John Whitehead on job creation cost with HSR

Now, John Whitehead is not exactly a scholar who isn’t appreciative of the fact that Americans overuse the automobile. But the money falling from the sky for high speed rail for North Carolina has him doing math over at Environmental Economics:

With about 100,000 annual passengers who earn an average of $23 per hour and valuing travel time at 70% of the wage rate, the annual benefits of cutting 13 minutes of travel time are about $350,000. Valued in perpetuity at a discount rate of 3% yields a present value of $12 million. Compared to $461 million in costs the net benefits are about -$449 million and the benefit-cost ratio is 0.03 (which is less than 1).


John Whitehead is, again, not a scholar you’d typically associate with anti-rail stuff. He’s a sustainability scholar, like me. It’s just really hard to take these project proposals in a world where we supposedly can’t afford to pay people pensions we promised them or K-12 schools, but we can afford to pursue unproductive projects.

I think his $23 an hour wage rate is a bit low. These are systems primarily used by business travels and tourists around the world, so that we could expect to have higher wage rates for time saved.

The comments are enlightening, too, as of course the usual objection comes up: but what about all those external cost savings we get from taking cars off the road? All the accidents avoided and the emissions saved?

These account for a small portion of the total benefit calculation by any measure, and we have to ask whether we will get these benefits at all. In his commentary on Whitehead’s post, Columbia’s David King writes:

I will also note that Google estimates that the 169 mile trip takes 2 hours and 54 minutes by car. So if you are that time sensitive you should probably just drive.

The train trip will take you three hours, the car trip 3 hours. Eventually the car trip may be expected to take longer, however.