Most politicians are optimistic about the government’s ability to intervene and solve problems. That’s one reason why they run for office. Neocons, for example, have excessive faith that foreign intervention can fix the world, while liberals embrace the misguided idea that subsidies and regulations can boost the economy.
On infrastructure, we’ve seen political enthusiasm leading to overpromised and underdelivered projects since the founding of the nation. The construction of the National Road—funded by Congress beginning in 1806—was fraught with problems. The Army Corps of Engineers has been known for boondoggles since the 19th century. In recent decades, government infrastructure has become so notorious for waste that The Simpsons had an episode about a failed monorail scheme.
Chapter 1 of Burton and Anita Folsoms’ book, Uncle Sam Can’t Count, examined the inefficiency of the government’s fur‐trading infrastructure from 1795 to 1825. Chapter 2 of the book looked at how 19th century subsidies for steamship transportation were wasteful and damaging.
Chapter 3 of the book looks at the orgy of state government canal building from the 1820s to the 1840s. Here is the basic story:
- New York State funds construction of the Erie Canal, which opens in 1825.
- The Erie Canal is a big success, which spurs canal fever across the nation and encourages other state governments to hand out subsidies. Government canal schemes are launched in Michigan, Pennsylvania, Ohio, Indiana, Maryland, and Illinois. There is particular excitement about subsidized “internal improvements” among Whig politicians, including Abraham Lincoln.
- However, politicians overestimate the demand for canals in their states and underestimate the costs and difficulty of construction. They do not recognize that the Erie Canal is uniquely practical and economic as it traverses relatively flat land and connects the Great Lakes with the Atlantic.
- Some of the state‐sponsored canals are huge boondoggles and are abandoned. And other than the Erie Canal, all of the state canals sustain heavy losses, including other subsidized canals in New York.
- After the failures, numerous states privatize their infrastructure and change their constitutions to prevent politicians from wasting further money on such schemes.
Thomas DiLorenzo writes about these issues here. And Clifford Thies goes into detail about the canal follies in this Cato Journal article. As these authors discuss, governments unfortunately made similar mistakes subsidizing railroads in the 19th century.
Perhaps our current political leaders are not funding escalators to nowhere—as they did on The Simpsons monorail episode—but today’s uneconomic streetcars and high‐speed rail schemes are not that much different.