Reasons and Explanations
David Schleicher has a proposal for how Congress can speed up infrastructure construction and reduce costs for megaprojects. Writing about what further research needs to be done, he distinguishes reasons from explanations.
I have argued that many of the stories we tell about infrastructure costs involve explanations but not reasons. There are plenty of explanations for why projects cost so much, from too-deep train stations to out-of-control contractors, but they don’t help us understand why politicians often seem not to care about increasing costs. For that, we need to understand why there is insufficient political pressure to encourage politicians to do better.
I hope in this post to go over this distinction in more detail and suggest reasons. The key here is to look not just at costs per kilometer, but also costs per rider, or benefit-cost ratios in general. The American rail projects that are built tend to have very high benefits, to the point that at normal costs, their benefit-cost ratios would be so high that they’d raise the question of why it didn’t happen generations ago. (If New York’s construction costs had stayed the same as those of London and Paris in the 1930s, then Second Avenue Subway would have opened in the 1950s from Harlem to Lower Manhattan.) The upshot is that such projects have decent benefit-cost ratios even at very high costs, which leads to the opposite political pressure.
Those high benefit-cost ratios can be seen in low costs per rider, despite very high costs per kilometer. Second Avenue Subway Phase 1 cost $6 billion in today’s money and was projected to get 200,000 daily riders, which figure it came close to before the pandemic led to reductions in ridership. $30,000/rider is perfectly affordable in a developed country; Grand Paris Express, in 2024 prices, is estimated to cost 45 billion € and get 2 million daily riders, which at PPP conversion is if anything a little higher than for Second Avenue Subway. And the United States is wealthier than France.
I spoke to Michael Schabas in 2017 or 2018 about the Toronto rail electrification project, asking about its costs. He pointed out to me that when he was involved in the early 2010s studies for it, the costs were only mildly above European norms, but the benefits were so high that the benefit-cost ratio was estimated at 8. Such a project could only exist because Canada is even more of a laggard on passenger rail electrification than the United States – in Australia, Europe, Japan, or Latin America a system like GO Transit would have been electrified generations earlier, when the benefit-cost ratio would have been solid but not 8. The ratio of 8 seemed unbelievable, so Metrolinx included 100% contingency right from the start, and added scope instead of fighting it – the project was going to happen at a ratio of 2 or 8, and the extra costs bringing it down to 2 are someone else’s revenue.
The effect can look, on the surface, as one of inexperience: the US and Canada are inexperienced with projects like passenger rail electrification, and so they screw them up and costs go up, and surely they’ll go down with experience. But that’s not quite what’s happening. Costs are very high even for elements that are within the American (or Canadian) experience, such as subway and light rail lines, often built continuously in Canadian and Western US cities. Rather, what’s going on is that if a feature has been for any reason underrated (in this case, mainline rail electrification, due to technological conservatism), then by the time anyone bothers building it, its benefit-cost ratio at normal costs will be very high, creating pressure to add more costs to mollify interest groups that know they can make demands.
This effect even happens outside the English-speaking world, occasionally. Parisian construction costs for metro and RER tunnels are more or less the world median. Costs for light rail are high by French standards and low by Anglosphere ones. However, wheelchair accessibility is extremely expensive: Valérie Pécresse’s plan to retrofit the entire Métro with elevators, which are currently only installed on Line 14, is said to cost 15 to 20 billion euros. There are 300 stations excluding Line 14, so the cost per station, at 50-67 million € is even higher than in New York. In Madrid, a station is retrofit with four elevators for about 10 million €; in Berlin, they range between 2 and 6 million (with just one to two elevators needed; in Paris, three are needed); in London, a tranche of step-free access upgrades beginning in 2018 cost £200 million for 13 stations. This is not because France is somehow inexperienced in this – such projects happen in secondary cities at far lower costs. Moreover, when France is experimenting with cutting-edge technology, like automation of the Métro starting with Line 1, the costs are not at all high. Rather, what’s going on with accessibility costs is that Paris is so tardy with upgrading its system to be accessible that the benefits are enormous and there’s political pressure to spend a lot of money on it and not try saving much, not when only one line is accessible.
In theory, this reason should mean that once the projects with the highest benefit-cost ratios are built, the rest will have more cost control pressure. However, one shouldn’t be so optimistic. When a country or city starts out building expensive infrastructure, it gets used to building in a certain way, and costs stay high. Taiwanese MRT construction costs began high in the 1990s, and the result since then has not been cost control pressure as more marginal lines are built, but fewer lines built, and rather weak transit systems in the secondary cities.
Major reductions happen only in an environment of extreme political pressure. In Italy, the problem in the 1980s was extensive corruption, which was solved through mani pulite, a process that put half of parliament under indictment and destroyed all extant political parties, and reforms passed in its wake that increased transparency and professionalized project delivery. High costs by themselves do not guarantee such pressure – there is none in Taiwan or the United Kingdom. In the United States there is some pressure, in the sense that the thinktanks are aware of the problem and trying to solve it and there’s a decent degree of consensus across ideologies about how. But I don’t think there’s extreme political pressure – if anything the tendency for local activist groups is to work toward the same failed leadership that kept supervising higher costs, whereas mani pulite was a search-and-destroy operation.
Without such extreme pressure, what happens is that a very strong project like Caltrain or GO Transit electrification, the MBTA Green Line Extension, the Wilshire subway, or Second Avenue Subway is built, and then few to no similar things can be, because people got used to doing things a certain way. The project managers who made all the wrong decisions that let costs explode are hailed as heroes for finally completing the project and surmounting all of its problems, never mind that the problems were caused either by their own incompetence or that of predecessors who weren’t too different from them. The regulations are only tweaked or if anything tightened if a local political power broker feels not listened to. Countries and cities build to a certain benefit-cost ratio frontier, and accept the cost of doing business up to it; the result is just that fewer things are built in high cost per kilometer environments.
Pedestrian Observations 
There is definitely pressure in the UK to reduce costs. It’s been discussed in Reeves budget speech last autumn.
I think you are confusing that with pressure to reduce government expenditure eg. currently the target is to reduce the budget by £40bn with the suggestion of increased taxes. Today there was a handwringing article about the Higher Education costs crisis/student fee crisis which finished with “The idea of abandoning the fees experiment altogether, meanwhile, is the stuff dreams are made of because it would be unthinkably expensive.” Yet not a single idea on how to reduce “costs” and not a mention of how those fiendish Germans and French etc manage to have free university attendance. If you look at all the psycho-drama over HS2, the abandonment of phase 2/Northern Powerhouse etc, the NHS crisis, the water & sewage crisis, the absurd increase in cost of building Hinkley Point nuclear plants, none of it addresses what is actually causing the cost explosions. The government, whether Tories or Labour, are deer in the headlights with the only “solutions” being a. to abandon doing anything, b. austerity, c. higher taxes.
Alon is correct. In the UK I’d say financialisation is part of it. It has so infected the minds of everyone that no one thinks of why these things are so expensive and why neighbours can manage so much better but instead of how to finance it, or massage the books (usually by trying to push it off the government books), or how to quasi-privatise the NHS or run the untreated sewage into the waterways rather than treat it etc. Costs in the UK have been on this ratchet for decades but you don’t hear about how to undo that one-way process or what is behind it.
@Michael – I think all of that is a reasonable analysis of the UK in general.
However in terms of infrastructure there absolutely is an acceptance at the highest levels in both major parties that costs specifically on HS2 got absolutely ridiculous – and there are also think tanks talking about costs being too high more generally such as Britain Remade.
Once you get any major political figure from the US talking about infrastructure costs (which hasn’t happened at all) then you can say the US is moving towards the same position as the British.
In terms of Taiwan I have absolutely no idea what they have discussed. But generally I would say that their government appears competent. However when I went it was my experience that the public transport Tainan was much worse than in e.g. Birmingham or Manchester or Oxford.
It is also worth noting that Taiwan as a whole has extremely high population density. And especially given the east/centre of Taiwan has low population density that Western Taiwan in particular is therefore incredibly densely populated.
The French did/do this too. They are just smarter about how they did so.
This seems like a pretty big flaw with the very neoliberal “cost benefit ratio” in dollars approach.
It’s a rubber tyre metro with close stop spacing and the French don’t take health and safety very seriously. That all helps keep costs down on automation.
Matthew, your concerns about cost-cutting are misplaced. In Paris, automation is safer than conventional operations thanks to the use of platforms screen doors as opposed to cheaper laser detection beams. Despite higher frequencies, air quality is better on the automated rubber-tyred L1, L4 and L14 than in many steel wheel L2, L5 and L9 stations.
One of the arguments against automation in London is that in an emergency the driver guides the passengers onto the tracks to safety – or there needs to be a separate walkway for passengers to escape on.
In Paris you wouldn’t have that, but also to be fair with the close stop spacing you wouldn’t be going very far on the tracks. And with the rubber tyres the trains also can stop pretty quickly.
Alon, the distinction between reasons and explanations is interesting but your statements “The American rail projects that are built tend to have very high benefits”, “decent benefit-cost ratios even at very high costs”, “low cost per rider” are questionable.
Here is a list of recent US rail projects with cost per daily rider :
These are significantly higher than French values in 2022 Euros :
I don’t know whether the Translohr rubber tired trams count as rail projects. They were supposed to be cheaper but they rank in the middle of tram lines with Paris T5 at 5555, T6 at 6500 and Clermont-Ferrand at 7130.
Clearly the US cost-benefit ratio is hit left and right. High costs are compounded by low ridership explained by factors such as low gasoline price, urban highways, sprawl, fear of crime on public transit, spotty territorial coverage.
New York numbers benefit from Manhattan’s high population density and comprehensive subway coverage but are mediocre. Try telling MTA accountants that cost per trip on 2nd Ave extension is reasonable. Manhattan Upper East side is generating less trips than when only served by the Lexington Ave subway. One can blame Covid and work from home but these factors also affect the UK. UK stats for Fiscal Year ending in March 24 are so skewed by the massive Crossrail ridership that they are published with or without Crossrail numbers. Such effort is not needed in NYC. LIRR is carrying a lower number of Manhattan-bound commuters than before the opening of the $11.2 billion East Side Access.
What an interesting post! I surprised myself by first being skeptical of, then coming around and agreeing with a conservative think tank! Although AEI seems to be more intellectually honest than Heritage, these days.
And my goodness, I had no idea about mani pulite. I read the wiki article on it. Utterly fascinating.
One metric I would question is costs per rider for service or infrastructure improvements to already-built lines. In other words, if it costs $120M to double-track a single-track line, and the current ridership is 30,000 riders per year, the cost is $4,000 per rider. But wouldn’t the real cost-benefit ratio be the project cost divided by the the projected future ridership (and wouldn’t that need to be recalculated once the project is complete and the improved services are being delivered)? In other words, the ratio would improve substantially, one would hope (but wouldn’t be validated until project completion)?
I’m also very curious about this statement:
May I ask (and I know you’ve written about this in the past), why do you think American railroaders are technologically conservative? Is it the nature of the industry? The company cultures? Is it a self-perpetuating cycle, sort of a “Well, diesel-electric distro power is what works today, why mess with it?” (in the freight world) Is it sticker shock from the enormous capital cost of electrifying entire networks and the hassles involved in freight interchange with feeder Class IIs and IIIs where the Class I has OCS and the feeders don’t? As an engineer I would absolutely salivate over solving that operations problem.
Do you (or anyone) know what did BNSF and the US Class I world think of Case Study 2 of the attached report (electrification of the BNSF Southern Transcon)?
https://railroads.fra.dot.gov/sites/fra.dot.gov/files/2025-01/CB%20Framework%20Rail%20Electrification%20Options.pdf
Almost nobody in the US cares about transit as a way to get people around. The democrats care only about the number of union workers employed, and both parties care about money to the contractors that donate to their reelection campaign. All those side projects that add costs (bike lanes…) are good things – they bring in more voters for the politician who gets this approved. Is there useful transit for anyone – nobody cares.
Yeah but it’s not like the US builds roads cheaply – https://pedestrianobservations.com/2024/03/29/the-united-states-has-too-few-road-tunnels/
Do you think you’re making a point here?
As henrymiller74 wrote
It doesn’t matter if there’s a superficial layer of bus lane or a superficial layer of rails on top of the egregiously out-of-control “public” works: what matters is that funding is transferred from the public to private contractors, efficiently, and that the funds are spent maximally inefficiently.
Having useful idiots who “support transit” greenwash the “public” works with some rails or whatever on top of the utility work and cast-in-place concrete and “unexpected” geotechnical difficulties and decades of “design and review” and “community buyin” is fine.
Having useful idiots who support “ending road congestion” by putting 6 or 10 lane freeways on top of similar civil engineeing shit designed and constructed by the same people is also fine.
Everybody can be a sucker and everybody can be a loser.
PS Democrats don’t actually care about the number of “union workers employed” — that’s all labour-washing. The real money doesn’t go to the dudes in the hard hats they parade at photo ops, not remotely! If they did care about jobs, they’d build lots of transit cheaply, because the actual ongoing not-outsource-able jobs are in operating, maintaining, cleaning, renewing, not in one-off photo ops in front of embarrassingly terrible rebar and wooden forms, not in embarrassingly terrible sheltered-workshop domestic-market-only potemkin factories.
Utter contempt for the public is perfectly bi-partisan in US poltics.
It is a different union operating transit. While that union would grow, those talking about labor only see the construction unions – those see a need for the next project, but they don’t care if it is a train or building: the electricians just care that there are wires to install.