The Wizard admits that he is belatedly trying to wrap his mind around the staggering news that President Bush is trying to browbeat Congress into approving a whopping $700 billion to bail out Wall Street.
With that in mind, I present to the public a Microsoft power point presentation that should help explain to the viewer in easy terms how Wall Street and the financial community at large got itself into the sub prime mortgage mess in the first place. Note that the power point presentation is about 2.5mb in size, ergo it will take a minute or so to download, depending upon your Internet connection. Follow the usual power point instructions to go through the presentation; press the ESC button to get out and the up and down arrows to go forward and backwards in the presentation.
I get a laugh every time I go through it and laughs are few and far between these days.
Enjoy!
Wizard
The Wizard's world has many secrets. Unfortunately, one of those secrets was blown this past week, once again by Wall Street Journal, which recently featured a friend of the Wizard who is in a beach front property rights battle down in Surfside. This time, my secret that was compromised is that one of my neighbors drives an electric car. He was featured in a Journal story entitled "You Know Gas Prices are high when Texans start driving golf carts", carried in the July 31, 2008 issue of the Journal and which can be read here.
My neighbor featured in the story, Andrew Kunev, actually lives in the part of our compound next to mine. He's been here for some time now and I pass by his three wheeler, white colored Zap Zebra Sedan, parked just inside our compound gate nearly everyday. The car always has a bit of an unbalanced look to it, which would cause me never to consider buying a Zap, but I've never seen any performance problems whenever I've seen him on the road. I saw him zooming eastbound along Westheimer last Friday evening as I was coming home from work. Mr. Kunev can be seen at 1 minutes 3 seconds, 1 minute 40 seconds, and 2 minutes 12 seconds in the Journal's online video, which accompanies the story.
Another encounter I have had recently is that I have seeing a teenager in the neighborhood north of where I live driving around on an electric scooter while I run workouts. He goes pretty fast down the street - probably 20 miles per hour - but the scooter makes a lot of noise. Nonetheless, he told me once while stopped at an intersection that he was coming back from the grocery store, something obvious from the fact that he was carrying two small bags in a backpack while on his scooter.
These stories have got me all pumped up about the idea of owning my own electric car, possibly as a project. Many years ago, I owned a green colored Volkswagen Rabbit convertible, much like this one. One idea I have is to go look online for an old VW convertible and convert it into an electric car. I love convertibles and am starting to hanker for another one. I spotted one website actually sells custom converter kits for doing it. Here are some photos of cars whose owners have done the job. Another idea would be to convert my current car into an electric car and buy another gas powered one.
The Wizard doesn't drive all that much, ergo I sorely doubt that on most days I would tax the capacities of an all electric car. My job and most amenities are within easy driving range of an all electric vehicle. I would probably keep a gasoline powered one for longer trips.
The Wizard believes that General Motors is making a mistake with the Chevrolet Volt, that being that at first GM was telling the public that the Volt would be in the $15-20,000 range. Then we heard that the Volt would run $30,000 - $35,000, but now we are hearing that the Volt might retail at $40,000. $40,000 is rather steep for most families.
The Wizard thinks that what Mr's Peters and Kunev are the ones on the right track. Their vehicles cost only $7,000 - $18,000. The main worries are how well the batteries will hold up over time (and when they will need to be changed), along with inclement weather and safety issues.
Still, this is low cost, non-gasoline dependent mobility, which can scale and which is within the price range of most developed economy families right now. I know from much travel and experience that motorcycles and scooters are a heavily used form of transportation in Malaysia and Thailand, where annual incomes are in the $200 - $5,000 range, much lower than those found in the West. Familiarity, along with preferences and tastes will count for much, but the Wizard thinks that solutions like this may be a realistic part of our mobility future.
Wizard.
On June 17, 2008, National Public Radio picked up on a property rights battle, previously covered by the Wall Street Journal, involving a friend of the Wizard named Brooks Porter. Brooks, along with his wife Merry, own a beach front property in Surfside Texas, near Freeport, which they have held for 25 years.
As the NPR story relates, the Porters purchased the house as a rental and occasional weekend beach house. The problem is that over the past 25 years, the Gulf of Mexico has eroded the local beach heads dozens of feet, sweeping grasses and dunes with it. The Porters, along with some other locals, now have housing that sits just yards away from the shoreline. That in turn puts them on the beach which is in violation of the Texas Open Beaches Act, which states that the beach is effectively a park.
Brooks told me a while back that the problem is that the beach erosion is not entirely a natural phenomenon, due to acts from the Army Corps of Engineers and other entities. He and the wife intend to stay put.
As the NPR story correctly concludes, this is a big looming problem. To quote NPR:
How this case gets resolved could set a precedent far beyond Texas. What if rising seas threaten one day to swamp skyscrapers in Manhattan or entire towns in Florida? Whose responsibility will it be to move buildings out of the way? Who will take the hit for the lost property value?
Mr. and Mrs. Porter have fought this battle for 10 years now. Stay tuned.
Sigh...
Wizard.
On February 13, 2008, the Wall Street Journal published a fascinating story on a largely unnoticed revolution going on in American transportation. American railroads are, for the first time in a century, making massive new investments in their infrastructure. Better yet, not one dime of the $10 billion (with $12 billion more planned) is coming from public coffers. From the story:
For the first time in nearly a century, railroads are making large investments in their networks -- adding sets of tracks, straightening curves that force engines to slow and expanding tunnels for bigger trains. Their campaign is altering the corridors of American commerce, more so than any other development since interstate highways spread to the interior.
The story goes on to say that this burst of new private development of railroads has been driven by a massive burst of finished consumer goods coming in from Asia. These goods add to the usual cargo that freight rail carries, such as coal, grain, and chemicals. Compare all of this to the slovenly inefficiencies of Amtrack or light rail inner city transit. Moving goods is cheap. Moving people - at least in the economically affluent part of the world - is expensive.
This development, the story goes on to say, is generating development along the pathway of the railroads, but the development is primarily commercial in nature. Also, the railroads and freight trucks complement each other, where trucking companies find that sometimes they can ship goods long haul over rail rather than doing it over the Interstates.
And speaking of the Interstates, I was reading a story in this weeks' issue of The Economist of China's massive spending on transportation projects. The print edition carries a side story on the effects that America's Interstate Highway system had on productivity while it was being built. The Interstates were initially estimated to take 12 years to build at a cost of $25 billion. At the end, it took 37 years and cost (in 2006 dollars) $425 billion.
Question: Was it worth it? According to Ishaq Nadiri and Theo Manuneas, yes it was. America went through its greatest and most long lasting economic boom during its history after WWII and the Interstates had quite a bit to do with raising that productivity and making America a vastly wealthier country. Broadly speaking, Nadiri and Manuneas say that the greatest gains were reaped early on in the program and declined slowly as time went forward. The gains of the late 1950's were 31 percent of America's economic productivity growth, 25 percent by the late 1960's, and down to 7 percent by the late 1980's as more money was spent on road maintenance. One out of every five dollars was also being siphoned away from road building to build rail transit and bike paths. Freight costs in 32 of 35 industries dropped by an average of 24 cents for every dollar spent on the system.
Could something similar to the Interstates been done privately? The Interstates had incorporated into them some 14,000 miles of toll roads, mostly in the Northeast. Conceivably, a far seeing Governor and Legislature in some states could have launched state wide initiatives using toll roads, but it would have taken multi state cooperation to achieve a similar result to the Interstates. As it is, now that the Interstate system is complete, I wonder whether it would not be such a bad thing to turn most of it over to the states and either curb or shutdown collection of the federal gasoline tax the way that the Republican Congress of 1994 wanted to do? Entertaining ideas.
Wizard
I received the following email today. I will share it in its entirety, the only comment being that the Los Angeles MTA has spent $11 billion (inflation adjusted) on rail transit since 1985, only to achieve the same number of boardings it achieved 22 years ago.
Wizard.
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Riding the Silver Line bus rapid transit from Boston Logan Airport into downtown Boston last weekend via a Big Dig tunnel -- a quick ride, on a bus with luggage racks -- got me looking at the transportation performance of the Big Dig project.
Answer, from recent professional presentations: enormous reductions in traffic congestion. Apparently, the traffic engineering in the new tunnels eliminates weaving and bottlenecks. T-Ops is working 24 X 7 with cameras and other sensors. b> The bottom line number is 62% improvement in traffic flow.
See recent illustrated document attached in pdf, an end-of-year edition of Peter Samuels' Toll Roads News - found here.
There is a Powerpoint presentation in PDF showing performance graphics by ITS engineer Dan Baxter from last October here.
Dan Baxter and Peter Samuels describe the financial mismanagement
as well.
For those who want more, there is lots of detail in this screen scrape of an article by the same Dan Baxter in Roads & Bridges magazine from June 2007.
Big believer
Despite setbacks, "Big Dig" potential benefits are stratospheric
- By Dan Baxter
This year marks the 25th anniversary of Boston's Central Artery/ Tunnel project, nicknamed the "Big Dig." Records of project planning activity date all the way back to 1982, and as of 2007 all sections of the project are now open to traffic.
More than $14.6 billion has been expended, and recent projections put completion closer to $15 billion. As with all highway projects, the Big Dig journey passed through planning to design, then on to construction and finally into operations and maintenance. The similarities with other highway projects stop there. The Big Dig has been unique in many ways, not all positive, including unparalleled cost escalations and highly publicized construction problems. Prior to completion, the only positive news has been a few construction achievements well known in the industry and the management of traffic during construction. New measurements and projections of project benefits are now available and an assessment of the true value of the project is possible. Even if the project does eventually achieve its original goals, will the highway construction industry ever see another mega project like the Big Dig? If there is another mega project with the scope and cost of the Big Dig, will it be managed differently based upon lessons learned? Looking back at the Big Dig, what really went wrong and what really went right?
True to traffic
With the final cosmetic touches now being put on the largest mega project in U.S. history, it is now possible for the first time to speculate how history will judge the project. As with every human endeavor, nothing is in reality a total success or a total failure. A Big Dig scorecard needs to consider costs, schedule, quality of construction and tangible benefits to the public. At a staggering $14.6 billion for 7.5 centerline miles of highway, the cost of the project is over $300,000 per inch. At that rate, achieving a positive benefit-to-cost ratio for the project will require unprecedented benefits. However, the facts emerging show the numbers may be closer than you might think.
The Big Dig has had more ups and downs than the numerous ramps that drop from the surface into the labyrinth of new subterranean highways. The most recent blow to the project came in August 2006 when a fatal accident resulting from a ceiling failure became the latest in a series of project problems to make national headlines.
Although it has been consistently maligned in its hometown newspaper, the news from the Big Dig is not all bad. Some monumental construction challenges have been met and mastered, including the soil freezing and tunnel jacking required to complete the I-90 extension to the new Ted Williams Tunnel. Now that the facilities are fully open to traffic, it is clear that the excessive daily traffic congestion and related air pollution that once gripped downtown Boston has been substantially reduced. A large portion of the vehicle delay disappeared with the giant concrete and steel elevated freeway that for two score years blackened the fourth-story windows of adjacent Boston buildings.
When it comes to traffic, the promise of the project planners to vastly improve traffic flow was kept, and even exceeded. A popular sound bite used by project critics during the design phase was "it will be obsolete the day it opens." Traffic data collected and compared with "before" conditions have proven the critics who voiced that position wrong. Dramatic reductions in travel time and increases in traffic flow have now been documented in a new study recently published by the Massachusetts Turnpike Authority (MTA). The study was conducted independently of the Big Dig construction management consultants. The study, titled Economic Impacts of the Massachusetts Turnpike Authority and the Central Artery/Third Harbor Tunnel Project, performed by the Boston-based international transportation and economics consulting group EDR, stated that "the original 1990 environmental projection was that the `Big Dig' would improve traffic flow by 40% by 2010. Today, the project exceeds that with a 62% improvement in traffic flow. This was accomplished while overall traffic volume grew by 23.5% since 1995."
Improved traffic flow is only one part of the picture. New public parks, reconnected neighborhoods, revitalized commercial activity and an aesthetic face-lift unparalleled in American municipal history have prepared Bostonians for a brighter socioeconomic future.The Rose Kennedy Greenway and the Zakim Bunker Hill Bridge will transform the path of the old Central Artery into an extraordinarily beautiful stretch of parkland crisscrossed by sidewalks and streets that reconnect the city to its waterfront. The bustling crowd of locals and tourists that can be seen every day walking about at the Faneuil Hall Marketplace will soon be able to stroll farther east through the R.K. Greenway to parks like Christopher Columbus Park that sit at the bay's edge. Dramatic increases in the value of downtown, South Boston and Seaport District real estate have been realized and are projected to soar with the completion of the greenway. As spectacular as the traffic improvements and urban area transformations may be, they are not sensational enough to capture national headlines. The Big Dig's unexposed benefits are every bit as real as the costs and problems so readily exposed by the broadcast media.
Sign from above
In spite of the realization of the key kept promises, the Big Dig is as beleaguered as ever, and new fears about structural integrity have eroded the public's perception of the project into a mired mess of mixed reviews.
After enduring more than a decade of political firestorms and media bashings, the past two years has seen a series of successful and meaningful ribbon cuttings. The opening of new tunnel sections and connector ramps, the world's widest cable-stayed bridge and numerous public parks only temporarily lifted the spirits of the remaining project partisans. Those spirits must certainly have fallen again with the concrete ceiling panel that killed a motorist last year. The tragedy started a new series of searing public commentary and politically charged lawsuits.
In the days following the disaster, Massachusetts Gov. Mitt Romney "knee-jerked," went on the offensive and publicly questioned the safety of the tunnels. As the top elected state official, his lack of confidence prematurely trumped lesser bureaucrats who were responsible for determining the actual cause of failure and dealing with the problems. The reaction was predictable if not understandable as the Big Dig has always been an easy target for criticism. Defending the Big Dig project in the light of this catastrophe might appear to be political suicide in the short term. However, joining the ranks of critics may erode long-term credibility when it is time to take credit for the benefits.
The accident that killed Milena Delvalle of Boston's Jamaica Plain was caused by the failure of an epoxy-based anchoring system that held a large concrete ceiling panel in place. Reports from the scene indicated that there was no evidence of epoxy on some of the anchors that were lying in the debris on the road. A cursory search of public project records reveals that ceiling panel installation methods have been the subject of claims and changes and formed the basis of a value-engineering effort managed by the management consultant, a joint venture of Bechtel and Parsons Brinckerhoff. The causes of the failure have been reported to be a deadly mix of poor workmanship, flawed inspection and questionable decisions by project management that ultimately reduced the factor of safety to save time and money.
The investigation found that the failed anchors were among the first to be installed using the epoxy method, with the implication not that the oldest anchors failed first, but that the first anchors were installed by crews inexperienced with the method. Although there is no way to prevent motorists from having accidents due to human error, there is no excuse for a purely structural failure due to nothing more than the weight of an element under normal stress conditions.
As each month goes by absent of more failures, the August 2006 tragedy looks more and more like an isolated problem. People in the construction industry know that history is peppered with tunnel collapses. Less than a month after the Boston accident, a highway tunnel linking the cities of Guangnan and Yanshan collapsed in southwestern China, trapping 25 workers. Unfortunately, like so many other "firsts," the Big Dig is the site of the only highway tunnel collapse in memory to occur shortly after the tunnel was opened to traffic.
Structural failures over the past two years provide a roadmap to the No. 1 thing that has gone wrong with the Big Dig. Since project inception, the highly privatized program management of the project has had amazingly minimal public-agency oversight, placing the true power of the purse strings and key day-to-day decision making in the hands of the management consultant.
Highway construction projects a fraction of the size of the Big Dig have had twice as many public-sector managers. Privatization itself is not the problem, because without privatization mega projects are not possible. The problem ensues when the privatized management is forced to operate outside their realm and role in order to fill a vacuum. When construction problems occurred, Boston political adversaries and the media have had the upper hand over the Big Dig management consultant, which is constrained both by its position as a private firm and its responsibility to deal in technical accuracy rather than shooting from the hip.
In the case of the tunnel leaks in 2004, the strong condemnation by the Boston Globe essentially went unanswered for six months. Six days is too long, much less six months. The Big Dig has needed both a political and a public-agency advocate empowered and motivated to respond quickly to quell the rush to judgment. Future mega projects need more than engineering and construction leadership. Advocacy in the ranks of the politically elected leaders and appointed agency heads must be cultivated and maintained to establish ongoing public confidence and accountability.
Money to move
The second thing that went wrong was the magnitude of the cost escalation. Some cost increases would be expected, but quadrupling costs point to either incompetence in estimating or intentional lowballing.
The reality of the Big Dig is that from the start, schedule compliance was favored over budget adherence. Management spent money to keep the project moving, knowing that failure to overcome obstacles in individual contracts would have a ripple effect throughout the project. In the mega project environment, the whole is split into many smaller parts that must fit together in both space and time. If one contractor's schedule slipped, several other contractors could claim a delay. Public-sector and political accountability also would have gone a long way to address the continuing issue of cost escalation. The decision to blame the management consultant for underestimating true project costs during project planning may have provided a convenient scapegoat to deflect political accountability. However, it also had the long-term detrimental effect of exposing the management consultant to media pressure to which it could not respond and eroding the public confidence in the privatized program management of the Big Dig.
When a technical problem occurs that rightly requires the management consultant's action, even their best efforts are met with skepticism. The lesson learned is that you can't have it both ways. If you use your program manager as a scapegoat in the media, you can't expect the public to accept your total reliance on him when problems arise.
Still glossy
The advocates of this project in the 1980s produced glossy brochures that focused primarily on elimination of the habitually congested elevated portion of I-93 in downtown Boston. One particularly powerful brochure was the "Now you see it, now you don't" piece that included a photo of the jammed Central Artery on the cover and an artist's rendering of a new park-like setting in the same location. The primary benefits described in detail were transportation related, and the secondary benefits described much more vaguely had to do with reconnecting neighborhoods" and creating new green space for Bostonians to enjoy. It is now possible to compare the promises of the project's visionaries with the realities of the as-built project.
A justification for the project was certainly that operation of the existing highway had become unacceptable by any standard. The 14-hour-long peak hour average speeds on the elevated Central Artery had dipped into single digits, reflecting one of the worst operational conditions in the world. Due to the extremely poor existing conditions, the contrast between the before and after conditions is truly dramatic and helps to justify the cost of the project.
The astounding results of the EDR study show dramatic improvements in average speeds and delays. As an example, the daily average travel speed for the old Central Artery northbound was 10 mph; the Big Dig quadrupled it to 43 mph. The average speed for all harbor tunnels (the new Ted Williams Tunnel plus the existing Sumner and Callahan tunnels) nearly tripled from 13 mph to 36 mph. These unprecedented improvements in traffic flow have the combined effect of reducing the daily hours of vehicle delay on these facilities a whopping 66% from 38,088 daily hours of vehicle delay in 1995 to 12,834 in 2005 after the Big Dig opened. The delay reductions for some individual minor movements were mind-boggling, such as the notorious bottleneck between Storrow Drive eastbound and I-93 northbound that improved by 81%. This was the site of an apartment building with a sign that read "IF YOU LIVED HERE YOU'D BE HOME BY NOW." The Big Dig decreased the average travel time through this segment from 16 minutes to less than four minutes. This perpetual traffic jam was as much a Boston landmark as the Old North Church, and now it is essentially gone. All of these numbers were achieved in spite of a growth in overall traffic demand reflected in vehicle miles traveled (VMT) of 13% in the same period.
Where did the traffic go? The traffic volume is still there. It has even increased. It is the delay that was eliminated, and this was the vision of the project. The true genius of this mega project has always been not just the replacement of decaying infrastructure, but the amazingly efficient transportation connections that the new viaducts, bridges and tunnels create that speed traffic flow throughout the metropolitan Boston region.
The Big Dig is essentially America's largest interchange. With these connections, the whole metropolitan highway system operated by the MTA finally functions as a system, and reductions of demand on formerly bottlenecked facilities abound. Traffic is better throughout Boston, not just in the project limits.
The EDR study projects that "these improvements are now providing approximately $167 million annually in time and cost savings for travelers. This includes $24 million of savings in vehicle operating cost plus a value of $143 million of time savings. Slightly over half of that time-savings value ($73 million) is for work-related trips and can be viewed as a reduction in the costs of doing business in Boston." The study points out that the promise of the original 1990 project documents used for the environmental assessment projected that the Big Dig would improve traffic flow by 40% by 2010.
In light of these improvements, is it possible to consider the Big Dig a failure? Unfortunately, if traffic were the only benefit, the astronomical project cost would make the Big Dig investment questionable in comparison with a more traditional reconstruction. The traffic analysis portion of the EDR report claimed that the completed project provides annual savings of $177 million (2005
dollars) in operating costs and delay reductions for roadway users. Although these numbers are impressive, based on traffic benefits alone it would take 80 years to break even (not considering the cost of a traditional alternative). In order to evaluate the true benefits of the Big Dig, the economic effects on real estate also must be considered.
Positive square feet
The historically volatile economy of the greater metro Boston region now sits at the near side of a new economic boom that will be fueled by nothing more than the subterranean superhighway brought by the Big Dig. In real estate, location is everything, and the Big Dig is transforming industrial wasteland choked by congestion into easily accessible high-end real estate.
The Big Dig will create an estimated 16 to 21 million sq ft of new commercial and residential development in the South Boston Seaport District alone. The EDR study stated that real estate projects already developed or in construction and planning total 10 million sq ft of office and retail space, including nearly 8,000 new housing units, reflecting $7 billion in private investment made possible by the Big Dig. The increase in property value is estimated to bring in as much as $120,000 million per year of much-needed property tax revenue. Combined with the prospect of future increases to toll revenue, this boost should help the commonwealth maintain its investment provided the dollars are properly appropriated to maintaining the roadways.
Given the history of Boston and the value of the adjacent Back Bay area, a man-made residential and commercial gold mine created from the swampy marsh south of the Charles River, there is no doubt that the market forces needed to capitalize on the Big Dig investment are converging and will drive the project's true value into the stratosphere within the next 20 years. With the concrete and steel canyon of the Central Artery being replaced by the Rose Kennedy Greenway, a remarkably beautiful property value engine that will provide a 180° swing in the aesthetics of downtown Boston, the project planner's commitment to keeping the air rights publicly owned will pay off 10-fold.
Another clear winner from the Big Dig is Boston's Logan International Airport. After years of steadily losing passengers to expanding airports in New Hampshire and Rhode Island due to the untenable travel time in the existing access highways and tunnels, Logan will solidify its position as king of the New England airports. The EDR study reported that access to Logan "is now easier for an added 800,000 Massachusetts residents who with the full opening of the I-90 connector to the Ted Williams Tunnel, now live within 40 minutes of the airport. Today, 2.5 million residents live within 40 minutes of Logan International Airport."
The Big Dig also delivered a massive shot in the arm for the New England economy. The cost of the cubic yards of excavation, new concrete and steel do not add up to $14.6 billion. The difference was corporate profits and job income. The Big Dig created nearly 50,000 jobs in Boston. Over 50 engineering teams and over 125 contractors received valuable contracts. Although some Boston
families paid dearly for the privilege to work on the Big Dig, the worker safety record was good. The Hegarty family in Dorchester lost their father, John, the first worker killed on the project after six years of construction without a fatality. Given the complexity and size of the project, the overall safety record of the project was far above average and provided unusually safe and high-paying jobs.
Touching the nerve
Recently, I sat in the $200 million Operations Control Center talking with Jim Murphy of the MTA, the man who is responsible for day-to-day operation of the world's most expensive labyrinth of tunnels, freeways, viaducts and tollways. Murphy spoke with sincerity in a serious tone about his job managing the facilities. He dodged no questions, admitting a few shortcomings of the project, but at the same time described the complexities and realities of this underground superhighway in a matter of fact way.
It may be hard for some to admit it, but the project worked. The Big Dig did what it was supposed to do, what it was promised to do. All the critics who lined up to say it would fail were wrong. The criticism of project cost escalations was justified, but the total value of the project to Boston will continue to exceed expectations. In an era when spending on a foreign war can be $2 billion per week, the cost of the Big Dig could be expended in eight weeks.
Baxter is North American ITS Director for Stantec.
Source: Roads & Bridges June 2007 Volume: 45 Number: 6
Copyright © 2008 Scranton Gillette Communications
Final notes:
Speaking as one who often experienced Central Artery congestion in the 1970s as a part-time Boston resident, it's an impressive, albeit expensive human achievement. There was a 2006 journalistic celebration of the achievement as a reversal of urban renewal destruction in the Washington Post at
http://www.washingtonpost.com/wp-dyn/content/article/2006/08/04/
AR2006080401755.html
http://www.masspike.com/traffic_cameras/trafficcams.html
provides streaming live video of traffic in central Boston.
The front page story on today's Houston Chronicle bespoke of the travails of $100 per barrel petroleum to modern day society. It was a good article, underlying the fact that the oil and gas industry does not waste one drop of a barrel of petroleum, but instead finds a way to use all of it. I write here because there was one aspect of the price rise of petroleum in recent years that was not covered by the story and that is the weakening of the United States dollar as a currency. This matters because petroleum is denominated in U.S. dollars when it is traded on world markets.
To give gentle readers a sample of how much the U.S. dollar has weakened in value over the past 5 years, I point you in the direction of the excellent Yahoo Finance and world currency website. What is really great about the Yahoo finance pages is that a reader can easily compare how the dollar has fared in world currency markets and what effect this can have on tradable goods.
Examples of how much the dollar has weakened include:
1) The dollar verses the euro. The dollar has gone from being worth 1.20 euros in 1999 to 0.96 euros in January 2003, all the way down to a petty 0.678 euros in January 2008. Put it another way, the euro was worth some 85 cents when it was created. Now a euro is worth about $1.50. The dollar has effectively lost some 44 percent of all of its value against the euro in the past 9 years.
2) The dollar verses the Brazilian real. I went to Brazil in 2003 on vacation. The real, (pronounced "hey ais"), was trading at 2.8 to 1 dollar when I went there. As one can see from the chart, the real has gone from 3.5 reals to 1 dollar in January 2003 to 1.76 reals to 1 dollar in January 2008. That's right folks. The Brazilians, who possessed currencies which suffered massive hyperinflation during long stretches of the 20th century, are now in possession of a currency which has doubled in value against the dollar in the past 5 years.
3) The Canadian dollar verses the U.S. dollar. The loonie has gained 1:1 parity on the dollar for the first time in some 30-40 years, having been worth only 64 cents in January 2003. So the loonie has also gained 55 percent in value against the dollar.
4) The U.K. pound verses the U.S. dollar. When I first went to the U.K. on holiday in May 2002, the Queen's money was worth $1.50. Now the pound, which hit $2 earlier this year, is just under, currently trading at $1.97. The dollar has lost 30 percent of its value against the pound in the past 5 1/2 years.
5) The Thai baht verses the dollar. The baht was trading at 43 to the dollar in January 2003, but now it only takes 30 baht to buy a George Washington note. The dollar has slid some 31 percent in value against the baht in the past 5 years.
6) The Russian rouble has gone from 32 to the dollar in January 2003 to 25 to the dollar in January 2008.
But then we compare these numbers against some of America's big trading partners, including Mexico, Japan, and China.
7) The Mexican peso has held steady against the dollar, losing only 8 percent of its value since January 2003.
8) The Japanese yen continues to bounce around the 110-120 yen to the dollar mark, a range it has done with some exception of the endaka period of the Clinton years.
9) Even the Chinese yuan, which traded at 5.2 to the dollar when I was in China, and which was revalued at 8.28 o the dollar in the 1990's, has been gaining strength and is now at 7.4 to the dollar.
As is well known, the Asian and Middle Eastern countries have routinely purchased untold amounts of U.S. Treasuries, both to help buoy their own currencies so as to continue to be able to sell something to America on terms helpful to themselves, and as a hedge in case markets lose faith in their own currencies. They also need a place in which to invest which is relatively safe and where their money will be put to productive use. They find all of these when they buy American treasury notes. In contrast, countries which have done little to interfere with currency markets have seen their currencies strengthen considerably against the dollar.
The Wizard thinks that what we are seeing is a long slow correction in the world's terms of trade with America. The United States has been running astronomically large current account deficits for 25 years now, and we have run up trillions of dollars of debts on our federal treasuries. Americans have essentially stopped saving money. Moreover, we will see in the next decade the retirement of the Baby Boomers en masse, which will per force require the United States to either raise taxes to meet the political demands of the Baby Boomer cohort retirements, cut their benefits, or continue to let things stay as they are and run up deficits and inflate them away through a punitive devaluation of the U.S. dollar.
The logical conclusion here is that world currency markets have spoken and have decided that the United States will not put its financial house in order, hence world markets will force America to put its house in order via the devaluation of the dollar. This of course revalues the terms of trade in all tradable foreign goods. As the Chronicle article notes, Americans will find foreign travel much more expensive, but we know that petroleum is also one of those traded goods. The Wizard postulates that had the dollar retained its strength, then we would be seeing oil prices at $60-$70 per barrel and not $100. That of course still means that the price of a barrel of oil has gone up 2-3 times since 2000, but that is different from a 5 fold increase in prices. What is interesting though is that a continuing slide in the value of the dollar would presumably improve terms of trade vis-a-vis the rest of the world, but it would also continue to push up the cost of petroleum imports which in turn would offset the improvements of the balance of America's terms of trade.
It is hard to tell how much of a correction would be required for America to come back to an equilibrium. The Wizard supposes that the Chinese, Japanese, and the Middle Eastern countries would need to be convinced that the dollar would continue to erode in value to the point where they would quit buying them. That in turn would send the dollar into a fully corrective tailspin. Maybe the dollar needs to lose another 50-75 percent of its value, on top of what it has lost already, before our current accounts finally balance out once again. On the bright side, manufacturing and other aspects of the economy which are not stuck in country would find it more preferrable to stay in America rather than to flee offshore. Jobs would be more likely to stay in country, indeed some of them might come back here.
As for what that would do to the price of a barrel of oil? Well, are you prepared for oil selling at $200 - $300 per barrel? Hold on to your seat folks. That would be a great reason for those jobs to come back here if we see prices like that. Prices like that also might finally make alternatives like cellulose ethanol a viable competitor to conventional petroleum. Hmmm. Now is that another reason why those Middle Eastern governments buy up our treasury bills? Think about it.
Wizard
Yesterday afternoon found the Wizard rearranging portions of his vast personal library of books when I stumbled across a book which I have not read in some 10 years: Marguerite Johnston's Houston the Unknown City, 1836 - 1946. In the Wizard's view, Ms. Johnston's history book is really more of a collection of journalistic accounts of Houston's early history, but all authors have their individual writing styles so you take what you can and go with the flow.
Today's epistle is a brief encapsulation of chapter 28 of Ms. Johnston's tome, which she entitled Automobiles, an Unnoticed Revolution. Packed in those six and one half pages are early accounts of what the world was like when automobiles were entirely new.
Ms. Johnston repeats an observation which Robert Bruegmann wrote in Sprawl, namely that motorized automobiles and trucks did not replace rail. What automobiles replaced were horse drawn transport. To quote Ms. Johnston:
In 1900, horse-drawn carriages, mule-drawn wagons, and electric streetcars were all anyone could need for transportation. Automobiles came into Houston as a sport, and an athletic and adventurous one at that. Nobody predicted that within twenty years, automobiles and horses would have traded places - the car to be driven for daily transportation and the horse to be ridden on fine mornings as exercise for Houston ladies and gentlemen. Very few foresaw that these would swell in number to provide a new use for the oil gushing up out of the ground at Spindletop.
Ms. Johnston wrote that the automobile age began quietly, a vehicle acquired here and there. She writes that by December 21, 1901, the Houston Chronicle was able to write that :
Automobiles have come to Houston... For more than a months now these agile, swift-moving steam machines have been dashing back and forth over the downtown streets.
Our socialite author then goes on to tell her readers that horse livery stables and blacksmith shops all over Houston stood ready to rescue horse drawn vehicles with broken axles or horses who had lost their shoes, but that nothing of the sort existed for these new fangled vehicles. Indeed part of what made all of this so amazing was that in the beginning there was no supporting infrastructure for motorized transportation.
Ms. Johnston tells of how C.L.Bering made a cross country trip in a car in 1903 and was cheered in every town he passed through. April 1, 1903 (appropriately) saw the first record of a Houstonian getting ticketed and fined $10 for "fast driving down Main Street." By 1906, Houston had 80 automobiles. On June 21, 1909, the Houston Chronicle reported that:
The first local party of automobilists to successfully make a trip from Houston to Galveston and return in a single day made the run on Sunday, leaving here at 6 o'clock in the morning... returning ... about 9 o'clock in the evening."
She then goes on to describe how such country trips were no mean feat, due to the fact that the roads were usually dirt ones, with wheel ruts, no maps, and no signposts. The trip to Austin involved trips opening gates through private property! Ms. Johnston writes of Julian Huxley (yes, that Julian Huxley!), who at the time was teaching at the Rice Institute. Mr. Huxley bought a Model T for 100 pounds ($5,400 - $10,700 in 2006 dollars) when he was in Texas and later wrote of it:
It was a gallant little machine which I could drive across the prairies. In the winter vacation, I drove with a colleague in my new car to see Stark Young, professor of comparative literature at the State University at Austin...
This important route from Houston to Austin soon turned into a dirt road, so bad that at one swampy place I had to turn off into a field.
Ms. Johnston' goes on to write that Dr. Huxley got stuck in the mud on that hapless trip.
From 1906 to 1910, the number of licensed automobile owners in Houston increased 10 times. From 1910 to 1913, the number increased another 5 times on top of that. There were 4,143 autos in Houston by 1913. Ms. Johnston wrote that cars were starting to replace carriage horses in the stable at the back of the property. She wrote that saddle horses held out for another two decades.
Modes of death changed. Deaths incurred from runaway horses, animal bites, and diseases were replaced by automobile accidents. Amongst Houston's early fatalities was nine year old LaRue Sachs, who was killed by a motorist. La Rue Street, located off of West Dallas near Waugh Drive, is named after her.
Ms. Johnston goes on to describe what it was like to actually operate and ride in early automobiles, saying that glass windows and the hard top and not yet come. Dusters and goggles were part of the driver's uniform. The ladies wore scarves over their hats to counter the stiff breeze from traveling 30-40 miles per hour. Lap robes were common. Other perils awaiting those intrepid new car buyers included flat tires which were commonplace. Patching holes in inner tubes was a skill that many young men of the era learned fairly quickly.
The crankshafts were located in front under the radiators. Turning them often required an adult male's physical strength and it was harder to turn them over in winter time. Some covered the hoods of their cars with blankets or lap robes to keep the lubricants from congealing. On some really cold mornings, motorists would light up charcoal heaters under radiators.
Electric cars were out and about, competing with the gasoline powered ones. Some well known figures in Houston like Mrs. Albert Bath and Mrs. Will Clayton drove electric cars, where Ms. Johnston notes that these vehicles needed to be plugged in and recharged after daily runs.
Running boards were another frequent feature of cars of the era, noting that children and young people would sometimes hang on to them for short trips. Running boards were done away with as newer cars were designed with more streamlining.
Then one day, a fellow named George Hawkins decided to build a garage attached directly to his house. He persuaded developers to push 10 1/2 Street through to his driveway. More of that was to follow.
Ms. Johnston's chapter is a great read. She does not, however, discuss observations such as that motorized transportation use is strongly positively correlated with incomes, and that accordingly the adoption of automobiles had much to do with rising incomes and living standards. However her writings do give insight as to how much trouble people were willing to put up with in those early days towards operating an automobile. In fact one could make the observation that the hassles our ancestors faced in operating motorized transportation were merely a tradeoff and may have been less than the hassles they faced in the upkeep of horses and wagons. Her work also shows that the people of that era created an entire operating infrastructure for automobiles within a manner of a few decades, something that should put to sleep any worries about the future of having to arrange a new infrastructure to support ethanol fuels from cellulose (ethanol absorbs water), or having to produce electricity from hundreds or thousands of square miles of solar panels or wind turbines. When it makes economic sense to do so, then those innovations will come.
Wizard
This past Wednesday, December 12, 2007, HPRA member Brooks Porter was featured in the Wall Street Journal in a story entitled Whose Beach Is This Anyway? Now we humble property rights advocates here in Houston have to deal with the fact that one of our members is world famous!
Amusement aside, as can be read from the story, Mr. Brooks and his staunch hold out neighbors have been fighting a property rights battle for some years now. At stake is the fact that Mr. Brooks purchased a pair of beach houses 25 years ago, but over time the Gulf of Mexico has slowly eroded away the beach at a rate of several feet per year. Now their homes lie within the vegetation line, ergo they are on the beach which is open access as per the 1959 Texas Open Beaches Act. Some of the holdouts basically want the State of Texas to buy them out, while others absolutely refuse to move at all. They say that State action to move the Brazos River has altered water flows which have greatly hastened beach erosion. Meanwhile, the Open Beaches Act apparently makes little provision for issues like beach erosion.
But as one might expect about the political classes, the Great State of Texas isn't about to pay up for a fully valued condemnation, something I have often discovered is the case when governments face the prospect of having to actually pay for swiping things away from people. As can be denoted from the story, the State is willing to pay money for relocation costs only.
Needlessly making life annoying for the beach home owners is the fact that the Texas Surf Riders Association asked (and was allowed) to join the suit on the side of the State. It seems the Surf Riders group has done rather well for itself over the years suing various property groups. The accompanying film shows a member of the Surf Riders complaining about rebar and septic tanks left on the beaches, but rebar was put in place by villages and those septic tanks could be found from anywhere and put on the beach for dramatic purposes.
Moreover, I have an incredibly hard time understanding how it is that the Surf Riders would get wound up by this. Unless the homeowners would actually try to define away the entire beach as their own property (something not talked about in the story), then as an interested bystander, it seems to me that both groups could co-exist. The homeowners could get their homes, while the Surf Riders and beach goers get their beach access. What's the problem?
As an advocate of property rights, I have a hard time understanding how the State cannot cough up money for a full condemnation buyout of some of the hold outs who may accept a full buyout offer. If the Act also makes little provision for erosion (and I have to admit I have not read the Act while writing this), then the issue needs to be sorely revisited before more people get caught up in problems like this.
Then there's a philosophical issue that certain groups say that property rights are defined and granted by society to members of that society. If that is the case, then I ask such people a rhetorical question. That would be that if property rights are bestowed by some act of noblesse oblige by society, then it would seem that property rights can be swiped away by society by effectively defining them away, can they not? That indeed is what is going on here and in every place where zoning is in effect.
Wizard
Oh my goodness! Even the Wizard didn't foresee this bolt from out of the blue cast by Tory. $1.8 billion for a 14 mile light rail line? $130 million per mile for light rail? Richmond and Wheeler costing $1.3 billion?
Just this past week I wrote about Metro's $3 billion limousine. Now, 30 miles at $130 million per mile is $3.9 billion. Add in the $520 million Main Street train and the $300 million Intermodal temple and you have a $4.7 billion limousine. I tried to show an argument that Metro could afford to field 500 buses on the road for a $3 billion limousine. Now the opportunity costs of the rail build out would mean we could probably operate 800 - 1,000 new buses everyday out on the road instead of 500. Instead, we have 18 rail cars on Main and Frank Wilson wants to buy another 100.
Folks, this is nothing short of a disaster! For American cities that were built in the age of the automobile, we need to completely reorient our public transportation tax dollars towards building up massive investment trusts for operations purposes - which would be inviolate and could not be touched by elected officials - and get them completely away from flashy transit monuments. Leave the massive capital spending for New York's subways and maybe Chicago. As described in my previous post, at a $4.7 billion we could acquire and operate 5 or more times as many additional buses out on the road as rail cars - indeed we could completely bury all of Metro's five rail lines with two times as many additional buses as rail cars - and still have some 400 or more new buses left over for the entire rest of the City. This would cut down wait times everywhere, give us a vastly more nimble transit system that would serve the entire city, rather than have a few dozen miles of trains going nowhere near where I need to go and a shriveled, truncated bus system which serves no other purpose other than to feed a greedy and rigid set of trains.
Friday, December 7, 2007, will be a day which will live in Houston Transit Infamy. Yes gentle readers, there will be even more Fireballs, Lightning Bolts, and Hell Storms yet to come.
Addendum edit - December 8, 2007: The news came across last week about the FTA's decision to require Metro to resubmit documentation and allow public comments on the North and Southeast alignments. I don't care if you are all for railroading the city and for violating the property rights of the home and business owners along the corridors by stuffing them into 500 yard radial condemnation zones which will surround all of the train stations. As a taxpayer, you should be thankful for the FTA's decision to do this.
Wizard
And so it has come across the news that South America's latest Caudillo, Hugo Chavez, is not pleased with the Venezuelan constitution which he himself wrote and is putting up for vote revisions. All this to push along his so called 21st century socialism, which of course is no different from the socialisms of the 19th and 20th centuries that succeeded - as the Wizard personally knows - in keeping billions of people throughout the world in dire poverty. Some people just never learn.
Today's epistle is about a specific aspect of the latest Chavez bombasts and threats - threatening to kneecap America by cutting off oil shipments in the event that America tries to intervene. In short order, such a threat will not work and the Wizard will tell his gentle readers exactly why.
As Daniel Yergin explains in his master work on the world oil and gas industry, The Prize, in the 1980's petroleum started being traded on world oil markets. Not all oil is created equal, as some petroleum from some places has lots of gunk in it like sulfur, metals, and other content in it which makes it more difficult to refine into useable products than other petroleum. The petroleum from Venezuela tends to be of the less desireable kind.
But the fact that Venezuelan crude is less desireable than petrol from other places doesn't mean it is not desireable at all. Indeed that's the whole point. Say for just a moment that Chavez make good with his promise to cut off oil exports to the United States. He needs to remember that in order to carry out his 19th and 20th century 21st century socialism, he needs oil revenues. As such, the country's fields need to continue to produce. There are supply schedules to follow and those schedules need buyers.
Now then, Chavez could try to command that the country's oil be sold to China or India, presuming that there would be enough buyers to use it. However, what would buyers do once their hands are on it? That is the problem is Chavez's threat. Petroleum is fungible and there is nothing preventing others from turning around and simply selling it to the United States at prices which are set by world oil markets. Indeed that is what happened to a large degree in the aftermath of the 1973 Arab oil embargo. Petroleum exports still eventually reached the U.S. through other countries, once the world's oil and gas industry figured out how to reconfigure the supply lines and shipping routes.
The real problem for America in 1973 was self created - namely that the Nixom Administration imposed price ceilings (price controls), which as every first year economics student learns, results in shortages in supply. Because prices were not allowed to rise, rationing had to occur somehow and that rationing came in the form of waiting in line for gasoline, with the entire country wasting time, money, and gasoline trying to get more gas.
And so gentle readers, Chavez's threat is little or nothing to worry about. If Chavez does not want to sell us oil, then some other corrupt government in some other heavily politicized (hence making it a disordered and disastrously run country) will.
Wizard
So the other day, I found myself watching the local municipal channel and saw the hearings on the Metro board decision to railroad Richmond and Wheeler Avenues. This is part of the proposed 30.1 mile expansion of the current Main Street rail line, which itself cost $520 million and not the advertised $324 million (and of which Frank Wilson immediately asked for another $104 million to upgrade). The advertised price of the expansion is $2.2 billion, but other documentation I have in my possession (and of which I will write about below) states that another cost estimate will be $2.6 billion (including the estimated 300 million for the Northside Intermodal temple). Either way, for further purposes, I will go with the $3 billion for the 37.5 miles of rail since nearly all transportation infrastructure projects have cost overruns.
So what to make of all of this? The point of this article is to make some rough back of a napkin comparisons of what the opportunity costs of spending $3 billion on 37 miles of rail verses what could be done with that amount of money with alternative forms of public transportation. It is also to air my thoughts on this whole mess.
Addendum edit - December 8, 2007: Please read my updated entry on Metro's $3 billion $4.7 billion limousine.
On August 8, 2007, the Examiner News, one of the Houston Community Newspapers, carried a story about a transportation solution that was implemented for the needy (one day access can be purchased to access the story) which are served by the Spring Branch Family Development Center of Houston and interviewed its director, a man by the name of Richardo Barnes. As it is, the SBFDC services immigrants studying English to improve themselves, single mothers and those who are otherwise struggling financially.
Mr. Barnes tells of how he has been on a crusade to get Harris County Metro to implement a series of bus routes to better serve the Spring Branch area. He correctly notes that the agency - scandalously in my view - does not run a regular bus route along Hillcroft, which turns into Voss road as it goes through Memorial, and into Spring Branch. Hence the agency does not even have a way to connect would be patrons from the heart of the Galleria to Spring Branch. It also does not have a direct route running along Chimney Rock, which turns into Wirt Road as it reaches Spring Branch. More to the point, Mr. Barnes believes that the Spring Branch area would better be served by a circulator route. I grew up in Spring Branch and cannot agree with him more. Instead, the agency makes sure that the routes in the area make it to the nearby transit center.
So what has Mr. Barnes done instead? Well, the Examiner article goes on to say that his Center received an anonymous donation of $60,000 to purchase a bus from Texas Bus Sales. Said Barnes,
The bus goes where people need to go and the schedule is made up based on their needs. "Sometimes they have to compromise a bit," he said. "If several people need to go grocery shopping, we ask that they go at the same time."
Barnes illustrates what some of his clients are up against by pointing out that a woman who lives in an apartment near Interstate 10 and Gessner must take three Metro buses in order to bring her baby to the WIC clinic.
"The trip takes about three hours," he said. "Our bus can pick them up and have them here in 20 minutes."
Barnes went on to say that there are more than 250 people who have signed up for the bus service and that they pay $10 per month. Their monthly fee barely pays for gas, however one might ask how much does it cost per month to maintain the bus?
The question of what to do here could use some reasonable framing. In Metro's National Transit Database profile for both 2004 and 2005, the agency states that the 7.5 mile MetroRail line costs $14 million per year to operate. This is more or less in line with the annual operating costs of other rail lines, which often take about 2-5 percent per annum of original capital costs to operate. Or, I should say that they do in their early years, until it comes time to do major maintenance of switchgear, signaling, wear out on rail cars, and so on. Still, a reasonable estimate will be that in its early years of operation, the 37.5 miles of trains will cost some $60-70 million - give or take some millions - per year to operate. Bear in mind that the agency has been stating that the ticket revenues for the train have been less than $2 million per year. This matters because that implies the agency has not been even coming close to collecting the annual operating expenses needed to operate the Main Street train, much less having those same passengers pay for the capital costs of building the train. This in turn leaves open the long run specter of the agency having to break its 2003 Metro Solutions bond election promise that it would not have to raise taxes in order to implement its plans. However, what rail fans are counting on is that once the rail tracks are in place, there will be - how shall I say - facts on the ground, which will force matters in the future and for which people will say that we have sunk those costs, we can't just tear them up now!
Moving onwards. The same NTD profiles state that for Metro to operate its 1,000 buses (the agency has over 1,400 buses in its fleet, 20% plus of which are spares), cost $263 million in 2005. This implies that the annual cost per year to operate a bus is some $250,000. This might seem outrageous, but maybe not. If you pay a bus driver $50,000 - $60,000 total compensation (wages, benefits, health care, 401k) per annum, that it would take 2 bus drivers to operate a bus for 18 hours per day, then thrown in fuel costs and maintenance, then that figure may well be accurate. I do have it on good word that "typical" buses operated by mass transit agencies get about 3.5 miles per gallon, bearing in mind that buses are the ultimate stop and go vehicles when operating in urban areas. Throw in the fuel costs have gone up about $1 per gallon since 2004-2005 and you are probably looking at another $20,000 per year (for $270,000), assuming that the bus runs 180 miles (10 mph for 18 hours) per day at 3.5 mpg.
Now then, believe it or not one of my biggest complaints against Metro as it has been run all these years has nothing to do with rail. It has to do with how it spends money on buses. The latest transit industry hybrid fuel buses cost $450,000 - $550,000. They do get some 20-30 percent better fuel economy, but that is absolutely absurd to think that this is a bargain when you can look at the Texas Bus Sales website and find used buses for as little as $4,500!
And where would you deploy such buses? This is another part of my complaint. Going back to the 2004 and 2005 NTD profiles for Metro, one will notice another metric. This one is the unlinked passenger trips per vehicle revenue mile metric. For the year 2005, one notices that Metro has 81.546 million unlinked trips for buses, while traveling 41.555 million miles. This equates to Metro buses carrying an average of 1.96 passengers per vehicle revenue mile traveled. That is statistical language for saying that Metro's buses run empty most of the time, something that should be obvious to anyone who spends time watching those buses go by. What makes the issue even more scandalous is to then view double attached buses run empty.
Moreover, even the 1.96 passengers per vehicle revenue mile is statistically skewed, probably with a very interesting kurtosis, by the fact that the agency does have a number of very productive bus routes, such as the #82 and #53, both of which operate on Westheimer and which I often see with nearly full buses everyday since I live right off of Westheimer. The #2 Bellaire is another route which gets good boardings. This anecdotal evidence should leave little room for doubt that a handful of very productive routes achieve much higher passenger per vehicle revenue mile metrics.
I also should bring up the Main Street rail line here, while on the passengers per vehicle revenue mile metric. One might notice that the Main Street train achieves much higher (about 14) passengers per vehicle revenue miles than does the bus fleet. Bearing in mind what was said about the bus fleet above, one also has to remember that the Main Street train was placed on the corridor which had the heaviest concentration of buses and boardings patronage. As far as I can tell, there were some 25,000 - 30,000 boardings along the Main Street corridor (some argue much differently) before the train was implemented. It would therefore make sense that the train would get high levels of passengers per vehicle revenue mile because the agency already knew that the Main Street corridor represented its highest and best corridor for ridership. In other words, the agency picked off its lowest hanging fruit. Now, in wanting to build out trains to other corridors, it will be spending vast sums of capital on successively lower performing routes, including the #50 Harrisburg whose entire route achieves a mere 4,500 boardings per day and which has few other routes around it which can be truncated towards it. I should state here that some people I know who live or work along the corridors have tried spending entire days counting the number of people on bus routes and have told me that these numbers are full of - well, you know what.
What would make vastly more sense for agency bus operations would be for Metro to actually match bus vehicles to the demand curve for its services. Small cheap buses could be deployed on vast majority of routes which have fewer than 5,000 boardings per day. According to my spreadsheet, only 17 of Metro's 133 bus routes (including shuttles and local routes) achieved an average of more than 5,000 boardings per day in FY 2006, the year of Metro's highest ever ridership. Such vehicles would most certainly get much better fuel economy than the massive buses that the agency operates today, indeed my research into the matter indicates that many of these vehicles can get 12 or so miles per gallon. The agency should continue to operate the current bus fleet on its routes of heaviest patronage and in fact could consider the idea of operating double decker buses on its heaviest routes such as Westheimer. However, as we shall see, even that idea might not even be needed if I were in charge.
So let us circle back to the question of what the opportunity costs are of spending $3 billion on rail, along with an estimated $60-$70 million per year on basic maintenance. An alternate idea of what we are looking at looks something like this. The agency could otherwise (but cannot as we will see below) purchase 500 buses and add them to the existing bus fleet. Of these, 70 (or 14 percent) could be used to augment the existing buses that are on Metro's bus routes of more than 5,000 riders, giving them four more buses running on them. The other 430 could be used on all other routes. The 70 buses on Metro's heaviest routes could be similar to those running already, costing the above mentioned $450,000 apiece. The other 430 could be from a company like Texas Bus Sales or other fleet vendor and could purchased at a cost of $60,000 each. This would result in a capital outlay of a paltry $60 million.
So what to do with the other $2.94 billion? One idea would be to take that sum of money and have Metro invest in 30 year U.S.Treasury bonds, which are currently yielding 4.6%. Investing $2.94 billion at 4.6 percent would yield $135.2 million per year, which could be employed for bus operations. The agency collects a mere $50 million from bus fares. If improved bus services were to yield a mere $15 million in additional bus fares, that would bring us up to $150 million for bus operations. Since we have estimated that bus operations are some $250,000 per bus per year (and which we could bump up to $300,000 per year), then we should be able to sustain the estimated extra 500 vehicles on the road.
So what could we do with those extra 500 vehicles? One of my favorite pet peeves is what happened to the #18 Kirby route. The #18 Kirby is one of the casualties of the hugely expensive rail centric transit system. The #18 used to get some 1,500 boardings per day in the late 1990's, but that figure dropped to the current 1,000 boardings per day after the frequency of bus service was sliced in half when Shirley Delibero burned through Metro's cash horde to build the Main Street rail line. All routes could get more frequent service, cutting down some of those horrific wait times that people have to suffer through. Many routes now have bus service that runs every 45-60 minutes during off peak hours. Entirely new routes could be devised, including ones which run from the Galleria along Voss and Chimney Rock to Spring Branch. Mr. Barnes would get his circulator routes with very little fuss, but he won't get a thing anytime soon by dumping all that money to run rail down streets like Wheeler, a street which Metro, in its entire history, has never had a bus route run down. Having never, in its entire history, run a crosstown bus which connects the University of Houston and TSU directly to Westheimer, West Alabama, or to Richmond, the agency and rail fans now politically demand that a $800 million train be laid down which does this. The agency loudly proclaims that college students are a big market of users for public transportation. If that is the case, then why has the agency never bothered to run a bus route directly across town before?
Are you worried that the world is about to run out of oil soon? Great! With $3 billion on hand, why doesn't the agency go out on a limb and ask the Tesla Roadster folks to manufacture 24 seats buses which run on lithium ion electric batteries? Surely they could do such a thing for less than $500,000 per vehicle? We may have cellulose ethanol available to us soon anyway, but if you are someone who believes that civilization is about to come crashing down because we are exhausting economical oil supplies (and for which you believe that there are absolutely no substitutes), then you might want to ask yourself why are we spending billions of dollars to run light rail to airports of all places?
Other benefits of a bus based public transportation scheme would include not having to tear up streets and roads along the corridors, which have deeply upset those who live along them. Residents who happen to live within a 1,500 feet radial of a proposed train stop would not find the deeds to their homes under the shadow of future condemnation because of their proximity to a Metro train stop. Metro may or may not condemn their property, but one needs to remember that Metro is not the only player in this game. Metro has formed a public private partnership with Washington Group International and I have some very good intelligence that WGI has made some - how shall I say - very interesting proposals to Metro regarding what might go on around the Intermodal Transit temple and around train stations. Without going into too much detail, there is a very strong argument to be made that this entire project has absolutely nothing to do with transportation, but does in fact have quite a bit to do with the politicizing of land use via real estate redevelopment. The building of rail lines represents, from the view of the economist in me, a massive concentration of capital along narrow strips of territory. The only way in which one can justify doing something like that would be because there already is a massive concentration of other capital directly in the area.
But I digress. What would ridership have been like with all these extra vehicles on the road? That is a good question. Metro achieved 68 million boardings in 1982. The agency achieved 82 million boardings in 1990 and 101 million in the year 2000. This steady increase of ridership over time was snapped after the light rail line was built. The latest 2007 figures show Metro with 97-98 million boardings even after 500,000 residents have been added to the county population.
It is quite likely, in contrast, that given population increases that the agency would have continued to slowly but steadily improve boardings. As things are, the agency is projecting to have some 120 million boardings after rail is built, but spending a whopping $3 billion to get a mere extra 60,000 net boardings per day (about 3 freeway lanes of passengers in SOV vehicles) is quite a feat. Indeed it is conceivable, based on past trends, that the agency could have achieved 115-120 million boardings by now without ever having spent a dime on rail.
The reason for the relatively paltry 20 percent gain in overall boardings for having spent this kind of money is because of what I wrote about above concerning the fact that Metro is not even collecting operating costs of the rail line, much less capital costs. Since the operational costs of the new rail lines will not be covered, that will force another truncation of bus routes towards the trains, cutting bus service to the wider area. My back of the napkin calculations are that Metro will have to cut back bus service by some $50 million in operational monies per year, which makes me think that about 20 percent of current bus service will be slashed after the trains are built. One also might think that Metro promised in the 2003 Metro Solutions ballot that it would improve bus service by 50 percent, but Metro stated a while back that there was no demand for an increase in bus service. That in turn makes one wonder why it was that the agency made such a promise and how is it exactly that the agency "knows" that the demand curve for extra bus service has been saturated? Read further down for what I say about politlcal markets and real world markets.
I have a story to tell about Metro telling the public that there is no demand for more bus service. Metro used to run a bus route, the #54 Aldine - Hollyvale Circulator. As one can notice from reading my boardings spreadsheet, the Aldine-Hollyvale route used to take in nearly 1,000 passengers at its peak in 2000. However, the Aldine-Hollyvale was one of the victims of Metro's cuts in bus service. Boardings went down in the early part of this decade, reaching a low of 510-690 patrons per day in its last months of operation in 2004 - 2005. In December 2004 (as part of its service improvements), Metro announced that the route would need to achieve an average of 855 boardings per day in order to justify continuing running the bus route - and I still have the publicly issued pamphlet in my possession to prove it. What the agency did not tell the public was that the route once upon a time actually was getting that kind of patronage! So in effect, the agency, having doomed the route to "fail" to begin with by cutting frequency of bus service, self justified its decision to shut the route down because of its supposed lack of success in drawing patrons and because of high operational costs.
Unfortunately, since we are going to a rail centric network, Mr. Barnes still won't get his routes even after we have spent $3 billion on rail transit, and we should investigate why that is so. The big problem with having the federal government diversion of the 2.8 cents per gallon gasoline tax diverted to transit is that because the way that the rules are written, the New Starts grant money can only be used for capital expenditures. Federal money is not to be used to operations expenses. Moreover, only public transit agencies are eligible for the start up grants. This in turn creates the following, warped incentives:
1) Local governments all over America had huge incentives to buy out any privately operated transit companies which still might have been around in the 1960's and 1970's. In their place, government transit agencies would be created and chartered, if for no other reason than to be eligible to get in line for federal handouts for transit. Who cares whether anyone bothered to take public transportation? What really mattered (and still matters) is that local interest groups get the grant money.
2) Since Congress has geared FTA programs towards capital expenditures, essentially the rules say that "we will give you big capital grants, but its up to you to come up with operating funds." This state of affairs completely warps the incentives facing local political elites,transit agencies, and transit supporters. The game is tilted towards spending huge sums of money on expensive rail lines which may cost dozens of times more money to build, but don't cost quite as much to operate. That in turn creates a ripple effect because very few transit agencies cover their operating expenses. That means that bus service usually is cut and reconfigured towards rail lines since doing anything else makes absolutely no sense at all.
I should say, in the light of what was said regarding Stephen Kleinberg's most recent transit survey, that there is a very big difference between political markets and real world markets. Someone participating in a real world market must come up with ideas that will pay their way on their own merits, otherwise, they are forced to exit the field. That, gentle readers, is a good thing. On the other hand, in political markets, ideas only have to win 50% plus one voter and the idea wins, regardless of what the conseqences are and regardless of whether the idea actually succeeds in doing what people think it will actually do.
If the current Main Street rail line were built in a real world market by a private operator, a good idea of what the train would take to be built would look something like this. Since the train cost $520 million and is costing $14 million per year to operate, the estimated annual carrying costs of capital (at 5% interest) would be $26 million. Add $14 million in operating expenses and you get $40 million per year. A private operator would probably have to pay off a loan at 2-3% per year, so the private train operator would need to collect some $50 million per year (if not more) for the idea to be viable in real world markets. Since the train had 11 million riders in 2007, that would equate to a private operator needing to charge about $5 per person per boarding (Metro would need to charge about $6 per boarding to fully pay its own way in the world instead of $1). Very few would be willing to pay that price to ride the train, ergo that is why you do not see rail being built by the private sector. But what you do see is the Houston Chronicle and rail fans in the political markets cheering on rail building while saying that "there is no demand for the increase in bus service".
One issue hanging out over the horizon concerns the 25 percent general mobility monies that Metro pays out to its constituent municipalities for road building and other transportation projects. This arrangement is set to expire in 2014. In theory, the agency could devote all of the money to improving bus service as promised which could fulfill the 50 percent bus service improvement aspect of the 2003 bond election vote, but that is contingent on the idea that the member cities and Harris County are going to actually come to an agreement that the current arrangement will end. That, ladies and gentlemen, is not a done deal. That issue also cropped up in Metro's Westpark rail line DEIS, as well as the FEIS's for the North and Southeast Corridors. In those documents, Metro claimed to the FTA and to the public that it would have $8 billion in cash on hand in the year 2030. Now let me tell you gentle readers something about myself and that is that I have read an awful lot about politics. If there is one thing I know, that is that no politician or group of politicians are going to let $8 billion in cash pile up without spending it. I do not know what will happen, but that money will be spent somewhere. So why did the agency make such a claim? Let just say that we already have covered that. It's because there are all of those all important federal grants to chase after and who gives a damn about what the consequences of that really are.
So we could have (or could have had) one of two things. We could have $3 billion in rail lines, with about 20-25 percent of the entire year 2000 bus system service cut and truncated. That would have offset any (if there were or are any) benefits which might have been gained from rail. Or were could have added 500 bus vehicles to the year 2000 fleet which was already in existence, which could be deployed anywhere - including some for Spring Branch which would help Mr. Barnes and those disadvantaged souls at the Spring Branch Family Development Center.
More Fireballs, Lightning Bolts, and Hell Storms to follow.
Wizard
Over the past several months I've been steadily become addicted to watching The Mad Men, a television series about the going's on at a fictitious small to mid sized advertising agency called Sterling Cooper located in - where else - New York City.
Before going any further, I should say something. I am not someone who follows television shows. My preferences when it comes to watching television include (of course), the History Channel, watching football, basketball, and track and field events. I also enjoy watching the Discovery Channel, and a few others. I used to watch current events programs long ago, such as C Span and the Sunday morning talk shows, but long ago gave up doing that since I came to realize that my life was not going in that direction and there was little I could do to influence things. I'd rather read academic journals and magazines for political information, but my time in this world dwindles by the day and there are other things worth doing other than becoming a walking encyclopedia of knowledge which I can't make money off of being.
Getting back to shows I do watch, I did follow Dallas when I was a young teen but quit doing so when I entered high school. I also watched Twin Peaks at the beginning of the 1990's. For comedy, I enjoyed watching Dream On and Reel Wild Cinema.
So what is it about the Mad Men that I find so alluring? Well, I will be the first to admit that the program will not appeal to everyone. One could visit the blog page of the show and read bucket loads of comments from the show's watchers. Clearly this show might have a fairly small audience, but that audience has a wild passion for this program. Clearly AMCTV has listened and has picked up the program for a second season. YES!
My own favorite character (and I should say that I like all of them) is the primary character, the handsome, wildly complicated, but 1950's Organization Man looking Don Draper, played by Jon Hamm. My own favorite scenes involving Draper include his telling off the hippie boy friend of Midge, how he punched Roger into remembering his wife's name after he suffered a heart attack, and most memorably, when he displays his awesome creative genius (which pays the salaries for the entire boat of everyone working at Sterling Cooper) when, in a mind blowing late night piece of inspiration while talking to Rich, he dreams up the name and sales campaign for the Carousel which is presented to Kodak executives. Draper's presentation is so inspiring, it causes Rich to depart the sales pitch meeting in tears because he is having trouble with his own girl friend. It causes the entire rest of the company, including the fiercely ambitious Pete Campbell to tip their hats off to him.
The women have their own dramas, constrained by the roles that were allowed to them by the America of 1960. Don's wife, an independent former model named Betty, slowly wakes up to the realization that her world has shrunk to that of being a housewife. Meanwhile she also (correctly) intuits that she might not be enough of a woman for her husband. That is because Don has also fallen for the strongly independent Midge and Rachel. Meanwhile back in the office, his secretary Peggy has displayed her creative talents, but fell pregnant with a baby she didn't want (remember this was before 1973). She however, admires Don for giving her the chance to be the first woman to get out of the steno pool since before World War II and has allied herself with her unwittingly visionary mentor against the younger hound dogs who size her up and think she should be put in her place.
It's rather amazing. Don finds himself at the end of the first season struggling to keep the hound dog younger 20 something men at bay, while trying to keep his wife and family in their place in suburbia despite his own indiscretions. At the same time he is attracted to women who are not constrained by the conventions of the era. Meanwhile, he has run away from a boyhood which he hated (he is revealed to be the son of a prostitute) and which he seems to have been treated a bit poorly. But at the same time he has a younger step brother (whom he disowned and who subsequently hanged himself) who adored him. My goodness, that has to weigh on anyone's conscience.
There were complaints early on that the show almost tried too hard to display everyone smoking and that nothing really happened. I dismissed these criticisms right away. I realized quickly that this was a show that could incubate a horde of problems and issues. Mad Men was a program that had an immense potential to mine a bunch of rich issues, such as the fact that a pair of lowly staff cleaning people, who were black, were fired for the discretions of a late night office party.
It's almost as though this program is a modern version of All in the Family, but made 35 years later and recast as a serious drama instead of a comedy. Whereas Archie Bunker was a bigoted working class man stuck in his ways, Don Draper is an any man American who has managed, both by the whirls of fortune and dint of genius, to reinvent himself and work his way into a star struck position in American society. Still, Draper finds himself surfing the waves of a swirling and rapidly changing world, though he and everyone around him don't realize how it is changing right below their very feet.
So, the Wizard heartily recommends watching this absolute gem of a program. You can download episodes, but I can't wait for the second season of the Mad Men.
Wizard
There is a lot in the news and the motor is firing up again. This epistle is about the delays in airline traffic and I have a brief comment on the Texas Transportation Institute 2007 mobility report.
There has been much talk in transportation circles about the TTI report, and in the interest of brevity, I will not say much here. Tim Lomax and company do say that, yes, building more roads does help with traffic congestion and we need to keep at it. Tom Bazan has written recently that 150,000 more vehicles were registered in Harris County last year than in 2005, so it is no surprise that traffic congestion has gotten worse. This mirrors part of what my public comment was to the 2035 plan. Additionally, heavy congestion is a sign of economic and social vitality in an urban area, so congestion isn't always a bad thing.
So, are you one of those who says that building more roads only induces ever more demand by current road users? Then try reading this article by Robert Cervero. Finally, I will state that traffic congestion is still not nearly as bad in Houston as it is in transit heavy Europe. Commute times in Europe vary by country with a mean of 38+ minutes. Note that the article I cited was 4 years old.
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We've been bombarded recently by a spate of stories about how bad air traffic has become and what remedies are there for alleviating the problem. Gary Becker and Richard Posner write about their ideas here.
When I flew to China in 1991, air traffic congestion wasn't too bad. When I went on holiday in 2000, the situation was much worse. I flew into O'Hare and had to go into a holding pattern which nearly made me late for my flight to Tokyo, and flights to Tokyo don't happen every hour. I and another passenger were then spirited through Narita onto our connecting flight to Bangkok.
Casual or long time readers of my blog will probably know by now that any time The Wizard reads about matters like these, I find it always helps to view the matter through the lens of history. This morning I awoke to watch a program on the History Channel entitled Our Generation: Fly with Me.
The Fly with Me program was a great one to watch and here are some of my hand written notes I took while watching the program:
1) The first really large scale passenger aircraft was the DC-3. It was mentioned on the program that in 1955, a cross country flight from New York to Los Angeles taken on a DC-3 lasted all day and had to include three stops to refuel. The Wiki entry for the DC-3 confirms this, as it mentions that the range of the aircraft is 1,025 miles.
2) The cost in 1955 to fly across America on a DC-3 was $1,000. Translated into 2007 dollars, that same flight would cost $7,500. So not only was travel by air a bit slow by today's standards, it was also expensive. Now where has that matter been discussed before?
3) As it was, flying was something for the rich and was considered to be a romantic thing to do. Going to the airport and getting on a plane was a special occasion.
4) The subsequent roll out of the Boeing 707, the first aircraft of the jet age, changed everything. Not only could passengers get to their destinations in one third of the time, but jet aircraft introduced economies of scale in the number of passengers it carried. Whereas the DC-3 carried 21-32 passengers in a noisy propeller driven aircraft that could not fly above the weather, the 707 could (somewhat quietly) carry 110-200 passengers 35,000 feet up.
5) The 707 was not the end of reaping the economies of scale from jet aircraft. 15 years later, my favorite plane, the Boeing 747 took to the skies. The 747 can not only fly twice as far as the 707 could, it can also carry 2-4 times as many passengers.
6) In 1978, Congress passed the Airline Deregulation Act, causing further drops in the costs of flying. Meanwhile, the standard of living in America has (more or less) doubled since 1950, allowing for more money to be spent on transportation and travel.
So what has all this meant for flying? I have flown with United Airlines since I worked in China because they offered me membership in their frequent flier program when I went over there. Just for kicks, I punched in a round trip ticket itinerary from JFK airport to LAX (New York to Los Angeles) for a 5-6 hour non-stop flight leaving on November 15, 2007 and returning on November 30. The response I got was that I could get a round trip ticket in economy class for $328, $302 if I used a nearby airport like La Guardia. Even first class flights could be had for $1,308. I am sure that if one looked hard enough, one could find cheaper flights.
As it is, these figures mean that flying by jet aircraft has dropped the cost of flying by roughly 80-95 percent since the DC-3 ruled the skies. Needless to say, flying by jet aircraft has democratized flying, just as the improvement of roads (and later rail transport) in Europe democratized travel. The number of passengers traveling by air in America has grown by 300% in the past 30 years. 80% of Americans have now traveled by aircraft and 50% have flown in the past 12 months. Then there is the issue of airport security and what it means for passenger inconvenience and delays.
And what about the supply side of airports in the United States? Well, America has built one large new airport in the past 30+ years!
Some of the supply has come online via private jets operating at smaller airports, especially for business executives or rich people who don't want the hassle of dealing with checking in at the big airports. The show mentioned that a typical private jet now runs some $40 million, but a company called Net Jets allows one to rent (or buy) into a private jet. Prices start at $412,000 and the program mentioned that a typical Gulf Jet ownership program will run you $2 million for 50 hours per year of flight time. Don't laugh. Net Jets operates 370,000 flights in 150 countries.
So what's the solution? Rail fans no doubt would dream of high speed train service, but realistically high speed rail can only compete with planes on a time basis over a distance of up to perhaps 600 miles once one considers the time differential of navigating the airports. Then there is the issue that capital costs of constructing high speed rail would probably average $30 million per mile and go up. Then, how do you navigate around in your destination city?
So should rail fans put their hopes in having the federal government fund a Los Angeles - San Francisco - Fresno high speed rail line, or perhaps one connecting Dallas - Fort Worth, Austin - San Antonio, and Houston? Well, let me put it to you this way: Each of those routes all connect destinations in only one state and if you are looking for the federal government to fund any big programs, you'd better make sure that the program in question benefits the entire country and not just one state! Get the message?
I had the opportunity, if I so desired, to take the Chunnel between London and Paris in January of this year. I opted for flying between Heathrow and Charles de Gaulle. When considering the time differential, it was only a one hour flight, but the train rides, navigating through customs, etc, made it a 4 hour trip. The chunnel trip would have probably come close in time terms, but the trip by air (and getting around in both cities) cost $90 less than by rail.
Any time I think of long distance travel by train, I think of Amtrak. One person I know who traveled by Amtrak wrote me a message a while back saying that Amtrak lost their luggage and did nothing to help them locate it!
My thought is that, considering the NIMBY'ism surrounding the building of new airports, we are going to have to continue with airport expansions for the near term future, along with better use of non - major airports. It's either that, or resort to using larger aircraft which can carry more passengers. Another idea might be implementing congestion pricing of flights at busy times at major airports. Bullying the airlines via legislation for their success in getting people to fly, but not increasing the supply of airport runways and terminals, is only going to drive up the price of flying because mandating the compensation of angry passengers who are forced to wait is going to force the airlines to raise their prices to come up with the money to do that.
Air travel will become more expensive in the future as petroleum prices rise, which may help alleviate the problem. It is difficult to fly aircraft using any other kind of fuel besides petroleum, although the Brazilians have made aircraft fly (albeit with major problems) with ethanol. However it remains to be seen whether or when alternatives to today's petroleum will become viable on an industrial scale. Some people are doing some really amazing and ambitious stuff finding a replacement for traditional petroleum as a liquid fuel.
I am going to stop now as this has been a long write. I may post more on this later.
Wizard.
To illustrate how many ideas simply refuse to die in politics until they get shoved through, we have once again witnessed the rise of universal health insurance in Amerika (yes, the our hallowed country's name was misspelled on purpose). We have seen Mike (I live in Manhattan) Moore unveil his movie Sicko, the story of Kathleen Aldrich going bankrupt to stay alive, pushing for expanded kiddy care in Texas, and now the Houston Chronicle chimes in saying that we should have universal health insurance. However Houston's own GHP Pravda bravely refuses to describe in that editorial how it is that Amerika is supposed to reach universal health insurance nirvana. All of this on top of Harry Truman's failed 1949 plan, Richard Nixon's universal employer based mandate, and Billary's 1993 failed plan.
I am going to make an assumption that many who bother to read this blog entry are reasonably aware of the many arguments for and against universal health insurance, the various ways in which a society can attain such a nirvana, as well as the strengths and weaknesses of America's vast patchwork of providing for health care (such as its heavy component of cross subsidization involved). If you want to read of some interesting stories regarding health care and its provision, here is a practicing M.D. who keeps a blog. You might be interested in reading the NHS Blog doctor. Try reading this and try watching the film The Barbarian Invasions on the joys of health care in Canada.
Several years ago, I was out of the country on vacation when I met an Englishman who climbed all over me because the United States did not have universal health insurance. He told me that people had a right to their health. I said okay, and... He replied that since people had a right to their health, then they had a right to health care when things went bad. That is when I told him to hold the horses. I told him that nobody has a right to health care anymore than they had a right to a house, an apartment, food, or anything else. You do have a right to seek help if things are wrong, but the providers may well turn you down in one way or another. You may well not get what you want. Indeed this happens quite often in the 41 countries which have some form of universal health insurance.
One thing I will say about the policy debates is this. A frequently advanced argument for socialized medicine is that everyone will get equal access to health care. Nothing could be further from the truth. When I was in the UK earlier this year, I read in one of the newspapers of a study which noted that wait times in the UK were shorter and hospitals were better funded if you happened to live in an area that was represented by a member of the Labour Party than if you happened to live in a constituency represented by the Conservative Party or by a Liberal Democrat. Do remember that Labour has been in power since 1997. When the study came out, the Tony Blair directed spin machine predictably went into action, declaring that people in their districts needed the greater spending for various reasons, but this rationalizing when you've been caught plundering more than your share of the public purse is to be expected with any government program.
Now that is not an attack against the Labour Party per se, as I would automatically assume that the Conservatives would do exactly the same thing were they to seize power in the next UK general elections. The Economist noted some years ago that when the Republicans were in control of the Congress, it seemed that the main difference between the time when the Republicans were in control and when the Democrats were in control was where the taxpayer monies went to. Taxpayer largesse does flow more in the direction of the party which controls the houses of the legislature, irrespective of what the government funded program happens to be.
As an aside, I work for a Big Evil Company. My UK counterparts have access to a private health insurance plan, which they take advantage of in droves. Recently, one of my colleagues suffered a heart attack while doing desktop work in Libya. Fortunately he survived. The BEOC sent him to London when he was strong enough to travel and they put him into a rather nice private hospital. Note that the BEOC did not put him at the whims of the NHS.
More to the point, I have this to say about universal health insurance. If there is to be a substantial government component to such a regime, then I want the Paul Krugman's, the Houston Chronicle Editorial Board, the Michael Moore's and all the rest of you to tell me something. It is pretty clear to me that under any such regime that I am going to have to wait to get health care when I need it. Like most men, I am the type that will not bother to see a doctor until I absolutely have to. Compare this to a (female) high school science teacher I had. This lady had a five year old girl who was just oh so dear to her. This lady must have taken 15 days off during the school year to run off to take care of her daughter (she was a single mother at the time, but I think may have remarried). If I remember correctly, most of these sick days taken off for her daughter turned out to be for minor ailments and eventually the school district docked her of pay, which really threw her into a funk. She then naturally complained to the teacher's union but those were the rules which had been worked out between the district and the union.
My point here is this. I do not under any circumstances want to wait when I need treatment - End of story!!! I know myself better. As I have gotten older, I have become the type of person that can often be very patient, but if something is important enough, then when I really want something now then I want it right now and that goes for health care. If anyone is going to shove some universal health insurance plan down my throat, then they really had better come up with a component that will allow someone such as myself to pay for convenience, get treatment on my time, and not have to wait in line the way that the hoi polloi does down at the county hospitals.
But you know, I've decided that is not enough. I have a hard time imagining that any new proposals will not end up raising my taxes in some way. Moreover, any new health care regime is pretty much going to take away more of my freedom. What I want to hear from the Michael Moore's, Paul Krguman's, Houston Chronicle Editorial Board, and all the rest of you who advocate some universal health insurance regime, is this: What else are you going to do for me? Don't answer that we are guaranteeing health insurance because I already have that. In fact I might end up with something inferior afterwards where I am going to have to wait for treatment. Moreover, I am worried about choking off the revolution that pharmaceutical drugs is bringing us. What I never hear from the advocates of universal health insurance is what are you going to do for me in return? How much of my freedom are you going to give me back?
Well in case you universal health insurance advocates are clueless, I have an idea. I am probably going to get hammered by Social Security to the tune of north of $500,000 irrespective of what happens. Ergo, what I propose is this. Either shut down the Social Security plan, or as a lesser option I will renounce any and all claims to Social Security benefits if or when I become eligible for them in return for being allowed to opt out of the program right now and to quit paying taxes. I figure I can cut my losses now and save several hundred thousand dollars in the process by doing this. In return, I just might consider supporting a universal health insurance regime which allows me to pay for convenience and to buy my way out of waiting for treatment. Now how's that for a deal?
Now I can just hear the chorus: We just can't shut down Social Security and we aren't going to allow you to get out of the program anyway! Don't you know millions depend on those checks and we just can't allow people like you to opt out because we are all in this together and if one rat jumps ship then all the rats will too!
Well if that's your Road to Serfdom type answer, then all I can say is that you can go kiss my ******* ass.
Wizard
Well not quite, but I thought that such a title to a blog entry would be catchy. Ergo I have deliberately mislabeled the subject matter of this blog entry. As it it, my central air conditioning went out the other day and I am sitting here writing this entry in a hot residence, next to a constantly blowing fan. The repair person shows up on Monday.
More seriously, the true subject matter of this entry comes from The Marginal Revolution. In that entry, entitled "Move South to live longer", Tyler Cowen points to a potentially important new paper recently published by the National Bureau of Economic Research which discusses the effects of extreme weather events on human mortality (a non-gated version can be found here) and as an accompanying topic discusses the effects of migration towards warmer climes.
This is the abstract of the paper:
We estimate the effect of extreme weather on life expectancy in the US. Using high frequency mortality data, we find that both extreme heat and extreme cold result in immediate increases in mortality. However, the increase in mortality following extreme heat appears entirely driven by temporal displacement, while the increase in mortality following extreme cold is long lasting. The aggregate effect of cold on mortality is quantitatively large. We estimate that the number of annual deaths attributable to cold temperature is 27,940 or 1.3% of total deaths in the US. This effect is even larger in low income areas. Because the U.S. population has been moving from cold Northeastern states to the warmer Southwestern states, our findings have implications for understanding the causes of long-term increases in life expectancy. We calculate that every year, 5,400 deaths are delayed by changes in exposure to cold temperature induced by mobility. These longevity gains associated with long term trends in geographical mobility account for 8%-15% of the total gains in life expectancy experienced by the US population over the past 30 years. Thus mobility is an important but previously overlooked determinant of increased longevity in the United States. We also find that the probability of moving to a state
