The Infrastructure "Crisis"--Posner

The August 1 collapse of a bridge that carries Interstate 35W across a river in Minneapolis, which killed 13 people, has led to loud calls for greater expenditure on maintenance of America's hundreds of thousands of bridges and millions of miles of interstate highways. The federal highway system--the "Interstates," like I 35W--has a total length of about 50,000 miles, and though that is only 1 percent of the total highway mileage in the United States, it carries almost a quarter of the nation's total road traffic, amounting to some trillion persons a year, and half its truck traffic. Concern with inadequate maintenance has focused on the federal highway system. It should be noted, however, that although the system is federal, its components--the individual interstate highways--are owned mostly by the states, with each state owning the portion of the federal highway system that falls within it. The system is financed in part by federal and state gasoline taxes, in part by the general federal budget, and, though most of the Interstates are freeways, in part by tolls levied by the states. The shock caused by the Minneapolis accident may seem excessive in light of these figures. A highway system that carries a trillion drivers and passengers a year is bound to experience occasional fatalities due to defects in highway design or maintenance as distinct from accidents due to driver negligence, vehicular defects, fog, and other conditions for which the highway system generally could not reasonably be thought responsible. Nor is it yet clear that the Minneapolis accident was due to deferred maintenance or other neglect. Current speculation is that it may have been due either to the installation of defective de-icing equipment or to the placement of construction materials used in a project to resurface the bridge's roadway. Although the accident may turn out to have had nothing to do with neglect of the transportation infrastructure (mainly highways, though of course there are local roads as well and some bridges are for railways rather than highways), there has been a long-standing, although until the Minneapolis accident a low-visibility, concern with what the concerned call "America's decaying physical infrastructure." What could this mean? A highway, like any other product, should be maintained at a level of quality at which marginal costs are equated to marginal benefits, including safety benefits. There is such a thing as making a product too safe. At the same time, there is a tendency to neglect the delay and wear-and-tear costs that are created by highways that have poor surfaces or that experience frequent lane closures due to the need to repair the road more often than if it were maintained properly. So the question is whether the nation is spending too little on highway maintenance as judged by a cost-benefit analysis along the lines just suggested with proper emphasis on delay costs and a realistic assessment of expected accident costs. The American Society of Civil Engineers has rated more than a quarter of the nation's bridges as "structurally deficient or functionally obsolete," and has called for an expenditure of $1.3 trillion to repair or replace them as well as to deal with similar problems of roads and other infrastructure. But an engineering optimum is not the same thing as an economic optimum. There is no indication that the ASCE has conducted a cost-benefit analysis of its proposal. Considering the infrequency with which bridges collapse, the idea that more than a quarter of them are "structurally deficient or functionally obsolete" in a sense relevant to serious concerns about safety is implausible. Not that it would be a surprise to find that the nation is spending less than the economically optimal amount on maintaining the highway system, bridges, and other infrastructure. Enormous recent growth in the total miles driven on the interstate system has not been matched by expansion of the system, resulting in a substantial increases in delay and also in wear and tear. The highway system has difficulty responding to a need for increased expenditures to preserve road quality and minimize delay because it is publicly owned, and is financed largely by taxes. Politicians have trouble raising taxes to pay for projects the benefits of which will largely be realized after the politicians' current term of office expires. Since accidents that are due to the collapse of a bridge or a highway segment, or some equally dramatic demonstration of a flaw in the highway system itself rather than a mistake by users, are rare, the likelihood of such an accident occurring within a politician's political time horizon is low. So there is an incentive to defer maintenance and thus live (slightly) dangerously rather than raise taxes, the effect of which will be felt by the taxpayer immediately. By the same token, rather than raise taxes to enable road repair or rebuilding that will avert any need for further maintenance for many years, politicians have an incentive to make frequent cheap repairs, even though the cumulative delay and accident costs (discounted to present value) may be great, rather than to take steps to reduce those delays and accidents after their term of office expires. Furthermore, while state taxes are paid by state residents, only part of the delay costs resulting from inadequate maintenance are borne by them because many users of the interstate highway system are nonresidents of the state that maintains its segment of the system poorly. In short, there are systemic reasons to expect the interstate highway system to be undermaintained, although there is also a reason to expect it to be overmaintained: the interest of road builders, like civil engineers, in overengineering the highway system in order to increase their revenues. Yet it is possible that they maximize their revenues by frequent small repair and rebuilding projects rather than infrequent but costlier because more extensive ones. My guess is that the interstate highway system is undermaintained, but it is just a guess, and I would be grateful if some of the readers of this post have better information on the question. Supposing that the maintenance of the system is not optimal, what might be done to bring it closer to the optimum? One possibility would be to privatize the system. Until the 1970s, it was believed that infrastructure services such as air transportation, rail and barge transportation, trucking, pipeline transportation, and even taxi service could be privately owned but had to be heavily regulated by government as "common carrier" services, with price and entry controlled by regulatory agencies. We now know better. Yet we treat highways, which are just another part of the transportation infrastructure along with airlines, railroads, and pipelines, as requiring not only tight regulation but public ownership. In fact limited-access highways are easily financed by user fees--tolls--and the advent of electronic toll collection (EZ Pass and similar services) has reduced, and will soon largely eliminate, the delay caused by having to stop and pay a toll. States have taken steps toward privatizing highways, including components of the interstate highway system, such as the Indiana Tollway. (See our posts of June 20, 2006.) If the interstate highway system were privatized, there would still be a need to ensure uniform safety standards, signage, and so forth, although the responsibility for achieving the requisite commonality could largely be delegated to the owners themselves, since it would be very much in their interest that the interstate system be from the user's standpoint uniform. There would be a potential problem of monopoly, since for many drivers there is no good alternative to using the interstate system. But that problem could be minimized by the terms on which states leased the operation of their stretches of the interstate system to private companies. Private operators who skimped on maintenance would be subject to being sued in tort if accidents resulted and to having their leases terminated; and to the extent that deferred maintenance caused unnecessary delays and thus reduced the value of the use of a highway, the operator would not be able to charge as high a toll, and so there would be a market penalty for suboptimal maintenance.

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The idea of privatizing the interstate highway system is interesting, but would there be enough of a profit margin for potential owners to be interested? The other aspects of transportation infrastructure mentioned (train, trucking, taxi, etc) all have some per-user fee associated with them, though I don't know enough about pipelines to say for sure. The few instances I know of where privatization was carried out was of toll roads (the Chicago Skyway, for instance). I don't think I'd want to see the entire federal interstate system become toll roads.

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