The California High-Speed Train that Wasn’t: The Opportunity Cost of Megaprojects


Physicists studying politically-radioactive emissions from California have stumbled upon the strange case of Schrödinger's Train. Is it alive? Is it dead? Who knows; let's ask an observer.

Time reported on Tuesday that California Governor Gavin Newsom was abandoning the state's plan to build high-speed rail connecting its major cities, a project which, at last count, had ballooned to an estimated cost of $77 billion and climbing. A number of other outlets also adopted the "it's dead" line. What Gov. Newsom actually said, in his annual State of the State address, was a bit more confusing:

“There’s been too little oversight and not enough transparency,” Newsom said. “Right now, there simply isn’t a path to get from Sacramento to San Diego, let alone from San Francisco to L.A. I wish there were.” 

But Newsom's administration reiterated the project isn't dead, more like indefinitely on hold. Curbed SF reports that the state will continue environmental review as as well as complete the already-under-construction Central Valley segment. In an arguable display of the sunk cost fallacy, Newsom intends to soldier on:

“Abandoning the high-speed rail entirely will have wasted billions of dollars, with nothing but broken promises and lawsuits to show for it,” said Newsom at Tuesday’s State of the State Address. “I have no interest in giving $3.5 billion federal dollars allocated for this project back.”

Regardless, it's clear a fast train trip between SF and LA isn't becoming a reality any time soon. Instead, we get a train between the mid-size cities of Bakersfield and Merced, only a 2.5-hour drive, and with very little you can do without a car at either end of that trip. 

This has already prompted predictable responses from the predictable camps of those who think this is the boondoggle of boondoggles, and those who still think this is The Thing™ that California needs to be doing. The likes of the Washington Examiner jumped on the news to declare the premature death of the Green New Deal. But the pro-rail side has some ammunition. As Henry Grabar points out in Slate, the idea of rail as an alternative to air travel isn't crazy:

A recent overview of research suggests that planes and high-speed trains are competitive on routes under 600 miles. Internationally, that includes routes like Rome-Milan, Tokyo-Osaka, and Paris-London. Domestically, it might include Atlanta-Charlotte, Los Angeles-Las Vegas, and yes, Los Angeles-San Francisco. Under 300 miles, rail becomes dominant.

Rail can deliver comparable door-to-door travel time to flying, at a lower cost to passengers, without the off-the-charts carbon emissions. So there's reason to want it, in theory, to supplant air travel for those under-600-mile trips. The question is whether this is a viable way to get California there, or a ridiculously fragile gamble—and good money seems to be on the latter.

A Poster Child for Our Megaproject Problem

The project has faced daunting technical hurdles, such as getting trains through the Tehachapi Pass, pictured. Photo by Adam Reeder via Flickr.

At this point there's a good body of research on the near-inevitability of cost overruns when a government entity attempts to build something on this scale. Explanations for this phenomenon include what megaproject expert Bent Flyvbjerg coyly calls "strategic misrepresentation"—that is, lying about costs—as well as an optimism bias common to planners who are invested in a project and fail to imagine the full range of possible setbacks. There's also the thicket of public process, and funding mechanisms that tend to try to satisfy every niche interest by throwing in goodies for all parties.

You couldn't ask for a better object lesson than the last ten years of California High Speed Rail, which has been beset by lawsuits, cost overruns, and a land acquisition process so slow that one suspects the DMV sloths from Zootopia have been managing it.

The standard narrative from rail advocates is that the problem is that the U.S. is just really, uniquely incompetent at this, compared to other countries. Yonah Freemark lays out this case here, and it's hard to argue with his evidence that the U.S. is an extreme outlier when it comes to the costs of delivering large-scale transportation infrastructure.

The reasons for that are complex and beyond the scope of this post. We can probably address a lot of them. We should address them. But in the meantime, do we soldier on with a project that is the poster child for Orderly but Dumb thinking?

What is the problem for which high-speed rail is the best solution?

Too often, the justification for this maybe-dead, maybe-alive project seems to become, "We have to finish it because it would be embarrassing not to." The California Alliance for Jobs lays the emotional manipulation on thick in this "Wimps Didn't Build California" video from way back in 2012.

Every objective of this project is one that California could be well underway to addressing by now had the money been distributed across other, higher-returning, less risky investments.

Then there's the infrastructure envy syndrome: "We have to finish it because [France / Spain / China / Japan / even Morocco] has high-speed rail and doggone it, California deserves nice things too." 

But what if we take a step back, given the nightmare that this has become, and ask, “What are the actual justifications that don't involve sunk cost or emotional attachments? What is the problem for which California High Speed Rail is the solution?”

I would suggest that there's no good answer to that for which this proposal, at this scope, given these wholly predictable setbacks, is anywhere near the best use of resources.

The opportunity cost of the High Speed Rail effort—not just money, but political capital, time and energy that could have gone to other things—has been heavy from the outset, and an object lesson in why going with the least-dumb idea consensus provides is not a good governing principle. Every objective of this project is one that California could be well underway to addressing by now had the money been distributed across other, higher-returning, less risky investments.

The state High Speed Rail (HSR) authority cites four benefits of high speed rail:

• Increase Mobility: Improve mobility in the face of growth—with the state's population estimated to reach 50 million by 2050.

• Better Air Quality: Improve air quality by shifting people from cars and planes to clean trains.

• Needed Alternative: Provide a more convenient and productive way to travel and new opportunities to collaborate on business.

• Job Growth: Stimulate job growth across the state—now with construction jobs and long-term with maintenance and operation jobs.

I'm confused by "needed alternative," which just seems circular (we need it because we need it, duh!), so let's look at the other three.

If the problem is mobility: California's bigger mobility problems are not travel between regions, but within them. The state's urban freeways are choked with super-commuters priced out of its big cities by untenable housing costs, and day-to-day public transit within those big cities is sorely inadequate. San Francisco Muni horror stories are the stuff of legend. These systems are crying out for hundreds of small-scale fixes to reliability, frequency, comfort, and route distribution. What could we do with $77 billion?

If the problem is air pollution: I'm going to lump air quality together with the issue of greenhouse gases here. 41% of California's 2016 greenhouse gas emissions were from the transportation sector, but only 2.5% of those were from air travel. A full 89% were from car travel. If we want to reduce car travel in California, high-speed rail might help, but the intercity trips it caters to are small potatoes next to the problem of what you do when you step off the train. We need to focus on urban land use, urban public transportation, walkability, and bikeability. On those fronts, what could we do with $77 billion?

If the problem is economic development: High speed rail would certainly open up much more convenient travel from the Central Valley to the Bay Area and to LA, and likely strengthen economic links between the Central Valley (poorer and more agrarian) and those booming tech-driven economies. Those links might come in the form of more of those super-commuters fleeing coastal housing costs, who would create demand for new businesses in Central Valley cities. But again, what is the return on investment? What if we spent even a fraction of that money directly on producing home-grown wealth in the Central Valley, say, through any of these five tested, low-risk strategies? What could we do with $77 billion?

It's The Process, Stupid

The problem is that we don't have a process to make $77 billion in a mix of public investment, private investment leveraged by that public investment, and debt financing available to a grab bag of incremental projects with a high rate of return (and diverse enough that if some of them fail to deliver, it's not a big deal).

We do have a process to make untold billions available to a pipe dream of statewide high-speed rail. Which might not even prove to be a bad investment once we got it up and running: I'm not going to prejudge that. But which is certainly a tremendous gamble with heavy opportunity costs. A big part of the tragedy here is all the things California has spent over ten years years not doing while fixated on high-speed rail.

Want to transform transportation in California? So do I. There are thousands of small, low-risk, neglected needs in California’s transportation sector alone. What would it take to have a system in place that would let those thousand flowers bloom?

(Cover photo: Shinkansen (bullet train) in Japan. Wikimedia Commons.)