Tag: robert samuelson

Reply to Samuelson: It Is an Engineering Problem

In today’s Washington Post, Robert Samuelson argues that the performance of U.S. public schools is at least adequate, and that the relatively low achievement of black and Hispanic students is to be attributed to history and culture rather than to our education system. These claims are not new, and I might well have ignored them if he hadn’t got my Irish up with the off-hand comment that “what we face is not an engineering problem.” (More on that in a second.)

First, let’s dispatch the claim that public schooling is off the hook for the poor performance of low-income minority children. I’m currently undertaking a statistical study of the performance of 78 separate charter school networks in California, relative to one another and to the state’s traditional public schools. To foreshadow the results, the performance differences within socioeconomic groups are enormous even after controlling for school-wide peer effects. Among low-income Hispanic students, across grades, schools and subjects, average scores at two of the top charter networks (American Indian Public Schools and Oakland Charter Academies) are roughly 4 standard deviations above the statewide traditional public school mean. Quatre. Quattro. FOUR.

To put that in perspective, effect sizes in social science research are normally evaluated based on Jacob Cohen’s rule of thumb that 0.2 standard deviations is “small”, 0.5 is “moderate”, and anything bigger than 0.8 is “large.” To put it further in perspective, the low-income Hispanic effect sizes of two of California’s most elite and academically selective public schools are closer to 2 S.D. So the top charter networks, which accept every student who applies, massively outperform elite public schools that actively select their students based on prior test scores. Consistently. Across grades and subjects. [Note that there’s also wide variation in performance among charter school networks, with many performing below the mean of traditional public schools. Further details when the paper is published in a few months].

So, no, public schooling is not off the hook. We know it is possible to dramatically raise the achievement of low-income minority students above the current public school level. The problem is that we lack a system for reliably replicating the good schools and crowding out the rest. And what kind of problem is that? Even Wikipedia knows the answer:

Engineering is the discipline, art and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge to design and build… systems… and processes that safely realize solutions to the needs of society.

Engineering is just a broad set of tools for finding practical solutions to complex problems. One of the most useful of those tools is an aversion to reinventing the wheel, so engineers always ask how the kind of problem they’re addressing has been approached previously, in other places, even in other fields. When possible, they adapt proven solutions to the problem at hand.

So let’s all be engineers for a day on January 28th and hear what education experts from Sweden and Chile have to say about how their nations have been encouraging the replication of good schools. You can register for this unique lunchtime event here.

Yglesias on High-Speed Rail

On November 1, the Washington Post published a devastating critique of high-speed rail written by journalist Robert Samuelson. In fewer than 800 words, Samuelson blows up just about all the arguments put forth in favor of rail. An 8-word summary: costs are too high and benefits too low.

One person who remains unconvinced is Matthew Yglesias, who dismisses most of Samuelson’s arguments because some of them resemble the work of a “car-subsidy shill,” namely me. Apparently, if you believe, as I do, that all modes of transportation should be paid for by users, and not by tax subsidies, then you, too, are a “car-subsidy shill.”

Yglesias did not even read Samuelson’s article, instead reading only a Cato-at-Liberty blog post by Tad DeHaven about that article. But after a mere three or four paragraphs of analysis, Yglesias somehow concludes that $1 trillion for high-speed rail is “a bargain.” His analysis, such as it is, comes down to two points. First, Randal O’Toole opposes high-speed rail, so therefore it must be a good thing. Second (pulling out his mortgage calculator), at 4.1 percent interest over 30 years, $1 trillion is really “only” $58 billion per year. “Let’s do it!” he concludes.

I’ve never met Yglesias, so he probably doesn’t know that I personally love trains and hate driving. But as an policy analyst, I have to put my personal preferences aside and ask a couple of questions that never seem to occur to Yglesias. First, what are the benefits? Second, what do you have to give up to pay the costs?

The answer to the first question is: negligible. High-speed trains will carry less than 10 percent of the number of passenger miles carried by the Interstate Highway System (all the cost of which was paid out of user fees), and virtually no freight (interstate highways not only carry 20 percent of all passenger miles but about 15 percent of all freight ton-miles in the United States).

The history of transportation shows that new technologies succeed when they are faster, more convenient, and less expensive than existing technologies. High-speed rail is slower than flying, less convenient than driving, and (based on Amtrak’s Acela) at least five times more expensive than either. That means, as Samuelson says, “High-speed rail would subsidize a tiny group of travelers and do little else.”

Moreover, really successful new transportation technologies significantly increase mobility. Yet Florida predicts that only 4 percent (see p. 13) of the riders on its 168-mph trains would be new mobility. California’s 220-mph trains would create even less new mobility: the California High-Speed Rail Authority’s latest estimate predicts that less than 1 percent (see p. 9) of its ridership would be new mobility. Here’s an arithmetic lesson for Yglesias: something that creates almost no new mobility, and merely substitutes high-cost transportation for a few marginal travelers previously using low-cost modes, is not a good deal.

Nor is high-speed rail the environmental answer to anything. The environmental costs of construction are high, while the environmental benefits of operations are low, leading Florida to conclude in its environmental impact statement that “the environmentally preferred alternative is the no build alternative” (see p. 2-38). In fact, both cars and airplanes are becoming more energy efficient so rapidly that, by the time a national high-speed rail system could be built, rail would be the brown form of passenger travel.

On the cost side, Yglesias only asks whether my $1 trillion estimate, which is “based on the costs estimates of the California system,” is valid considering that “California is an above-average cost jurisdiction.” That’s a legitimate question that would have been answered if he had bothered to read the footnoted reference. (I divided routes into low-cost and high-cost lines and used different estimates for each.)

Samuelson’s cost estimate was only $200 billion, but that was for high-speed rail in California and Florida and moderate-speed rail (90- to 110-mph) everywhere else. The $1 trillion is for a true national network of high-speed (150-220-mph) rail. I was not the first to use a $1 trillion estimate; that was Matt Rose, the CEO of the BNSF Railway, who probably knows a little more about rail costs than either Yglesias or me.

Beyond that, how could anyone conclude that $58 billion per year is a low price for anything, especially in today’s economy? Where is this money going to come from? Not the states, most of which are financially strapped. Perhaps we could cut all other federal spending on surface transportation–but that was only $54 billion in 2009. I know: let’s pass a health care law that will save money. But we already did that, and now federal health-care costs are projected to rise by, coincidentally, $58 billion between 2009 and 2011. Darn–there goes the money for high-speed rail. (All these numbers are from page 69 of the 2011 federal budget historical tables.)

High-speed rail riders aren’t going to pay $59 billion per year–they won’t even pay the operating costs of high-speed rail on most routes, which Yglesias managed to ignore. Amtrak claims its Acela trains earn a profit (not counting capital costs), but the Acela shares a lot of its operating costs with other Boston-to-Washington trains, which lose money. Between the two of them, they barely broke even in 2009 (see p. C-1). No other high-speed rail route in this country is likely to do as well.

By the way, in order to break even on Boston-to-Washington trains, Amtrak charged Acela riders 72 cents per passenger mile. That’s more than five times the average fares charged by airlines and intercity bus companies. Fares on Amtrak’s low-speed trains are only twice air and bus fares, which I am sure Yglesias thinks is a bargain.

I don’t know why Matt Yglesias thinks spending $1 trillion on trains that only a few people will ride would be a bargain. But I have no doubt that high-speed rail would be a high-cost burden on taxpayers.

High-Speed Pork

Washington Post columnist Robert Samuelson provides a blistering critique of the Obama administration’s plan for a national system of high-speed rail. Samuelson dismisses HSR as “pork-barrel” and “a perfect example of wasteful spending masquerading as a respectable social cause.”

The pork-barrel nature of HSR was underscored by last week’s politically-timed release of $2.5 billion by the Obama administration for rail projects across the country. From the news side of the Washington Post:

Eight days before midterm elections, embattled Democratic candidates cheered the release of billions in federal funds for high-speed rail projects from New Hampshire to California, saying they would help create jobs in their economically bruised states.

The Transportation Department notified lawmakers of the money on Monday and will make a formal announcement on Thursday. The timing of the announcement raised questions about whether the administration was trying to help some Democratic candidates.

The biggest winners of an estimated $2.5 billion pot of money were California and Florida, which have competitive governor, House and Senate races. But numerous other states scored as well.

California will get another $902 million to advance the design and construction of a high-speed rail system initially running from San Francisco to Los Angeles. The money is in addition to $2.25 billion in stimulus money that’s headed to California for high-speed rail.

Samuelson singles out the illogic of California HSR in particular. The state’s “budget is in shambles” he notes and it simply could not afford to fund the debt and operating subsidies that its proposed high-speed rail line would entail. And even if the money were there, it makes no sense for the government to spend billions of dollars on a mode of travel that would benefit so few individuals.

Federal taxpayers can’t afford high-speed rail in California or anywhere else. A Cato essay on high-speed rail points out that the cost of California’s HSR could be $81 billion and a national system could cost $1 trillion. Samuelson is right: the Obama administration’s HSR dreams “represent shortsighted, thoughtless government at its worst.”

Putting Private Insurance Out of Business

Over at Think Progress, Matt Yglesias takes me to task for saying that the so-called public option in the House’s health care bill “would all but eliminate private insurance and force millions of Americans into a government-run system.”

Yglesias apparently still buys into the myth that the public option is, well, an option.

For people who receive health insurance through their employers, which is to say the vast majority of the Americans who currently have health insurance, the House bill would change very little. Or, rather, the biggest change would simply be the confidence that if, in the future, you cease to get health insurance from your employer (maybe you’ll lose your job or want to change jobs) that you’ll still be able to get health care. What’s more, of the minority of Americans who would be getting health care through the new “exchange,” the majority will probably sign up for private health insurance and everyone will have the option of doing so. If the government-run public plan is, for whatever reason, vastly more appealing than the private options then it will dominate. But if you believe the government can’t run health care well, there’s no reason to think that will happen. Whatever you think of that, though, the basic fact is that even if the public option does dominate the exchange most people will still have private employer-provided insurance.

That might be true if the new government-run program were going to compete on anything close to a level playing field.  But, because the public option is ultimately supported by the taxpayers, the playing field can never be level.   True, the bill does say that the new program is supposed to be self-sustaining, covering administrative and benefit costs entirely out of premium revenues.  But remember that Medicare Part B was originally supposed to support 50 percent of its costs through premiums.  That has shrunk to the point where premiums pay for less than 25 percent of the program’s cost.

And the government has a myriad of ways to prevent the true cost of the program from showing up in premium prices.  For example, the government-run plan will not have to pay state or federal taxes, and unlike private insurance plans, who can be sued in state courts, the government-run plan could only be sued in federal court.

At the very least, the program carries with it an implicit guarantee against future losses.  Suppose the public option prices its products too low and loses money.  Can you imagine that Congress is simply going to let it go bankrupt, go out of business?  Would a Congress that has bailed out banks and automobile companies because they are “too big to fail” resist subsidizing the government’s insurance plan if it began to lose money?   Even without the actual bailout, such an implicit guarantee has a value. For example, the implicit guarantees behind Fannie Mae and Freddie Mac were estimated to have saved those institutions $6 billion per year.

All of this means that the government-run plan would be significantly cheaper than private insurance, not because it would out-compete private insurance or because it was more efficient, but because it had unfair advantages.  The lower cost means that businesses, in particular, would have every incentive to dump workers from their current health insurance plan into the government plan.  And, if other provisions of the bill make insurance more expensive, as is likely, the incentive for employers to shift workers to the government plan would be even greater.   Estimates suggest that nearly 90 million workers could eventually be forced into the government plan.

As Robert Samuelson, dean of economic columnists, writes in the Washington Post, “a favored public plan would probably doom today’s private insurance.”

Samuelson is right.  There is nothing “optional” about a public option.  And that is just the way the Left wants it.

High-Speed Fail

In a four-part series on the New York Times Economix blog, Harvard economist Edward Glaeser scrutinized high-speed rail and concluded that the benefits are overwhelmed by the costs. After making generous assumptions regarding the costs, user benefits, environmental benefits, and effects on urban development, Glaeser concludes that all the benefits of high-speed rail would still be less than half the costs.

As Washington Post writer Robert Samuelson observes, the Obama administration’s vision of high-speed rail is “a mirage. The costs of high-speed rail would be huge, and the public benefits meager.” Yet even Samuelson falls victim to the common assumption that high-speed rail “works in Europe and Asia” because population densities in those places are higher than in the United States.

The truth is that high-speed rail doesn’t work in Europe or Asia either. Japan and France have both spent about as much on high-speed rail as they have on their intercity freeway systems, yet the average residents of those countries travel by car 10 to 20 times as much as they travel by high-speed rail. They also fly domestically more than they take high-speed rail. While the highways and airlines pay for themselves out of gas taxes and other user fees, high-speed rail is heavily subsidized and serves only a tiny urban elite.

Obama uses the fact that France, Japan, and a few other countries are racing one another to have the fastest high-speed trains to argue that we need to join the race. That’s like saying we need to spend billions subsidizing buggy whip or horse collar manufacturers or some third-world country will beat us in those technologies. The fact is that high-speed trains will never be as fast as flying on long trips and never be as convenient as driving on short trips, and there is no medium-length trip in which high-speed rail can compete without heavy subsidies.

The rail advocates go ballistic whenever anyone questions their fantasies, mostly engaging in ad hominem attacks (“you must be paid by the oil companies!”) or accusing skeptics of lying about rail. The reality is that Glaeser (like me) “almost always prefer trains to driving.” If anything, he was too generous in many of his assumptions about high-speed rail.

For example, Glaeser built his case around a hypothetical high-speed line between Dallas-Ft. Worth and Houston, the nation’s fifth- and sixth-largest urban areas which together house close to 10 million people and are located about 240 miles apart, supposedly an ideal distance for high-speed trains. If the numbers don’t work for this market, how are they going to work for Eugene-Seattle, Tulsa-Oklahoma City, New Orleans-Mobile, St. Louis-Kansas City, or any of the other much smaller city pairs in the Obama high-speed rail plan?

The rail nuts don’t want to hear Glaeser’s (or Cato’s) numbers because they fantasize the Field of Dreams “build it and they will come” myth; that building rail will “create the demand for the rail lines.” That may have been true in nineteenth-century America, when no alternative forms of transportation could compete with rail. But it wasn’t true in twentieth-century France or Japan (where heavily subsidized high-speed rail carries only 4 to 6 percent of passenger travel), and it won’t be true in twenty-first-century America.

Building high-speed rail will be like standing in the chilly vestibule of an Amtrak train in mid-winter Chicago and burning million-dollar bills to keep warm. But that’s what happens when you base your transportation policies on a slogan from a Kevin Costner movie rather than on real data.