Public Choice Theory, HSR, and Strippers Thrown in For Good Measure

Public choice is in the air, a little like fall for me.

Yesterday in planning theory class, one of my brilliant students brought up public choice economics, without calling it that, because it’s not something that makes its way into much undergraduate education (I think he went to Princeton, where such things do come up in undergraduate education).

My brilliant colleague, Peter Gordon, notes Tyler Cowen’s remarks about how about public choice economics is neglected in today’s macroeconomic debates.

Why such a neglected field? I’m not sure, other than things go in and out style in economics just like everything else. Back in the day when I was studying, urban economics and labor economics were unpopular fields, in favor of game theory and econometrics. Now at least urban economics has come back, along with public finance, as a sexy field.

Perhaps it is time for James Buchanan Renaissance, as certainly the ideas are very relevant to those who currently suspect government workers from enriching themselves at the expense of the public.

Anyhow, the basics for public choice are laid out actually pretty well in Wikipedia. I love how people have made Wikipedia better and better over the years.

So here are James Buchanan’s two brilliant books, which many students no longer read due to how old the books are. It’s a pity.

The Demand and Supply of Public Goods, first published in 1968.

The Calculus of Consent by James Buchanan and Gordon Tullock.

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Nonetheless, Buchanan is still out there, tearing things up. He recently starting taking his own profession to task over the 2008 crisis and their failures in dealing with it: Economists have no clothes.

If you read Peter’s blog, he’s nonplussed by my reactions to the announcement that HSR is now expected to cost $98 billion. Dear Peter always suspects me of being naive, but I did expect more of a reaction from supporters. Instead, it’s more of the same: the HSR is worth it, worth it, worth it, worth it, no matter what it costs. The Transport Politic embodies the response nicely. It has a supposedly convincing graphic that the state can afford the HSR project because–check it out!–the yellow circle representing the high speed rail project is such a tiny, tiny dot compared to the state’s entire product, and look! at how much bigger that big big big Caltrans dot is! According to this graphic, we’re just dumping money into to the auto-oriented bureaucracy*, so that by comparison, $98 billion for the train project seems absolutely reasonable.

Ok. First off, I hate circle graphics because they almost never accurately reflect proportions right. Does this tell us anything that a straight up pie chart wouldn’t? No it doesn’t.

And then there’s the assumption that a train project, because it costs less than one of the state’s biggest agencies, is actually a pittance, or not that expensive, after all.

Under this logic, we could invest $98 billion of tax money in strippers and call it effective public policy. Yay, us! We poured $98 billion–oh, excuse me $74.5 billion (cough)–into a hole in the ground, but it’s ok because it’s not as much we spend on other things! Wooooo!

Maybe the HSR project is, indeed, worth it worth it worth it worth it, but that graphic–oye–and that logic. Urk. Bad liberal logic in a nutshell.

So what does public choice theory have in it to explain the problem? Well, first, public choice theorists would note that the $286 billion wrapped up in Caltrans represents an ever-expanding bureaucracy where public managers have a strong motivation to expand their roles and powers. I think the average public choice theorist would argue that state departments of transportation have outlived their usefulness now that that interstate highway system has been built (I don’t think that, btw), and yet here they are, hanging on, continuing to gather resources because that is the motivation of the bureaucrat absent the profit motive: more power, more revenue, more things to command.

IOW, public choice theorists argue that with Caltrans, you are looking at the future of the California High Speed Rail Authority, which is already starting off on the “we’ve already taken billions to do very little but produce renderings and marketing plans” foot, with a $98 billion project. So that if it gets the funds to do that, it will simply continue to seek more and more rationales for its continued existence.

For the Cal HSR folks, they have no real choice–they were forced to own up to the reality of the finances at some point, after they spent years dithering, and now they must continue to the carry the banner for the project. Yes, it’s going to be wildly expensive, but look at how wonderful the trains are. Their jobs is to do their job, and their job is to try to get a train built.

*BTW, Caltrans spends a lot of its time and money focusing on transit support.

2 thoughts on “Public Choice Theory, HSR, and Strippers Thrown in For Good Measure

  1. ps, to me the really interesting public choice model of CA HSR is how they’re deliberately building a commitment trap, both in terms of laughably low cost projections just long enough to get the plebiscite through and in terms of how they’re building the easiest (and most useless) leg first.

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