too busy to host any other traffic. It’s awful the way actual passengers screw up the crayon scrawls.

          • Alon Levy

            That’s not actually true, the LIRR trains have very low crowding levels by subway standards. Long Islanders just feel entitled to a seat.

          • adirondacker12800

            I don’t know how many times I got to Woodside on one ticket because it was so crowded they could get through the car. It requires ignoring a few billion dollars worth of East Side Access and Penn Station access.

          • df1982

            What stopped Paris from extending the M1 was stop-spacing (ca. 500m), not whether the line was compatible with main lines. And while setting up the RER cost more up-front, it has given the city an almost paradigmatic S-Bahn + U-Bahn network, which much better serves the needs of the metropolitan area as a whole. The messier situation in London has left them several decades behind Paris in this regard. I find your insistence on metro/commuter rail interoperability strange, given that you generally promote de-interlining. There are significant operational and customer benefits to keeping the two systems physically independent (while organisationally linked through shared ticketing, easy interchange, etc.).

          • michaelrjames

            I wrote a response to Alon’s comment, but didn’t hit Post. Because I reckon he was somehow joking/trolling, or feasibly it was extremely late/early in some Berlin club …
            also the phrase “teaching your grandmother to suck eggs” comes to mind …
            .. but what the heck.
            ……………..
            M1 has a lot of closely spaced stations (26 in 16km) and is the busiest Metro line carrying 214m pa, so there was never the possibility of it going into the suburbs (in fact it does go into the suburbs at both ends–NeuillysS-LaDefense & St Mande-Vincennes–but you mean deep). RER-A is the busiest transit line and carries 300m pax pa, with its very long trains and duplex carriages, so clearly you are not seriously proposing M1 could shoulder much of that load: combined 500 million! Even if RER trains could use a Metro line & tunnels & stations, these two goals are quite incompatible: slow, frequent-stopping service in Paris versus fast, infrequent stopping over long distance (120km versus 16km!). A is so overloaded that they are building another RER line to relieve it.
            The only feasible means of making M1 serve deeper into the suburbs would be to completely transform into something like M14 which is a mini-RER: deep bored tunnel under everything else, much greater station spacing allowing higher speed etc.; and why M14 is being pushed deeper into the suburbs at both ends. Though M1 has adopted the trains and driverless operation of M14, they would never alter the stations it serves because it is a backbone of so much of Paris.
            ……………….

          • Herbert

            Between Nuremberg Hbf and Fürth Hbf there are three different one seat rides. One can take the U1 subway. One can take the S1 S-Bahn and one can take any number of local trains (RE&RB). The only difference between those three is stop pattern. The U-Bahn is standard gauge with third rail, the S-Bahn is standard gauge with catenary (15 kV 16,7 Hz) and the RE/RB trains likewise (tho some of them are diesel). In fact, the Bombardier Talent 2 is in use both for the S-Bahn and the RE…

        • Eric2

          Metro-commuter rail compatibility is only useful if you have interlining. To get maximum capacity out of lines, you want to minimize or eliminate interlining.

          The Bakerloo Line which Alon mentions above is reverse branching – even worse.

          It is true that NYC etc should run their regional rail more like a metro, but that does not require compatibility with the metro. As we see Paris runs its regional rail very like a metro without metro compatibility.

          As for costs: standard gauge etc may lead to savings due to more standard equipment. In India, this is a (weak) argument for incompatible metro and regional rail.

      • yuuka

        You might probably want to look up the Velaro RUS, which is the ICE3-type train adapted to a wider Russian track and loading gauge. Is that noticeably more expensive than the ICE3 with the modifications for the Russian environment? I know Taiwan also ran into some systems integration difficulties when they asked the Japanese to build a train to European standards as well. Although for their effort they got some practical benefit, such as shorter noses on the lead car compared to the very long Japanese design, which was possible because of a wider loading gauge even if the trains themselves were still Japan-sized.

        As for metro-commuter rail integration, a good compromise would be the approach I’ve seen in Russia, of having metros terminate at a commuter rail interchange and providing cross platform interchange there.

        • Alon Levy

          It’s a lot more expensive, yes, I believe around $9 million per car whereas a normal Velaro is $5 million. But this includes extensive winterization, plus what appears to be a general Russian rolling stock cost premium that isn’t seen in Finland.

        • Herbert

          Meanwhile Nuremberg does the opposite of that. There’s not a single U-Bahn S-Bahn interchange where the change of mode is anything close to seamless. Often it involves several sets of stairs for no good reason.

          To say nothing of U-Bahn Tram interchanges which were never planned to be “a thing” ™ because the tram was to be shut down once the U-Bahn was “done”…

      • Coridon Henshaw

        Here: https://www2.gov.bc.ca/gov/content/transportation/transportation-reports-and-reference/reports-studies/vancouver-island/island-rail

        Cost estimates are on PDF page 12 (document page 5). The estimate for rebuilding for commuter rail service over the 14km from Langford to Victoria is $600 million CAD to serve an expected ridership of 119 people daily. Just under half this estimate is reserved for contingency. Fixing the entire line for intercity passenger rail from Victoria to Nanaimo–a distance of around 100km–is estimated to cost another $730 million CAD.

        To my knowledge, these costs are overwhelmingly for reconstruction of infrastructure on a pre-existing right of way with only $44 million estimated for land acquisition costs (see pdf page 80). However, the terrain on the right of way is mountainous. Reconstruction will require extensive natural hazard mitigation measures and the major overhaul, or complete replacement, of multiple bridges.

        Given that public transit in BC is melting down due to pandemic-related ridership decline, it’s highly unlikely that repairs to the Vancouver Island route will be undertaken for the foreseeable future. Keeping Translink and BC Transit from going bankrupt are (or ought to be) far higher priorities for mobility spending in BC at present.

        • F-Line to Dudley

          Sandbagapalooza. The Canadian feds were subtly trading fist-pumps when that track went out-of-service and have spent a decade spanning the Harper and Trudeau Admins throwing out every excuse in the book to do nothing. Same shit with the Montreal-Gaspe and Winnipeg-Churchill trains. It took getting ensnared in thorny legalities with First Nations communities on those two routes to get any action on reinstatement. Those routes lasted so much longer than other cut VIA Rail branches because the subsidy was intertwined with old treaties calling for mandatory service. Churchill was only down for a year because a First Nations consortium bought most of the route depriving the feds of their best reason to keep stalling. Gaspe restoration is still tentatively planned, but ETA is open-ended by years and packed with way too much wiggle room to back out so is no sure thing. It’s already a farce of broken promises and empty rhetoric.

          Vancouver Island, unfortunately, is much easier to shit on and get away with it because it doesn’t nearly so much grab the third rail of tortured Canadian-First Nations relations and legal tripwires therein. Just invent a billion dollars in whole-cloth repair costs for reinstating the same barely usable service as before and the rails will be torn up for a bike path in no time flat.

          VIA Rail in 2020 is still run like Amtrak in 1977…and the government sees that as a feature not a bug.

          • Herbert

            Would an NDP led federal government change things substantially?

          • Brendan Dawe

            Herbert, the study was commissioned by the NDP government of British Columbia

  5. Eric

    Like most research, most of the benefit from your research will not come in a single year (any year), but rather spread out over decades.

    • Herbert

      I think the geological factor is not to be discounted.

      The Faroes are largely solid rock, right?

      • Coridon Henshaw

        Does that necessarily make the Faroe Islands a special case? A lot of places with extensive tunneling only need it because the local geology is solid rock. Consider Switzerland, Norway, the far western portions of the US and Canada, etc.

        • Herbert

          Switzerland and Norway are good at building tunnels.

          That includes the cost aspect.

          In the Anglosphere, it appears, politics is stronger than geology…

  6. df1982

    As I see it there are basically three modes of financing railway infrastructure, which in Western countries at least have existed in roughly chronological order (but with differing time frames in each country):

    1. funded by private capital for direct profit from the operations of the railway. As in Europe and North America in the 19th and early 20th centuries. Cost containment was motivated by the need to turn a buck, although this often meant lines were built to shoddy standards without any long-term perspective. Of course a lot of the time these lines turned out not to be profitable in any case and had to be taken over by the state or left to ruin, which led to:

    2. state funded and operated railways. The state oversees all aspects of construction and operation of the line, which was not expected to be profitable per se, but produce an overall benefit to the populace. This happened in both communist and social-democratic countries, and on a municipal level in the US as well. Cost containment varied and depended on how willing and able those in command were to act in the general interest (countervailing factors were gold-plating for prestige purposes, dysfunctional planning and good old corruption). But in the late 20th century this model tended to give way to:

    3. the neoliberal model. The state still finances construction since it is rare for a line to be profitable overall (in terms of operational profits being enough to cover the cost of capital expenditure), but it outsources construction, and often operations too, to private corporations. The latter see it as their prerogative to squeeze as much money out of the state as possible through cost overruns, and the state is caught over a barrel once it has committed to the project (since not completing it is more politically costly than adding a zero or two to the construction budget). The extent to which countries succumb to rampant construction inflation mirrors the extent to which states have been hollowed out both the economics and the ideology of neoliberalism: so the Nordic countries and Switzerland fare the best and the Anglosphere the worst, while the rest of Western Europe (Germany, France, Spain, Italy, the Low Countries) are somewhere in between.

    This schema admittedly only works for the West. China, Russia and post-colonial countries clearly have other patterns of development.

    • Herbert

      State built railways sometimes didn’t even have the goal of helping the populous or the economy but rather military aims.

      Having won the 1870/71 war largely on the strength of quick mobilization and quick troop deployment (in which railroads were essential) Prussia became obsessed with military railway timetables. There are several lines – some of them still extant, but many partly or wholly shut down – which have names like “Kanonenbahn” or even “NATO Bahn”. Many of them were built to high standards through sparsely populated areas…

      The first electric train to beat 200 km/h ran on the Jüteborg-Zossen military railway which was dismantled after the Versailles treaty…

      • R. W. Rynerson

        Another example of the Prussian concern for connectivity was the military railway connecting Wildpark (Potsdam) and Wustermark (on the Lehrter line). And, most famously the Berlin Stadtbahn. My understanding of this is that Prussian observers of the American Civil War learned from the Southern gauge-change and “intermodal” fiascos and the Northern hurried-creation of the U.S. Army Railroad Corps. (For today’s readers, under control of the Deutsche Reichsbahn the Potsdam line became the west side of the Outer Ring Bahn.)

    • Alon Levy

      This schema doesn’t work for the West either. Spanish costs are low across the board, and French costs are higher under the PPP model (LGV SEA) than under the directly state-built model (LGV Est phase 2), but the PPP premium looks like a factor of maybe 1.5, which is a lot less than the Anglosphere premium overall.

      • df1982

        Spain is an interesting case, although the fact that it was a fascist dictatorship until 1975 could be a factor here, in the sense that Spain saw an ascendant social-democracy at the same time as the Reagan/Thatcher model was becoming dominant elsewhere. And while it was keeping infrastructure costs low, it was also doing a hell of a lot fishy building in the lead-up to the 2008 crash (unused airports, speculative apartment blocks that didn’t meet code, etc.).

        What you say about France proves my point exactly: outsourcing in France increases costs, but because the state hasn’t gone as far down the neoliberal path as the UK, US or Australia, it is still able to resist the more rampant feather-bedding in those countries, thus limiting the premium to something more reasonable. Germany is pretty similar in this regard.

        • Alon Levy

          First of all, low Spanish costs go back to the 1960s if not before.

          Second, France and Germany are plenty neoliberal. Germany (but not France) has seen a pretty hefty increase in inequality in the last generation, thanks to Hartz IV and then Merkel’s austerity budgets. Sweden has seen a large increase in inequality as well, albeit from levels comparable to those of the communist bloc in the 1980s. The difference is that there hasn’t been the same impulse to privatize the state here. Privatization takes the form of having a private company operate a public service under contract, e.g. Stockholm’s privatization of T-Bana and commuter rail operations to the MTR. But planning remains public and there’s in-house design review as far as I can tell (I know this for a fact re Madrid and Milan, but am less sure about the details here and in France).

          Third, the history of British costs is unclear on this. The Jubilee line in the 1970s was pretty expensive by the standards of the Victoria line, though not by contemporary Parisian standards (the RER A remains the most expensive urban rail tunnel built outside New York per km, though a handful of under-construction projects including Crossrail are about to overtake it). So “Thatcher wrecked state planning” is not falsified, but it’s not clear that it is what indeed happened. Reagan, in contrast, is not relevant – the origin of high New York costs is in the 1920s and 30s.

          • df1982

            Well, yes there are a large number of variable factors in all this. A city with high property costs and lots off tunnels already under the ground (not to mention architectural artefacts as in Rome, Athens, etc.) will have higher costs for metro tunnelling than a more greenfield site. But a lot of the details you bring up still confirm my thesis. France and Germany have definitely enacted neoliberal shifts, but they have been less sweeping than the Thatcherite reform or its equivalents in Australia and NZ.

            I’m not thinking so much about inequality per se as the role of the state within society, which in the post-war Keynesian era was marked not only by a strong welfare system but also things like centralised planning, progressive taxation, high levels of public ownership over utilities, etc. Since the 1980s it has basically been turned, to varying degrees, into a vehicle for rent-seeking within a slash-and-burn free market system.

            And yeah, the US is exceptional in the sense it never had a universal welfare apparatus or a strong centralised state the way post-war Britain, France or West Germany did. As far as I know the federal government has built close to zero rail infrastructure, and everything there was either privately built (intercity railway lines in the 19th century) or municipal/state (transit systems in the 20th century). So you could say it’s always followed the rent-seeking model later adopted elsewhere, but it also varies much more widely between different cities/states, some have been models of fiscal probity, while others, like New York, have not (to put it lightly).

            One interesting piece of counter-evidence though is streetcar projects in non-transit US cities. There is a lot to criticise about these – they are basically useless as transit and mainly conceived as downtown property boosters. But they seem immune to construction inflation: recent projects tend to come in at around $10-30m per km, which is very favourable not only to the DC Streetcar, but also similar projects in Edinburgh and Sydney (which were at $100m+ per km).

          • Herbert

            American style streetcars don’t have their own right of way.

            I’m not sure whether that matters, but it might…

          • df1982

            I don’t think right-of-way matters for construction costs. Streetcar lines have little in the way of property resumption costs either way and I can’t see how it would affect engineering standards (they might even have to be more stringent if the right of way is expected to have streetcars and general traffic coexisting).

          • Herbert

            Overpasses and underpasses certainly aren’t free…

            And I think Rasengleis also costs something…

    • Henry Miller

      A lot of the early railroads were built to get the state reward for building in that location. Most of the transcontinental railroads were paid in land. Sure private investors put up the money, but the poor construction was a feature of their return on investment. In many cases as you note the route didn’t make sense outside the subsidies and so there was no reason to build more. Railroads built where it made economic sense tended to be built to higher standards as that results in better return on investment in the long run.

      Though we do need to be careful comparing subsidies then and now. Land in the west was worthless to the government as nobody could live there without a connection to the rest of the world (ignoring a few isolationists), the railroads added a lot of value to the land by existing. Most subsidies these days are not giving away something worthless and thus the return on investment for the government is different.

      • Herbert

        The last phase of major non hsr rail construction in most of Europe were narrow gauge railways or railways of standard gauge built to lesser standards under different laws than mainlines. Those had a significant share of private investment, tho often said private investment was by local notables or municipalities… This phase mostly didn’t survive the interruption caused by WW1 and many of those lines were abandoned or turned into heritage lines before the 1970s…

    • johndmuller

      The private investment approach has not always been as simple and straight-forward as one might innocently imagine at first blush. As Henry Miller mentions above, much of the US western railroads were built to a significant degree to take advantage of land grants. Other railroads developed into investment scams – at various times, the railroads were the dot-coms of their age. People were throwing money at them because they were the future and everyone else was doing it. Much buying and selling of the Brooklyn Bridge went on.

      As a result, second and third generation inheritors of bankrupt railroads acquired a lot of heavily discounted assets. To some extent, the US has only recently passed through the most recent round of receivership; the fire sale of Conrail was perhaps the last of it and it is still in the process of being digested. Unfortunately, public interests were not very well served in that round and CSX and NS are in the process of profiteering while they gradually sell back excess segments to public authorities who could have bought them cheaper from other public authorities a few years earlier.

      Unfortunately. the properties now in public hands are not in a position to go bankrupt again unless they are sold at a politically unpalatable price to private interests first, which makes it difficult to further revalue them. To pursue this financing model further, we would have to interest new investors in wasting their money on these overpriced projects so that the public could eventually by the assets at a more reasonable price. The investors, on the other hand may wish to think that they will be able to sell the too expensive road to a public authority at a profit to themselves because the public will have become addicted to the service and the government will need to buy it for them. Brightline has been viewed under suspicion of being one or another of various kinds of scams along these lines, but has so far developed as if they really intend to be a profit making new rail entity – time will tell; likewise a similar venture LA to Los Vegas and possibly in other areas.

      • Herbert

        I have no doubts all of the projects currently in development with private capital in the U.S. can make a profit “above the rails”. Whether they can pay back the initial investment at an acceptable rate is a different question altogether… But in Florida at least, the rail investor seems to intend to profit from the real estate boom they are creating…

        As for your comparison to dotcoms: Every transformative new technology under capitalism generates an investment hype at some point…

        • michaelrjames

          But in Florida at least, the rail investor seems to intend to profit from the real estate boom they are creating…

          Yeah, it was the only reason they built the rail line. It’s a version of land value capture but by private investors it risks various outcomes. Mostly that the rail line comes to mean less to those investors than their associated developments and they let it fail under “market forces”. Naturally expecting the state to pick it up, especially if there is a demand. But the state will never get a share of where the real money is made. Same old story of rail and transit over the last century.

          I have been saying for years that the model of how this works well, and curiously in one of the world’s most red raw capitalist exemplars, is Hong Kong and its MTRC (remember still >70% publicly owned) which does exactly as Stephen Wickens recommends in the report that Alon cited (Why Subway-building Costs Have Soared in the Toronto Region; An investigative study commissioned by the Residential and Civil Construction Alliance of Ontario (RCCAO), BY: Stephen Wickens, April 2020.): (my emphases)

          KEY RECOMMENDATIONS
          10 Create designs, processes and incentives that allow stations and their catchment areas to pay dividends.
          Tunnels and tracks will always be costly, but stations and their catchment zones can and should be yielding bigger returns on investments. Talk of transit-oriented development (TOD) has become increasingly mainstream, but action in this part of the world has been lacking, timid and unfocused for more than half a century. TOD proponents often have simplistic notions of the potential, while too much of what we hear from detractors ignores real-world successes or serves as excuse-making for people unwilling to accept that we must change how we do things to stay competitive globally. The province might need to emulate the big pension funds and create a Crown developer and real estate manager largely free to operate as if it were a private-sector firm. But the full worth of catchment zones will rely on more than station-related properties and residential density. Richer land-use mixes and pedestrian-friendly design can go a long way toward creating bidirectional all-day transit demand that’s more economic for transit operators, whether they’re running subways, commuter rail or local bus networks.

          • Herbert

            I have no doubt that the rail service will turn an operating profit. And part of the thinking behind the real estate speculation is that rail service will make the land increase in value (this is empirically true in virtually all cases I know). So IF the company overall gets into the profit zone, there is little to no reason for them to abandon either the real estate or the railroad part of the business.

            And trying to “offload” the service onto the public purse in a country like the U.S. where the public purse is loath to maintain any rail service (Amtrak was deliberately set up to fail under Nixon) is a riskier business model than simply building a profitable rail line aided by profitable real estate development…

          • michaelrjames

            I doubt very much it is making a profit, and right now it is making a big loss.
            Your Amtrak example, and of course all city transit like NYC Subway that was private in one way or another, aren’t anymore. Proves the point. Companies and shareholders change and once the real estate profits have been realised ….

          • Herbert

            It won’t make a profit before reaching Orlando, obviously. But why wouldn’t a three hour train from Miami to Orlando make black figures?

            Nota bene, exclusive of the initial construction and land acquisition costs…

          • michaelrjames

            As I understand it, the whole thing is using ROW-tracks owned by the same investment group, so no acquisition costs. Oh, and continued to be shared by freight. However that hasn’t stopped them seeking almost $2bn in special tax-exempt bonds (for public interest projects) so it looks like the public will be paying some of the costs (usual deal: forgoing taxes).
            I suppose the argument is that so many Floridians are oldies that they will grab at the opportunity to go shop by train and not drive. Not sure about, especially since Florida is so car-dependent.
            There’s a reason this is the first private passenger rail line in the US for a century. As I said, the investors only care about the railway as a means to an end: to establish and create value to their property investment.

          • Herbert

            The faster parts and the parts which actually go to Orlando are new build.

            And while I would’ve preferred this to be a public project, Bush killed it. And the lost tax revenue now will be more than made up for with the benefits over the lifetime of the project…

          • Tonami Playman

            Going by the ever increasing reports of fears of Virgin trains kicking the more affordable Tri-Rail commuter trains off the tracks, It appears that Brightline does not really car about rail service in the region in any way. Unfortunately local politicians are fawning over the shiny new expensive Virgin trains and ignoring the mass market Tri-Rail service which it shares tracks with.

          • Alon Levy

            Tri-Rail has 15,000 daily riders for commuter rail in a metro region of 6 million; it’s not really mass-market.

          • Herbert

            Virgin and Tri-Rail needn’t be competitors…

            It’s unfortunate that Virgin is still far from reaching Orlando and thus a slightly upscale commuter rail operator with diesel trains…

    • David Stauffer

      Aren’t the Scandinavian states/Switzerland more neoliberal than e.g. Germany, France, Spain? Higher on the Heritage economic freedom index (https://www.heritage.org/index/ranking).

      Can you be more specific about what makes a country neoliberal? Because neoliberal often seems to be used as a shorthand for “countries whose policies I dislike”, not a descriptor of regulations and tax rates which I understand it to mean.

      • Coridon Henshaw

        Not the original poster, but ‘neoliberal’ is an effective shorthand for ‘government policies driven primarily by the desire for legal graft, corruption, and self-dealing, as facilitated by the offloading of risk and externalities onto the public sector while directing profits into the hands of well-connected private entities.’

        If you want a metric of the most neoliberal countries, the Corruption Perception Index rankings, masked to include only fully capitalist countries, is a very good place to start.

        • Alon Levy

          Okay, by this standard, the policies of Angela Merkel and Emmanuel Macron are not neoliberal, a definition that the vast majority of the left would not be happy with.

          • Herbert

            Privatization (btw, a word which first gained currency as a description of Nazi policies) is certainly a core tenet of neoliberalism…

      • df1982

        Well, there’s a consensus that around the 1970s-1980s there was a strategic shift that took place across many countries in the industrialised West that involved the following traits:
        * market deregulation
        * dismantling of trade barriers and the globalisation of the economy
        * erosion of welfare programmes
        * lowering and flattening of tax rates
        * privatisation of state assets
        * reducing the public sector workforce
        * labour “flexibility” (i.e. hamstringing trade unions)
        * off-shoring of manufacturing to lower wage countries

        The process is uneven and has had different forms of implementation in different countries, but this is what people generally mean by neoliberalism. And its result has been an across the board transfer of wealth from labour to capital and a much higher degree of income and wealth inequality.

        I don’t think there’s any reliable measure that would count Scandinavia as more neoliberal than France and Germany, and I wouldn’t really trust the Heritage foundation on this question.

        • df1982

          I would add that the neoliberal policy book also entails subjecting state investment to strict standards of profitability (so-called “economic rationalism”). The irony is that this same model has seen infrastructure costs explode in most countries in which it has been imposed, when according to the textbooks the opposite should happen, since states would be motivated to contain costs in order to ensure a favourable CBR, and so there should be less room for profligacy. But the reality and the theory of neoliberalism don’t particularly match up (this is not even to get into military spending, which is its own universe).

          • Herbert

            A particularly nasty aspect of neoliberalism is that they claim to be “free of ideology” and often have “expert commissions” draft legislation (Under Schröder there were too many to count – some of them led by people now known to have been corrupt). Basically when someone claims to be “free of ideology”, most of the time they are a neoliberal.

          • Eric2

            You know this is exactly what Alon recommends? Build up in house expertise rather than relying on private contractors?

          • Herbert

            Neither Rürup nor Hartz nor Riester were “in-house”. And they were not experts, they were ideologues. Neoliberal ideologues…

          • michaelrjames

            Quite.
            Market fundamentalism and economic rationalism are the main theoretical principles underlying neoliberalism. Applied to government and it drives small government (privatisation), low taxes, low regulation (self-regulating markets), reduced welfare, labour ‘flexibility’ (globalisation of labour conditions), full mobility (globalisation) of capital, etc.

            What I think confuses some, is that there is the theory, that may be genuinely rationalised, versus the real world in which it is merely an excuse–or a mechanism–to (re)establish a financial elite. Maybe many politicians sincerely believed it would produce better outcomes for everyone, eg. Bill Clinton, Tony Blair and maybe even Thatcher (though I think she was genuinely nasty and believed in the Hayek crap of winners versus losers being nature’s way) but not someone like Reagan who was a simple-minded fool and tool of the elites. But many political acolytes of neoliberalism were and are mere charlatans who have no interest as to what the outcome for the general population might be. Indeed most of them were and are ignorant of the underpinnings of neoliberalism and–as expounded by David Harvey–have simply adopted its clothing post hoc to justify what they want to do, or their clients want them to be proxies for. There cannot be a (genuine) thinking person on the planet who believes in trickle-down economics anymore, if they ever di, especially since the GFC which has seen a strengthening of the trend to greater inequality, such that it has become a threat to the economy itself. Further, while competition is the neolibs favourite mantra, the reality is the exact opposite of essential monopolies like Google, Amazon, Facebook etc. The grotesque hyper-success of the tech world is based on a technological basis of monopoly reinforced by regulatory impassivity. (But as usual investors often don’t understand this; the likes of Uber, Lyft etc or indeed Tesla don’t have any claim to such monopoly–or even meaningful leadership like Apple–and so they aren’t good medium-term bets. Of course just like the robber-baron era, Google, FB, Amazon may yet be broken up so might be a risky bet depending on timing.)

            The infrastructure cost explosion is exactly what one would predict from this small government approach. No matter what the theory says, if private capital can shift the balance in their favour because of little to no public oversight, then they will. And in no time it quickly ratchets up to the maximum possible–that is one theoretical outcome that does come to pass. It’s why I am so irritated at the likes of Flyvbjerg’s pronouncements on mega-projects, because I think he quite blithely (or deliberately?) entirely misses the point. As I wrote earlier, this is clear enough in the Anglosphere of infrastructure costs, but I can’t quite see why it should happen in a place like Singapore.

          • Alon Levy

            1. In Flyvbjerg’s dataset, the US doesn’t have bigger cost overruns than Europe. The US has higher absolute costs, but the pretend-Continent has its share of huge cost overruns, like L9 in Barcelona.

            2. Singapore is adopting British and American privatization of the state (according to what are to me second-hand sources, so caveat emptor). That it should be this way is not surprising – it’s run by people who share the same contempt for ordinary people that the British elites do, so the language of Thatcherism would be very appealing. You see this with Singapore’s policies on labor, social welfare, taxes, and increasingly immigration; it even has high coronavirus infection rates, having overtaken Italy in per capita terms yesterday, because the government was too racist to monitor conditions in the migrant worker dorms when it mattered.

            3. Speaking of language, there’s an economic rationalist language used by (say) the Adam Smith Institute, which is distinct from the languages used by German ordo-liberals and by Macron – and for that matter, the r/neoliberal Reddit community is much more Macronist than anything Anglo-American, and even in the latter world it’s vaguely Blairite and not Thatcherite. For example, both the US and the UK have monetary dual mandates, whereas Germany has had a single mandate for price stability since the postwar formation of West Germany. Conversely, Germany did not outsource public planning to private consultants in an attempt to say that the era of big government is over, and even France has only partly dabbled in that (see e.g. the airline execs who’ve run SNCF into the ground).

          • michaelrjames

            OK.
            1. In Flyvbjerg: not quite sure how that matters. Flyvbjerg is a typical modern-day econocrat, attempting to dazzle (ie. blind) with statistics and pseudo-precise mathematical treatments. It worked, got him a prof at Oxford (but you’ll understand that doesn’t by itself impress me). I read him and learn nothing, except that every single public mega-project should never have been begun … (which appears to be pure market fundamentalism, ie. the state shouldn’t be doing such things).
            2. Singapore: ok, simple greed and corruption but since they (the elites) control everything one imagines they would want to keep such projects to a reasonable cost –for the state, since they don’t have recourse to high taxes etc. (Though they do have recourse to state borrowing which is at 120+% GDP so yeah) But as I originally said, these things may not matter enough to the next gen. And you’re right, the British elites would have controlled costs of state projects once but that has completely disappeared.
            3. I have no idea about the Adam Smith Institute, but Adam Smith would have rejected most of the nonsense spouted by today’s self-proclaimed neolibs. Self-regulated markets, yeah.
            As to Germans, as Herbert wrote, they have had their share of political ideologues.
            And do you really believe SNCF has been run into the ground? That’s rhetorical, because you’ve said it many times, but I think you’ve been influenced by the negative press etc (not that I have any time for those ex-airline execs). I think the jury remains out on Macron.

          • Herbert

            https://www.youtube.com/watch?v=E4CI2vk3ugk Not only is neoliberlaism entirely compatible with fascism (see Chile, see the origins of the word and concept “privatization” to describe policies of Nazi Germany), conservatism is – at the very least – skeptical of democracy. A right winger believes people are not equal and they believe they themselves are the better people.

            The left wing meanwhile believes everybody should be treated equally, because they surmise they might as well get the short end of the stick…

          • Herbert

            Fun fact: Richard Lutz is the first “Bahnchef” since 1994 to have had previous in-house experience. He also comes from a railroading family. But his job (incidentally he started in 1994) was in accounting, not operations or planning. But if you look up images of him at the controls of an ICE with childlike glee, it is not hard to believe that he genuinely likes trains…

  7. Herbert

    Do you have data on transit related predictions?

    I know that in the German speaking world it is a widely held belief among transit advocates that the NKF based predictions of ridership are virtually always lowballing real ridership…

    On the other hand we know the spectacularly too high predictions for Chunnel traffic which were probably arrived at through rectal extraction…

  8. adirondacker12800

    To the successful investor,
    Measures performance against the broader market and multiple studies over decades show that the way to make money in the market consistently is to stuff your money into a broad market based mutual fund(s) and sit on it. There is a bias in the reporting, just like there is bias at the race track. The losers don’t have anything to say. Fortunately the people who come up with the numbers that say “market based mutual fund” also look at other options and ferret out that there is reporting bias in the business pages of the newspaper.
    ….I’m the youngest of 13 first cousins, some of them are complaining bitterly about the performance of their retirement accounts. Well if you had read the books your financial advisor had recommended, 80 year olds wouldn’t have their money in hot mutual funds, it would be stodgy government bonds. They then complain about the income tax they have to pay on it. We should all have such problems.
    ..it’s a casino with chalk stripes and wing tips, park the money in a broad market based mutual fund until you get older.

    • Alon Levy

      Yeah, if you’re a retail investor, you should invest passively. But there are non-retail investors out there who can actively invest and make a profit, like the people who manage various investment banks.

  9. R. W. Rynerson

    While my career field mostly was on the Service Planning and Marketing side, I was witness to numerous rail and bus priority projects. A few notes in no order:

    + Projects in the 1970’s till early 80’s were managed by veterans of the last Great Depression and World War II. They tended toward tight control over their projects and often worked for entities left over from the days of regulated private enterprise. In Canada and other Commonwealth countries that included municipal systems that were structured as public utility corporations. In miniature, when watery coffee was served at our North Denver church, my wife was informed that the older ladies could not help it, because they were “daughters of the Depression.” On a bigger scale. the first Edmonton LRT segment included a pre-fab metal staircase on the low-volume south side of the 118th Avenue Station rather than the planned escalator, because they needed to come in precisely under budget.

    + The original Edmonton LRT had its own project financial manager, because the City’s fiscal control system was oriented to after-the-fact reporting that was to late to use for tracking commitments. When I took over the Marketing budget the LRT project finance expert taught us how to track commitments and in one fiscal year we were able to come into line with our budget.

    + The first segments of the Edmonton LRT were managed by City of Edmonton staff from the Transportation and Deep Sewers staff. A tunneling mole that was shared with the sewer people was used to lower costs (and the deep sewer guys knew a lot about what was under the CBD). The second tunnel segment was dug with the same mole, but the spoil was removed by rail using a third-hand steeple-cab electric locomotive and home-built dump cars on second-hand frames and trucks.

    + The first segments of the Edmonton LRT were completed opened on time, with same-day changes to the bus network. A later segment was handed over to consultants to manage (for political reasons) and was late, over budget and had the only fatality of a construction worker.

    + When Edmonton metricated its bus facility standard plans, it was done in 1977 by a summer engineering intern. In 1986 or 87 I obtained two sets of drawings of bus transit centres/centers from a former colleague and brought them to my new U.S. employer’s attention. They liked the novel features and hired a multi-national consulting firm to demetricate them!

    + Calgary’s LRT system started after Edmonton’s == with funding from the same provincial government — so I assume that they would have felt the need to keep costs in line.

    • Herbert

      Back in the day far more people died in construction accidents. There used to be “formulas” for this. Like “every million mark is one dead worker”. Or the likes…

  10. Alon Levy

    By the way, I bring up the investor vs. worker distinction in the first section because it’s relevant to something I’ve been asked re Tesla. If I’m so skeptical of its product, say various tech and EA people, why don’t I short it? The answer is, I am skeptical of Tesla as a transport researcher. There are things other than the product in play, for example the possibility of a large federal subsidy to Tesla as part of a green stimulus program, or the possibility of a bailout on generous terms (“Geithner put” in the language of the last recession). I have no particular expertise in judging these, so I leave such questions to investors. I am fairly certain as a transportation researcher Tesla is a bad product, but I have no certainty in investment-level questions.

  11. Henry Miller

    Most economists are suggesting that 2021 will not be a recession, this virus will be solved (I do not know how, a vaccine before fall 2021 is just barely possible) and everyone who had a job will be excited to spend all the money they have saved just to get out.

    Only time will tell, but although I’m not convinced of the timing I think the idea is right and a recession will be over before 2022. Even if we were funding massive projects today the design phase (including environmental impact statements that might or might not be an important reason for our high costs) would not be over in time to move dirt by 2022.

    That is my prediction given what I know today. Time will tell if I’m right.

    • Coridon Henshaw

      My view is that we’re facing a very long recession because there are two problems that must be dealt with sequentially before the economy can fully recover.

      Things can’t begin to turn around until there’s enough movement on the health front that it’s safe for large groups of people to gather again. Until that happens, nontrivial parts of the economy will have to stay closed (travel, entertainment, live sports) or restricted (restaurants, cafes, retail, and many more) and that alone will cause a recession.

      The second problem is that, with much of the economy curtailed for health reasons, many people have been forced to turn to credit to make ends meet. All private credit (national government credit is completely different) runs out eventually. This will lead to a debt crisis and a debt-deleveraging recession. 2008 was a debt-deleveraging recession; they take a very, very long time to clear up. Indeed, the impacts of 2008 still haven’t gone away in many places (e.g. Trump and Brexit) and will leave a multi-generational impact. The fallout from the pandemic will be worse than 2008 and probably much worse.

      I would not expect a major turnaround until 2030. 2030, however, is the point at which global warming is expected to flood out most coastal cities, which will, in turn, cause another economic crisis.

      • Herbert

        What about deliberately letting inflation go off the charts?

        That would take care of the debts…

        • jcranmer

          And the large cadre of voting population that is expecting to imminently retire and live on their savings will be very unhappy if those savings suddenly disappear overnight.

        • adirondacker12800

          There has to be consumers with money to buy things for there to be inflation.

  12. johndmuller

    The US has already spent $2 or $3 trillion (,000,000,000,000) throwing money at the economy to try to keep it from crashing; this not long after Trumpistas threw a previous trillion in only politically needed tax cut stimulation, all without any attempt to “pay for it” with any kind of revenue increases as conservative dogma supposedly requires. Any one of these would have been totally unprecedented on its own before the 2009 or 10 bailout, which was somewhat repaid I believe. Thus, one might expect some pipers to be paid at some point to account for all this new money that was seemingly just printed. No one yet seems to be worried about that yet and they are instead talking about new tax cuts and stimuli with nary a thought of any downside to that business. Seems like we’re due some inflation or stagflation or something unpleasant at the very least.

    No one seems to be suggesting that we balance the budget or anything extreme like that.

  13. Coridon Henshaw

    Alon — have you seen this: https://twitter.com/_MiguelHernan/status/1256901994020814853

    According to an unofficial translation, the French government is pressuring Air France to get out of the short haul passenger air business, on routes where rail alternatives exist, as a condition of Air France getting pandemic funding. I can’t confirm this from primary sources as I don’t speak French.

    This could have interesting implications for inter-city mode split in France going forwards, presuming some sense of normal life returns in the foreseeable future.

    • Alon Levy

      I saw this from a few secondary sources, yeah. I think it has some impact on the future of intercity travel but not all that much – there’s barely any domestic air traffic in France wherever the TGV hits 3:30, let alone 2:30. The top city pairs are Paris-Nice (5:30 by TGV) and Paris-Toulouse (4:00 as of recently, and I think Paris-Toulouse traffic fell noticeably after the LGV SEA opened). There’s some Paris-Marseille (3:10 by TGV) air traffic, but not that much, and I think it’s all low-cost, not Air France.

      • Herbert

        The Allianz Pro Schiene in Germany however is taking up this idea and running with it, saying any aid to Lufthansa needs to be preconditioned on a ban of flights were rail takes less than 4 hours.

        Mr. Spohr the boss of Lufthansa is on record as saying he’d rather go bankrupt under the “Schutzschirm” procedure than let the state get a say in his business…

    • Tonami Playman

      They also have a provision for connecting flights which might not change the current passenger air traffic. If the force all connecting flights to go to rail, then things become interesting.

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