CNBC Video on Construction Costs

There’s a CNBC video about construction costs. It references our data a bunch, and I’d like to make a few notes about this.

Urban rail and GDP

CNBC opens by saying better urban rail would increase American GDP by 10%, sourcing the claim to our report. This isn’t quite right: our report references Hsieh-Moretti on upzoning in New York and the Bay Area; they estimate that relaxing zoning restrictions in those two regions to the US median starting in 1964 would have, assuming perfect mobility, raised American GDP by 9% in the conditions of 2009 (and the effect size should have grown since).

The relevance of transportation is that the counterfactual involves both regions growing explosively: New York employment grows by 1,010% more than in reality, so by a factor of about five compared with actual 1960s population and about 3.6 compared with actual 2009 (in 1969-2009, metro employment grew 35.4%), and likewise San Francisco would be 3.9 times bigger than in reality in 2009 and San Jose, having had much faster growth in the previous decades in reality, would have still been 2.5 times bigger. Hsieh-Moretti assume infrastructure expands to accommodate this growth. But if it can’t, then the growth in GDP is lower and the growth in consumer welfare is massively lower due to congestion externalities, hence our citation of Devin Bunten’s paper on this subject.

So the issue isn’t really that building subways would increase American GDP by 10%. It’s that building subways paired with transit-oriented development, the latter proceeding at levels that would raise regional population at a somewhat faster rate than in 1900-30, would do so. The issue of costs in the United States is only peripherally connected with the lack of transit-oriented development, an American peculiarity in which more housing is built in poorer regions than in the largest, richest metro areas. In contrast, Canada gets TOD right and yet is rapidly converging to American construction costs, Toronto’s reaching around US$1 billion/km per the latest estimates. Germany, conversely, is rather NIMBY, although its rich cities still build much more than New York or the Bay Area, and is capable of building subways just fine.

The portrayal of Second Avenue Subway

The portrayal looks mostly good. It points out the tension between Second Avenue Subway’s extreme cost per km and reasonable cost per rider, the latter comparing very favorably with Los Angeles and about on a par with Grand Paris Express. Second Avenue Subway Phase 1 was a bad project in the sense that it was severely overbuilt and poorly managed, but were it not possible to build it for cheaper (which it was), it would be a good value proposition, and even Phase 2 is marginal rather than bad. The issue is that New York’s cost-effectiveness frontier, at current costs, makes it capable of building a few km of subway per generation, whereas that of Paris, a city that isn’t especially cheap to build in, enables the 200 km Grand Paris Express.

The video goes over our comparison of station to tunnel costs, and connects this with various forms of surplus extraction; Eric gives examples of how cities demand betterments and do general micromanagement and threaten to withhold permits unless they get what he calls bribes. It gets the picture well for how important actors, up to and including the mayor of New York, just treat infrastructure as an opportunity to grab surplus for other priorities.

There are a few errors, all minor:

  1. The visualization of Second Avenue Subway has it running down First Avenue in Midtown and Downtown Manhattan, which was certainly not in the original plan and I think still is not.
  2. The video states the cost of Grand Paris Express at $38 billion, I think out of converting euros to dollars at exchange rate, whereas in PPP terms it’s $47 billion in 2012 prices and $60 billion in 2022 dollars, either way about 10 times the absolute cost of Second Avenue Subway Phase 1 for 10 times the projected ridership and 70 times the overall length. But the costs per rider are correct, at least.
  3. I’m not sure why, but the Madrid numbers are stated to be around $200 million/km, which is a cost that I don’t think exists there – costs in our database don’t include the latest lines there, but the ongoing expansion program is 40.5 km for 2 billion euros, which in PPP terms is around $70 million/km, I think all underground.
  4. The section on soft costs says that they were 21% of Second Avenue Subway’s overall costs, compared with a norm of 5-10% elsewhere. This is not quite true – they were 21% of the hard costs (and the same is true of the 5-10% figure); their share of overall costs was therefore a bit lower.

Carmen Bianco and Robert Puentes

Three people are extensively interviewed in the video. The first is Carmen Bianco, who was New York City Transit head in 2013-5. The second is Eric. The third is Eno’s Robert Puentes. The interviews are pretty good (by which I mean those with Bianco and Puentes – I of course find what Eric says good I’m the least impartial judge on this). There’s also a short quote from Bent Flyvbjerg about construction productivity, which isn’t quite true (productivity is rising in Sweden, just at lower rates than general growth).

Puentes talks about standardization, comparing the custom-designed stations in the United States with the standardized ones in Copenhagen. He also talks about the benefits of utilitarian stations and connects this with standardization – American subway and light rail stations aren’t particularly nice (the overbuilding goes to crew break rooms and crossovers, not passenger facilities), but one way local political actors get to feel important is making each station a bit different, and I’m glad he highlights this connection between overbuilding and poor standardization. But I think he somewhat errs in that he says that one cause of this among a few is that American cities build little subway tunneling. Copenhagen, after all, built its first line in the 1990s and early 2000s (using consultants, since there was no preexisting in-house staff and no political appetite to staff up); it just made the right design decision to standardize, which has helped it build a subway even at not especially low costs, in a fairly small city.

Then there’s Bianco, who I think appears talking more than anyone else, even Eric. He gives the standard list of problems in New York: it’s a dense city with a lot of complex underground infrastructure, utility relocation is difficult, and so on. At least on camera, he doesn’t make excuses. It’s just, complex historic utilities are not unique to New York, and I don’t know to what extent he understands that New York can learn this from Italian cities (or from London, which I believe has very good underground utility mapping). I assume Bianco isn’t generally great about this since he was in charge in 2013-5 and didn’t reform this system, but he doesn’t come off as repulsive, and it’s plausible that he’s more reasonable knowing not what he may not have 10 years ago.


  1. archie4oz

    I did find Bianco’s comment about there being “nothing like it in the world” (commenting on the engineering complexities of the Second Avenue Subway) a bit off putting. Political complexities sure, I’d buy that.

  2. adirondacker12800

    The visualization of Second Avenue Subway has it running down First Avenue in Midtown and Downtown Manhattan, which was certainly not in the original plan and I think still is not.
    Which original plan? There have been a lot of them over the past century. The original plan was to have all six tracks of it go to the Bronx. The people along the Flushing line would get the Second Ave. El all to themselves.

    The original plan was all six tracks of it to 34th. Squint at the East Side south of 42nd there are parks and playgrounds scattered around that would allow them to put the curves under a park/playground. The park between Chrystie and Forsyth is part of the plot and something is up with Allen Street. They tore down the tenements on the east side of the street. The storefronts on the east side go through to Orchard. there were serious proposals to send it down Ave. B a few decades ago.

    And since it’s going to take them until 2070 to get south of 34th Street, I’m sure plans will change again.

    I lean towards terminating the Broadway Locals in Manhattan, leveraging the unused capacity on the Nassau line and using the tunnel to connect Second Ave to the Fulton and Culver lines. Utica Avenue and the West End line could get Second Avenue trains. It would get West End trains out of DeKalb. they have until 2045-ish to decide,

      • adirondacker12800

        More or less sorta kinda according to Wikipedia. They’ve changed their minds about things a few times. Three track terminal, two track terminal, delete the trail tracks pointing at the Bronx… Plans change. Who knows what people will come up with between now and 2045.

          • adirondacker12800

            There have been lots of official plans over the past century. For instance the Second Avenue station on the Sixth Avenue lines is deep enough for the Second Avenue lines, four of the six tracks, to pass over it. Any plans they do have are already hopelessly obsolete. When they decide something should be done, in 2040, they are going to have to start from Major Investment Study.
            I suspect whoever had the First Avenue fantasy at CNBC was aiming at the Rutgers Street tunnel, today’s F train’s tunnel to Brooklyn. That doesn’t get people to Wall Street. And it’s all fantasy because at the rate they build things it’s going to be 2218.

  3. adirondacker12800

    He also talks about the benefits of utilitarian stations and connects this with standardization

    They were only building one. The PATH station in Harrison cost a quarter of a billion. Above ground. NJTransit is rehabbing Elizabeth and adding a fifth track. That’s one-off because cantilevering platforms off an ancient viaduct doesn’t come up often. If I remember correctly 53 million.

  4. BindingExport

    It’s so funny hearing New York cost apologized always claim how nobody knows what’s below ground in NY yet anytime you touch soil in German cities chances are high that you have to evacuate half the city cause they discovered an unexploded 700 kg WW2 bomb. The U5 extension in Frankfurt was delayed by 3 years cause it took so long to clear the ROW from unexploded ordinance 75 years after the last bombing run…

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