Time equals money but does it also equal cash?
Thanks for cutting me some slack on Monday when I was too busy to write. Making it up for you today. If you have the chance, make sure and catch the webcast from San Antonio today. And, if you haven't already, we really need you to become a member of Strong Towns. It's one step you can take right now to support this effort.
Last week’s Friday News Digest drew some criticism from credible corners of the Strong Towns movement. Here’s what I wrote:
Words have meanings, not just for people building unproductive places but for those advocating for strong towns as well. To that end, I have to call out the Pembina Institute for their recent infographic adopting the highway engineer’s ridiculous approach to calculating value to justify transit. Saved time does not equal cash. We should be exposing fraud, not coopting it.
The infographic in question was an advocacy piece for transit in the Greater Toronto area. Here is the specific part of the graphic that I objected to.
The pushback I got was pretty simple. Time = Money. There was more than one person who weighed in on this and I won’t name names except to say that they are all intelligent people. Many insisted that, if a government investment saves people time, they are saving them money. Here are some highlights:
Chuck I need you at my house the next time the plumber tries to bill me $300/hour. Tell him his time does not equal that much money.
Time does, in fact, equal money for lots of people lots of the time. The plumber, by the way, is passing off that traffic congestion cost to me. I'm paying for him to sit in traffic. His time is my money.
Every weekday something like 4 million commuters pour into Manhattan. Fifteen seconds multiplied by four million equals an astronomical amount of human capital (by the way... NYC motor vehicle congestion causes a heck of a lot more than 15 seconds of delay per commuter). Granted, my personal 15 seconds or 15 minutes doesn't mean all that much. But collectively, all of that time added together must be worth something, no? If policy makers are trying to understand the public investment required to move all of those people to and from the places where they go to work and earn their living and buy lots of stuff with their money, it is perfectly reasonable to at least try to put a dollar figure on this collective waste of human beings' precious, valuable time.
I won’t argue with the time equals money assertion, but I will ask: does time equal cash?
I’m most interested in why local governments are going broke, why we never seem to have the money to do just basic things despite the fact that government’s total percentage of our economy’s spending is really high. Some would argue government is inefficient and wasteful. Others would argue that some in our society are not paying their share. I’ve long argued that the problem is more fundamental: the places we have built are not financially productive, and by that I mean they are very expensive to maintain and operate and generate insufficient revenues for that task.
So when the government says they are going to spend my cash and their doing so is going to actually save me money, it raises all kinds of red flags. Let me elaborate on some.
Obviously four million commuters each saving five seconds a day adds up to a lot of social capital, but there are a number of assumptions behind that which simply don’t play out. My five seconds is not going result in my being more productive. I’m not going to increase my output a noticeable amount. When we initially built these systems and connected some remote places, that was economically transformative. Shaving a few seconds – or even a few minutes – off a commute is not nearly as game changing.
And when making the claim that their expenditure is saving me money by improving my commute – even by seconds – the government is presuming that this is the optimal way to improve my productivity. Maybe if the government wasn’t so obsessive on improving my commute, housing wouldn’t be induced to move so far away from jobs. Maybe wages would go up and housing options would improve. The natural and historic solution to congestion is intensification of land use, something government policy has made impractical.
Then there is the question of cash. How much of this money that I’m saving actually ends up as cash in the coffers of the government? While there are a lot of benefits that come from government action, governments need to be solvent in order to do them. Solvency is the prerequisite to any good that comes from government. We’re building a $700 million bridge here in Minnesota that supposedly has six times the “benefit” than it costs. That’s quaint, but where is the $700 million coming from? It’s not coming from savings on the wear and tear on my car (which actually costs the government money since I’ll theoretically now drive my car longer thus not paying the sales tax on a new one).
There are a couple of other problems with this thinking. The benefit/cost analysis suggested in this graphic – which, incidentally, is the type of analysis routinely used by governments to justify projects of all sorts – does not account for any changes in the future. How could it? I’ll give you two obvious instances.
So we make a huge, billion dollar improvement to save people some time but then the marketplace reacts to the extra capacity and induces congestion once again, totally defeating the benefit. We’ve spend a billion dollars but have not improved anyone’s productivity. We are not saving anyone money. How do we account for this? We don’t.
The second instance is the reverse: let’s say we make a billion dollar investment and no growth happens. The four million commuters turns out to be only three million. We’re still saving those three million their increment of time/money, but we’re not getting the theoretical productivity gains of that extra million. That’s doubly negative from a cash standpoint because, not only is the revenue not there, but you can’t undo expenditures on large capital projects.
Finally, I would have more faith in these assertions if they were based on real accounting being done by cities. I have never seen a city that actually performs a real cash analysis on any project, let alone tracks and accounts for that cash after the fact. We might get a PhD economist to assert relationships between certain government actions and economic growth, but I think there are good reasons to be skeptical of the practicality of such theoretical endeavors.
For individuals, I agree that time equals money. For governments, it is not at all accurate to suggest that my time equals their cash. There is a reason governments are going broke. This type of thinking is part of it.
And for all you transit advocates out there; there are a lot of really strong financial arguments for transit. The most powerful is the increase in community wealth that “should” preface and follow the construction of each stop. Let’s drop the arguments of the traffic engineer – and, quite frankly, the traffic engineer’s focus on remote commuters – and instead advocate for building productive places, places that will ultimately be served economically with transit.
That’s how we build a nation of strong towns.