Evan Soltas observes that despite near-constant warnings about the deterioration of U.S. infrastructure, its quality has actually improved over the past two decades. U.S. infrastructure needs are often framed through a comparative lens, i.e., the quality of U.S. infrastructure has fallen behind [Country X, usually in East Asia] and this is cause for alarm. Soltas notes that U.S. public investment in infrastructure closely tracks the OECD average: the U.S. has lagged behind South Korea and Poland, both of which are countries transitioning from middle-income to high-income status, but it is in line with Canada, Germany, and Australia. It is hardly surprising that the scale of public infrastructure investment would be higher still in rapidly urbanizing countries transitioning from low-income to middle-income status.
China is a telling example. Michael Pettis has written at length about the outsized extent to which the Chinese state subsidizes capital investment, including white elephant infrastructure that make very little economic sense. The logic is straightforward: speed is more valuable in highly productive societies, as the opportunity cost of the delays caused by traffic congestion, etc., are much higher than in less productive societies. Building expensive, high-quality infrastructure in societies with low wages might have symbolic benefits, but there is a good case that the money would be better spent elsewhere. And this is leaving aside the question of how durable and high-quality flashy Chinese infrastructure projects will prove to be over time. In a similar vein, one of the chief barriers to infrastructure spending in affluent countries is that the cost of land and, perhaps more importantly, the cost of disruption is much higher in, say, the U.S. than it is in a less productive economy. The Economist’s recent survey of London’s airport expansion efforts offers valuable insight into how these dynamics play out on the ground. This isn’t to say that the U.S. should not spend more on public infrastructure. That may well be true. But it’s important to get the frame of reference right.
Moreover, there is much to be said for focusing on the effectiveness of infrastructure spending over the sheer amount, and that points to a challenge Americans ought to dwell on. Though the U.S. public sector might spend as much as the public sectors in Canada, Germany, and Australia, it is not clear that U.S. taxpayers get as much value out of this spending as their counterparts elsewhere in the OECD. The World Bank’s Global Competitiveness Report ranks the quality of overall infrastructure (p. 412) in Canada and Germany well ahead of the U.S. while Australia is well behind. This is hardly conclusive evidence, but Alon Levy, Stephen Smith, and Jarrett Walker, among others, have often lamented the pathologies plaguing U.S. infrastructure investment, as has Barry LePatner, author of Too Big to Fall. LePatner has written a great deal about the cost overruns that plague U.S. infrastructure projects, and he has offered detailed thoughts on how to mitigate them.
David Levinson, a transportation economist at the University of Minnesota, has emphasized that one of the key issues in infrastructure investment is improving accessibility, or the ease of reaching valued destinations. One way to improve accessibility is make it easier to traverse long distances, so you can reach a larger number of jobs and consumption opportunities, etc., in a given amount of travel time from home. Another way to improve accessibility is to bunch up jobs and consumption opportunities and homes, i.e., by increasing density. Levinson finds that while accessibility has deteriorated relative to 1990, it has improved relative to 2000. My sense is that the best way to increase accessibility is to focus on implementing peak road-user fees and using the resulting revenue stream to carefully add capacity at bottlenecks, and also to ease local land use regulations that have proven a barrier to increased density in high-productivity regions. These strategies ought to be pursued in tandem. One crude way of putting this is that while we tend to fixate on the “hardware” layer of infrastructure, we should devote more attention to the “software” layer, i.e., the systems governing the allocation of infrastructure resources. Focusing on accessibility rather than infrastructure spending levels as such will get us much closer to tackling the frustrations that plague commuters.
For another take on infrastructure spending, I recommend Kevin Williamson’s recent NR cover story on the subject.