How to Build High Speed Railroads
|December 9, 2013||Posted by Scott Baker under Editorials|
America has no internationally recognized High Speed Railroads – that is, our fastest train, the Accela, does not even meet international standards for a High Speed Train.
I left a response to an article on the popular blog: Nextbigfuture, regarding the potential, but thus far unrealized, benefit of building Elon Musk’s Hyperloop between Los Angeles and San Francisco.
This is the short original article:
“If Hyperloop could succeed it would disrupt airline and rail travel as we know it and improve the whole economy with more economical and efficient transportation. There have been many innovative engineering designs and proposals but they are not taken seriously and have not been funded even if they could greatly benefit society and potentially be economically successful.
The entire culture of Silicon Valley, and entrepreneurship around the globe, has taken on a groupthink that prevents truly novel inventions, like the Hyperloop, from reaching the market. The result is a major loss. It’s a loss to our society. It’s a loss to our capital markets. It’s a loss to private investors. And it’s a loss to entrepreneurs.
The age of software is suffocating investment in improved largescale physical changes that require a lot more funding and patience to get to a lower return than software can provide.
If we want to have companies like Hyperloop in Silicon Valley, and we want to have less companies like Instagram, we have to stop building startups based on a one-size-fits-all formula. This formula produces companies like Instagram and Buffer. They hit all of the checkboxes, but entirely fail to innovate. Not to mention, they’re boring.
Companies like Hyperloop break all of these rules. There is no MVP, it’s very high risk, there is no angel who specializes in it, it’s a first-time inventor, the company wants to go public, and all the founder has is a scribble on a legal pad to explain how it’s going to work. It goes against all conventional wisdom, but that may be the best investment of our generation.
Bigger societal goals and embracing change
Even though the electrical grid in North America and other developed countries has many known problems only about 1% of the grid is upgraded. There is a large backlog of unrepaired bridges and other infrastructure.
Very little power generation is replaced even though it is well known that existing coal plants are polluting or is an old and inefficient system.
Adopting best practice in infrastructure could boost global infrastructure productivity and save $1 trillion per year within 18 years. This would be a 40% increase in productivity.”
In response I wrote:
The problem is that the people who benefit are those who live along the hyperloop line, to the tune of billions of dollars, while those who would pay are either private entrepreneurs (too little capital and too much risk), or the general taxpayer (too little benefit for most), or the rider (too few to be able to pay for it on their own without ticket prices that will drive away all but the elite, who might just take their own planes and helicopters anyway).
The people who benefit the most should pay the most. This means a non-attenuated government charging a Land Value Tax based on Von Thunen (http://en.wikipedia.org/wiki/Johann_Heinrich_von_Th%C3%BCnen) analysis of marginal productivity:
R = Y (p – c) – Y Fm
where R=land rent; Y=yield per unit of land; c=production expenses per unit of commodity; p=market price per unit of commodity; F=freight rate (per agricultural unit, per mile); m=distance to market.
Formulas aside, the point is that landowners are the ones who win when a new rail line goes through, particularly near stops (this only works if it’s not a train to nowhere). Here in NYC, for example, billions in new property development is already springing up, seemingly overnight, along the projected 2014 #7 line extension from 8th Avenue and 42 street to 11th Avenue and 34 street. Speculators build because of their correct perception that value will be added to the new “corridor” even in an already bustling city like New York.
Read Fred Harrison’s book, Wheels of Fortune to understand this better:
“It is often assumed that government intervention is required to bring to fruition large scale infrastructure projects because the large initial capital outlays such projects require must be funded from the public purse. In Wheels of Fortune, Fred Harrison shows that large scale infrastructure projects can be made self-funding. Infrastructure projects almost always bring about a large increase in the value of adjoining land. For example, it is estimated that the London Underground Jubilee Line extension increased adjoining land values by close to GBP3 billion. When such infrastructure projects are funded by government, they therefore involve a substantial transfer of wealth from a large number of taxpayers to a small number of property owners. Harrison argues that a fairer and more efficient means to fund infrastructure projects is to capture and use the increases in land values that they bring…
There were actually MASSIVE subsidies and outright giveaways for the railroad companies to get the transcontinental lines built. It was the checkerboard policy — giving away alternating miles of land on either side of the track to the railroad companies so they would build. More info:
“The transcontinental railroad, completed in 1869, passes through southern Wyoming. It was financed in part by land grants to the railroad under the Union Pacific Act of 1862. In that Act, Congress granted every other section (one square mile) of land within ten miles of the railroad to the Union Pacific, which tried to sell it to raise capital for the venture. When sales proved less than brisk, Congress doubled the area to 20 miles on each side of the railroad. Congress believed that the coming of the railroad would greatly increase the value of the land retained by the government. The land could then be sold at a profit at a later date. This scheme, used successfully in the East, was not practical in the vast semi-arid rangelands of the West. Many sections in remote areas remained unsold and in government possession. When homesteading and government sales of land ceased, many areas were left in a permanent checkerboard pattern of alternating public and private land.”
To change the zeitgeist regarding Land Value Taxation, we need to reach beyond the usual audience and introduce the concept in novel ways. There are opportunities to do so almost everywhere.