37 ms·

Why Infrastructure Is So Expensive

409 points by swivelmaster 9y ago

zkms 9y ago
> He goes through and dismisses all of the usual suspects. Union wages drive up infrastructure costs (yet not true in countries paying equivalent wages). It's expensive to acquire land in the property-rights-obsessed United States (yet countries with weaker eminent domain laws have cheaper land acquisition costs). America's too spread out or our cities are too dense (arguments that cancel each other out). Our environmental review processes are too extensive (yet other advanced countries do extensive environmental reviews with far less delay). I concur with all these points, by the way. > Smith concludes with this: > That suggests that U.S. costs are high due to general inefficiency -- inefficient project management, an inefficient government contracting process, and inefficient regulation. It suggests that construction, like health care or asset management or education, is an area where Americans have simply ponied up more and more cash over the years while ignoring the fact that they were getting less and less for their money. To fix the problems choking U.S. construction, reformers are going to have to go through the system and rip out the inefficiencies root and branch. A thing that isn't mentioned (but might be mentioned in the book) is the obstructionist effect of NIMBYism. To them, the above-mentioned "inefficiencies" are a critical feature and not a bug. Why does shit (the kind that can't be built overseas and transported here in a shipping container) cost so much in US? Obstructionist NIMBYs (and the laws that enable them, like zoning / land use regulations) play a nontrivial role. There's nothing wrong with regulations that, say, preventing wanton dumping of toxic chemicals in the air/ground/water, but NIMBYs are scum that pervert well-intentioned environmental-protection laws to prevent harmless and critical infrastructure from being built. NIMBYs will oppose everything -- regardless if it's an airport (https://www.washingtonpost.com/news/dr-gridlock/wp/2016/03/07/are-you-the-person-who-filed-6500-noise-complaints-against-national-airport/?utm_term=.bd044f080999 https://www.washingtonpost.com/news/dr-gridlock/wp/2016/03/0...), rail rights of way, high-density housing (whether public or private), medical clinics, cell sites, and literal clothes lines (https://en.wikipedia.org/wiki/Clothes_line#Controversy_in_North_America https://en.wikipedia.org/wiki/Clothes_line#Controversy_in_No...). You got that right, clothes lines. Cell sites don't pollute, aren't used by equipment that pollutes, don't create noise (OK maybe if you're sitting next to it you can hear fans), don't litter, don't have any sort of odour, and really...don't hurt anyone. It's difficult to find more innocuous infrastructure! Of course, increasing the cost of building out infrastructure (the kind that needs to be local to the area served) decreases supply and decreases quality (and increases cost) -- but the NIMBYs are happy because their precious feelings are preserved because they don't have to see a cell tower or whatever. They don't care if your cell phone bill is higher than it'd otherwise be, or if you get shitty cell service. They don't care if a rail line doesn't get built, they don't care if land use regulation means that real-estate costs for your doctor are huge and thus so is your healthcare costs. They do, however, care if your rent is super high -- in fact, it's what they love to be the case, because it means that their damn single-family home has more worth. NIMBYism -- this desire to prevent one's fellow citizen from benefiting from slightly better and cheaper public goods and infrastructure -- on this scale is incompatible with any sort of high-trust society. A society cannot have this many citizens with this much power and desire to obstruct the construction/maintenance of critical infrastructure that most citizens benefit from. It's antisocial backstabbery, pure and simple, and to indulge in it (as the US has done) is a horrific corrosive mistake and poisons society from the bottom up. Infrastructure -- health care, transportation (of people, material goods, of data), housing -- should be a nation's pride! Until NIMBYs are forced to relinquish the obstructionist powers that they so preciously hold, infrastructure construction/maintenance will keep being expensive and inefficient. Any reform that doesn't explicitly address NIMBYs (either via the carrot or the stick) will fall prey to NIMBYs who will somehow reintroduce inefficiencies so their goals of preventing construction will be met.
- meddlepal 9y ago
  NIMBYism exists because home ownership is basically the most accessible mechanism to grow personal wealth in the US. People are not willing to risk their financial stability and future by allowing basically anything they view as a threat to their primary wealth generation asset in life. More housing, bad views, whatever all challenge people's bottom line.
  - rwallace 9y ago
    That is indeed what such people believe to be their motive, but they have forgotten something very important: when you start a war of all against all, retaliation can take any form, not just the same form you used. Previous poster remarked concisely that NIMBYism is incompatible with a high-trust society; once that unfolds, the dream of 'growing personal wealth' at everyone else's expense will become a hollow victory indeed.
    - zkms 9y ago
      It also need not be everyone who fights against {cell towers, high-density housing, clothes lines, airports, railways, wind farms} -- the relevant laws/regulations/procedures let a sufficiently motivated minority have a pathological amount of influence when it comes to obstructionism. For example, there's a pathologically minuscule number of people who file the overwhelming majority of airport noise complaints; 6852 out of 8760 complaints for DCA in 2015 came from one single person, and this pattern holds for many airports: https://www.mercatus.org/sites/default/files/screen_shot_2016-10-17_at_9.17.00_am.png https://www.mercatus.org/sites/default/files/screen_shot_201... How many excessive tonnes of fuel burned in circuitous flight paths, how many years of administrative work wasted, how many near misses are we risking -- just to please this sort of goddamn wingnut who makes 18 fucking airport noise complaints literally every single day? This is what NIMBY nonsense looks like.
  - jogjayr 9y ago
    > NIMBYism exists because home ownership is basically the most accessible mechanism to grow personal wealth in the US. That has to be due a lack of financial education and knowledge of what options exist to grow personal wealth. You need at least $50k to put 20% down on a median US home. You need only $2.5k to start an index fund account with Vanguard. Guess which one will give you a better return on average and is more liquid?
analog31 9y ago
With health care, I have a hunch that it's so expensive because the system is such a tangled web of business entities, that we have no idea where the money is actually going, or what anything costs. As a result, everybody can accuse everybody else of gouging us. I wonder if infrastructure is the same way. However, one difference is that infrastructure, while expensive, costs all of us more or less progressively, even if it costs too much. In a sense, I like that better than the health care system, which is designed to place individuals at risk of ruinous costs.
- ryanmarsh 9y ago
  > we have no idea where the money is actually going This is what auditors do. If anyone in government really gave a shit some auditors could get to the bottom of it in a matter of months.
  - jonknee 9y ago
    > If anyone in government really gave a shit FWIW the government gets a better deal for healthcare than private insurers do (e.g. Medicaid is cheaper per person than if they were covered in a private plan). So I would say they do give a shit and have gotten to the bottom of it. It would be cheaper still if Medicaid covered everybody.
    - JBReefer 9y ago
      The coverage is substantially worse than most private plans - Medicaid looks worse than my crappy ACA plan.
      - jonknee 9y ago
        That depends on where you live, but also your income. If you don't have the cash, Medicaid wins no matter what. A ACA plan with a co-payment that you don't have is worthless.
      - kurthr 9y ago
        That is why in every country that has single payer there are additional coverage plans that allow you to have even better coverage... and it's still cheaper! See Canada, Australia, England, Germany, Japan... well, basically everywhere else. What is really amazing is that it also returns Emergency Rooms back into a place where you go in an emergency so you can actually get treatment in 15min rather than wait for a few hours at 3am as you drip blood on the floor through the towel you've wrapped your arm in, and watch in horror as the lady next to you screams and shakes on the floor as she passes kidney stones (yes you would recognize the world renowned hospital where this happened).
chrismealy 9y ago
We know it's cheaper outside of America. Instead of playing Not Invented Here why not just ask what other countries are doing better?
- the_mitsuhiko 9y ago
  Same reason that does not happen with healthcare: the mindset is different. In many ways changing the system means giving up some things Americans value more than citizens of other countries.
  - dasil003 9y ago
    In the case of healthcare it's not because of American values directly, it's because the entire conversation has been framed in a way so the majority of Americans don't even understand what the possibilities are and the debate is entirely centered around a series of fantasy narratives put forth by lobbyists for the status quo. I mean the whole conservative argument about the value of the free market for moderating health care costs is completely blown up by the most cursory look at the value you get for private health insurance in the UK due to the fact that they have to compete with free. But there's no attention span in the political debate to put forth an argument like that because it doesn't align with an established narrative and therefore can be triggered by a sound-bite-sized emotional appeal. You need a years-long strategy and talking points to chip away at it, but the people with the knowledge and facts to do so are not good political strategists, and the people with the time and inclination to do so all have vested interests in the current system.
    - the_mitsuhiko 9y ago
      > I mean the whole conservative argument about the value of the free market for moderating health care costs is completely blown up by the most cursory look at the value you get for private health insurance in the UK due to the fact that they have to compete with free. I disagree that they have to compete with free because they effectively compete with free footing parts of the bill and that is ideal. If you take the UK and you have a private insurance (like Bupa) you don't have private insurance instead of the NHS (the public one) but in addition to the NHS. One the one hand this means that I have the choice as a customer to go with an NSH or Bupa service, but I also know that the NHS will always take me and Bupa knows that I will think like that. Bupa knows that people are very unlikely to charge the private insurance for an ambulance (because why would I? The gov pays). However they know I will use their services when I had a mountaineering accident and need a helicopter. They fundamentally operate in largely different areas that just happen to overlap in some parts. Sometimes people use a private insurance because they don't want to wait. But that often also means they don't have to wait not because they will die because then the state system (unless it's temporarily broken) will prioritize you anyways. I think splitting the problem into two (emergency care vs. 'lifestyle' care) would work in the US but that's not the conversation that is taking place and that is a cultural thing more than it is a problem of politics.
Robotbeat 9y ago
The article is very high level, looking at root causes and (correctly) pointing out the flawed incentives in how America builds infrastructure. Here are some lower level observations: I've been watching construction and similar projects at a government site lately. It seems that there are always more people watching than working. But that's not too bad, as often construction projects will languish with no one working on them for months (meanwhile, the site gets dirty due to rain water filling the site, etc) due to red tape requiring certain people to do certain parts of the job (such as cost exceeding a certain amount and thus the work needs to be put out to bid instead of using the on site contractor). The exception is if it's something simple, like erecting a temporary meeting tent rented by some company. In that case, it seems like EVERYONE is busy and is doing something. Stuff gets done rather quickly. Maybe they have a lot more practice? I bet they also do multiple types of job, i.e. a guy doesn't just tie the tent down, but also helps unroll the fabric from the truck or moves chairs to the seating area, etc. Regular road projects seem to be not so bad, more people working than during a building construction. But I noticed another thing: huge machines which must cost almost a million dollars sitting idle with no one using them. I think the secret might be just to ensure that work starts and finishes on a project as soon as possible, that both people and expensive equipment have work ready for them so they can keep busy constantly until the job is finished. This probably would require a responsive, competitive, well-managed, and very well practiced company to do this. And maybe it'd help if people were cross-trained to do multiple trades, so that after one task is completed, they could immediately go work on another. But if people & machines were simply kept busy constantly on the project, I've gotta think the project could be done for far, FAR less money (and time). And the author is correct that the way to establish those is via the proper incentives. Constructing a building by contract with a government agency is not a very dynamic environment. Renting a meeting tent, on the other hand, is something very amenable to competition even if the customer happens to be the government. I'd really like to see some sort of study that simply observed construction projects and crews, on-site, in multiple locations in the world and multiple types of projects. We could get some decent answers.
- dilemma 9y ago
  What you describe is lean management applied to the construction industry. I'm certain that it is possible but I've never heard of it being practiced. Possibly by Broad Sustainable in Chiba.
solatic 9y ago
TL:DR - the way to combat rising costs is to constrain the supply of capital. This isn't going to work. Infrastructure contractors will just turtle up and say that it can't be done at the lower price. Lowest-bid mechanisms are intended to harness Adam Smith's invisible hand, but aren't working as intended. The essay touches upon two distinct points: a) the private developer cared deeply about how his money was spent, but the public developer did not b) general incompetence of public management, by misunderstanding how contractors manipulated costs to reach their estimates and establishing perverse incentives The way you typically solve this kind of problem, at least in the private sector, is to set up a way for the manager to personally earn a fraction of what he saves the organization - the organization still saves a lot of money overall, even after paying the bonus. But if you bring up the concept of performance-based pay for public employees, you find massive opposition - both from a public worried about corruption and graft, and from public employees themselves, many of whom were drawn to public work in the first place specifically because of the stability and security of a public paycheck. That's when you understand that what really needs to be talked about is a culture change in public work culture, and when you understand that, you understand just how high the mountain is that needs to be surmounted.
- mahyarm 9y ago
  But why do public organizations in developed europe & co have infrastructure projects for cheaper then? Don't they have similar or even stronger public work cultures?
  - lmm 9y ago
    European view: the US in general seems to have a really procedurally-oriented way of doing things. There are good sides to this but it does sometimes break down: in particular the legal system seems to focus a lot more on whether the process was followed rather than taking a step back and asking whether this is the just outcome. I understand the rationale for low-bid rules. But actually the US has pretty low corruption and a good public work culture; IMO those rules do more harm than good. If you were willing to trust the people evaluating the bids a little more and empower them to use their judgement and pick the overall best bid (and maybe pay them a little more), you'd get better outcomes.
throwaway-1209 9y ago
Because of the law of budgets: use it or you'll get less next year. We have a few streets here which have been undergoing "repairs" pretty much constantly for the past decade. They aren't getting wider or better, perfectly serviceable pavement gets torn up again and again, several times a year. Why? Hell if I know. The most plausible explanation is someone needs to "use up the budget".
- tgjsrkghruksd 9y ago
  You must live in a funny-mirror version of my world. I'm in the pothole belt and there is never enough in the budget to fix all our roads. Yes, for various reasons, sometimes a stretch gets replaced that's in much better condition than other deplorable streets (usually because it coincides with some other development), but the funding is never there to fix all the outstanding urgent problems much less ripping up and redoing good pavement.
  - throwaway-1209 9y ago
    Actually same here: there are plenty of potholes elsewhere, but only these few good roads get continually torn up and repaved.
- marcosdumay 9y ago
  > The most plausible explanation is someone needs to "use up the budget". The only plausible explanation I know is that somebody in gov is friend of somebody on the contracted company.
known 9y ago
"If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." --Reagan
- matt4077 9y ago
  People use this quote as some sort of insightful attack on the failures of government, but, in a certain light, it's exactly what government is supposed to do.
  - fivestar 9y ago
    Any thinking person should question the insipid nature of government because it never seems to get perfected but is always and everywhere just a blunt object which bludgeons us into cooperating with it one way or another.
scythe 9y ago
>The more lane miles a state has, the more federal transportation dollars that state qualifies for. What is the incentive? It is, of course, to build more lane miles. Add to this the fact that federal transportation programs generally pay 90%+ for new construction, but only ~50% for maintenance, and we have a system that encourages states to build more than they can ever maintain. This is a microcosm of a larger systemic problem with state budgets that started with the Sixteenth Amendment. Not because income taxes are bad (they're fine) but because that was the first step in a process where nearly all revenue in the United States is collected by the federal government. This was a shift from the original situation where the government was funded by excise taxes and most taxes were collected by the states. This didn't become a problem however until the federal government's fiscal advantage became so large that federal outlays began to dominate state budgets. The result is a growing clusterfuck of incentives that would make Roman Polanski blush. State governments used to get more money by growing their states' economies. Now they pursue the twin goals of getting more money from Uncle Sam and generating more of the kinds of economic activity that they can most easily derive revenue from, because federal income taxes are too high for states to collect very much money from income tax, and because states compete against each other to lower taxes to attract businesses so are better off seeking federal funds than raising taxes. If a state raised its own taxes to build roads they'd never overbuild the network like this. It's completely insane. It's possible that the election of Senators by state legislatures also served to prevent this slow transfer of fiscal power from happening during the first century of our country's existence.
- rzimmerman 9y ago
  I think you make a very interesting point that the direct election of senators removed an important protection by effectively shifting representation in the senate away from state governments directly to the people. Direct election was opposed when writing the US Constitution for this very reason.
- maxerickson 9y ago
  States and local governments collect lots of revenue. http://www.usgovernmentspending.com/ http://www.usgovernmentspending.com/ And for the point you are making, it would be sensible to pull out some spending as "other" (Social Security, maybe Medicare, some portion of defense spending).
BjoernKW 9y ago
Lack of accountability is an important, perhaps even the most important, part of the problem: With private projects if a project is overdue or if it is exceeding the originally projected costs either of the parties will be held accountable, either through civil liability enforced by a contract or in simple economic terms. With public projects there generally is no such accountability. If a public project is delayed and it costs more than planned the public purchaser (the state, city, you name it) - and by extension taxpayers will simply cough up the money, put up with the inconvenience of yet another unfinished and out-of-repair piece of infrastructure and move on. If we want to change that creating the right incentives is only one side of the coin. The other side is holding both civil servants and politicians accountable for the public projects they're responsible for. Given the amount of money typically involved in these projects personal financial liability wouldn't be practical. Disciplinary consequences for gross negligence or the outright nepotism rampant with that sort of projects shouldn't be out of the question though. I find it unacceptable that civil servants and politicians who demonstrably and deliberately waste tax money continue to climb the ladder with apparently no care for the damage they cause.
- matt4077 9y ago
  I've seen quite a few articles and studies that say that government projects aren't actually more expensive than private projects. The impression is created because (a) the media will report on a government-run project over budget because they actually get that data (unlike private cost overruns), and the public cares more about these projects. And, (b), government projects are more likely to start with an initial estimate that is too low, because that's beneficial to getting a project approved. Speaking to your argument about accountability: Do you think the CEO of GE is really more afraid of the shareholders than the mayor of some city in Kansas? Politicians are plenty accountable. And for something like the federal government, projects are managed by employees, who are managed by agency heads. The latter get a budget and have to work within it. Say you're the head of the National Park Service: If your new visitor centre at Yellowstone gets swallowed in a geyser, will you not face exactly the same consequences as someone at Disneyland tasked with building a new ride?
  - 9y ago
mschuster91 9y ago
In ye olde days in Germany, the municipalities had their own construction teams, employed by the municipality. That meant that e.g. road constructions were done by the government - which also means that the "feedback loops" were way shorter, and there was no incentive for the construction teams to delay the construction or similar. Now, with the privatization trend and "cheapest-bidder-wins", it's a catastrophe. Especially when construction companies from foreign countries are involved (thanks to EU-wide tender crap)... the language barrier is a huge issue. One thing the article totally leaves out: in ye olde days, there were next to no changes to a project when it was approved. Now replannings in all stages of a project are common - be it due to politicians trying to gain something, NIMBY morons, environmental protection or, the worst case as can be seen at BER, changing technological requirements. Every replanning causes delays and cost overruns.
- detaro 9y ago
  BER and "changing technological requirements"? BER (primarily) got doomed because they rearranged the layout to be able to sell more shopping space halfway through and didn't properly plan out the consequences of that change.
  - mschuster91 9y ago
    I didn't mean to allude to this, rather to an article I read half a year ago that when the construction permit expires before the thing is built that they'd have to rip it half apart AGAIN because regulatory frameworks changed :'D Your point more fits into "politicians and personal gain", imho.
adekok 9y ago
Because in badly managed projects, the managers have no idea what the project is about. They don't know how anything works. They can't distinguish good work from bad work. Instead, they rely on rote rules and checklists to "prove" they've done their job. This happens in both public and private sectors. For example, a friend's employer got bought by a large multinational. The multinational imposed all kinds of processes, checkpoints, checklists, etc. to "ensure product quality". They then got upset that the bids were triple the cost they were previously, and took twice as long. And that's of course coupled with the fact that no one from the parent company paid any attention to the day to day activities of the (now) division. Instead, they relied on paperwork. Well, paperwork is no substitute for feet on the ground. One of my favorite books is "On the psychology of military incompetence". It uses military examples to show how organizations are run (bad vs good), and what quantitative differences there are between bad leaders and good leaders. Paying attention to details, and ignoring superficial forms is a major differentiator between good leaders and bad leaders. This is echoed in the story. The city didn't pay attention to the project, while the developer did.
fivestar 9y ago
I think a major point was missed: The reason for infrastructure projects is the meta effect called "jobs." There are no projects that don't take into consideration how many blue collar jobs get created/maintained. You look at all the road and bridge projects and everything else and those projects are rarely centered around need but rather "how many jobs are preserved or created." That's what Obama's "shovel ready projects" were about. A lot of jobs are a form of welfare doled out by government. Unlike the true welfare recipients, there are people who prefer to work because it gives them a sense of satisfaction but similar to out and out welfare queens, they are recipients of a further form of welfare which they do trade labor for. But, unlike the true private sector, those who oversee these workers make sure that some new project springs up each year to keep them employed. It's a weird system...
vlehto 9y ago
>Tolls, maintenance districts and direct user fees are less popular but actually more empowering for people in that it allows them to speak their preferences more forcefully and clearly. How about land tax? This way you can still provide free movement to poor people, but you can collect funds very locally. ( I can admit I'm die hard Gergist.)
devwastaken 9y ago
The first part of the article talks about Healthcare with this: "Which is why, on the healthcare island, the conversation is about costs. Your preferences don't matter, except where they are aligned with the objectives of those on the island. Substitution doesn't matter; there are no competing services. Obscene profit margins don't invite competitors; they invite consolidation. Justifying costs to third party payers, instead of prices to patrons, is the name of the game. It's a bizarre world that doesn't make any sense to people like Goldhill when they take a critical look at it." I haven't read the book, but it looks to me they're making the age-old argument that 'third parties' shouldn't pay for healthcare because thats why its screwed up now. But, this is far too simplistic to be true. Healthcare is not a product, its a service. That service changes depending upon the person. Its not mass-producable or competable down because of demand in many cases. And, even if it were a product, you still have the eternal problem that people cannot negotiate for their own healthcare. You can't. You physically need it, and may die without it, and there is no process by which to negotiate or even many times know what price you will be paying. That is what universal healthcare strives to solve in other countries, and does so decently.
- canes123456 9y ago
  The vast majority of health care decisions are not life and death. Many times it is still hard to know how much something will cost and it is hard to price shop. But the same thing applies to auto repair. You need a car to get around and it is extremely expensive to toll your car to other body shops. You need to take the price the person offers you a lot of the time. But in medicine some times it is not time critical and you can shop around. We don't do it know because we don't pay.
  - CPLX 9y ago
    All healthcare decisions are life and death. Just not necessarily directly. That fact complicates matters significantly.
    - paulddraper 9y ago
      All decisions are life decisions
andrewaprice 9y ago
I feel like the blame too often goes to insurance companies, but insurance companies are a natural player in a free market system. When you are sick, last thing you will do is shop around 10 different doctors and compare prices, instead insurance companies do this for you. They negotiate a price with the provider, and if the insurance company isn't happy the provider risks not being in-network and loosing a large pool of patients. In an ideal world, this system should work. What I'm worried about is hospital consolidation. https://image.slidesharecdn.com/annenberg-frakt-150324142714-conversion-gate01/95/austin-frakt-changing-how-we-pay-for-care-webinar-31915-7-638.jpg?cb=1427207315 https://image.slidesharecdn.com/annenberg-frakt-150324142714... We have created a regulatory environment with high fixed overheads, so: a) consolidation lowers the fixed costs, encouraging entities to centralize these fixed costs to minimize them b) makes it difficult for new independent players to enter the market Rather than a metro area having 8 independent hospitals all competing against each other (giving insurance companies a lot of leverage in negotating prices with providers), that metro area might have 2 companies with 4 hospitals each, so you have 2 companies that know what the other's hospital charges for services, and in their own interest of profit aren't interested in getting into a price war with the other.
dadvocate 9y ago
because in good old days they got-by by exploiting cheap labor (in other words slavery). Things went down south since they couldn't do it anymore legally.
woodandsteel 9y ago
Interesting and disturbing article. The author ends with some ideas about how to solve the problem. I would like to make a suggestion. To start, I think it is a good principle that whenever there is a problem in this country, we should look at other countries to see if they handle it better, and if any do, look in detail at how they do it, and then think about adopting their methods to the US. My suggestion is simply we do this with the infrastructure construction problem.

409 points by swivelmaster 9y ago

zkms 9y ago

> He goes through and dismisses all of the usual suspects. Union wages drive up infrastructure costs (yet not true in countries paying equivalent wages). It's expensive to acquire land in the property-rights-obsessed United States (yet countries with weaker eminent domain laws have cheaper land acquisition costs). America's too spread out or our cities are too dense (arguments that cancel each other out). Our environmental review processes are too extensive (yet other advanced countries do extensive environmental reviews with far less delay). I concur with all these points, by the way. > Smith concludes with this: > That suggests that U.S. costs are high due to general inefficiency -- inefficient project management, an inefficient government contracting process, and inefficient regulation. It suggests that construction, like health care or asset management or education, is an area where Americans have simply ponied up more and more cash over the years while ignoring the fact that they were getting less and less for their money. To fix the problems choking U.S. construction, reformers are going to have to go through the system and rip out the inefficiencies root and branch. A thing that isn't mentioned (but might be mentioned in the book) is the obstructionist effect of NIMBYism. To them, the above-mentioned "inefficiencies" are a critical feature and not a bug. Why does shit (the kind that can't be built overseas and transported here in a shipping container) cost so much in US? Obstructionist NIMBYs (and the laws that enable them, like zoning / land use regulations) play a nontrivial role. There's nothing wrong with regulations that, say, preventing wanton dumping of toxic chemicals in the air/ground/water, but NIMBYs are scum that pervert well-intentioned environmental-protection laws to prevent harmless and critical infrastructure from being built. NIMBYs will oppose everything -- regardless if it's an airport (https://www.washingtonpost.com/news/dr-gridlock/wp/2016/03/07/are-you-the-person-who-filed-6500-noise-complaints-against-national-airport/?utm_term=.bd044f080999 https://www.washingtonpost.com/news/dr-gridlock/wp/2016/03/0...), rail rights of way, high-density housing (whether public or private), medical clinics, cell sites, and literal clothes lines (https://en.wikipedia.org/wiki/Clothes_line#Controversy_in_North_America https://en.wikipedia.org/wiki/Clothes_line#Controversy_in_No...). You got that right, clothes lines. Cell sites don't pollute, aren't used by equipment that pollutes, don't create noise (OK maybe if you're sitting next to it you can hear fans), don't litter, don't have any sort of odour, and really...don't hurt anyone. It's difficult to find more innocuous infrastructure! Of course, increasing the cost of building out infrastructure (the kind that needs to be local to the area served) decreases supply and decreases quality (and increases cost) -- but the NIMBYs are happy because their precious feelings are preserved because they don't have to see a cell tower or whatever. They don't care if your cell phone bill is higher than it'd otherwise be, or if you get shitty cell service. They don't care if a rail line doesn't get built, they don't care if land use regulation means that real-estate costs for your doctor are huge and thus so is your healthcare costs. They do, however, care if your rent is super high -- in fact, it's what they love to be the case, because it means that their damn single-family home has more worth. NIMBYism -- this desire to prevent one's fellow citizen from benefiting from slightly better and cheaper public goods and infrastructure -- on this scale is incompatible with any sort of high-trust society. A society cannot have this many citizens with this much power and desire to obstruct the construction/maintenance of critical infrastructure that most citizens benefit from. It's antisocial backstabbery, pure and simple, and to indulge in it (as the US has done) is a horrific corrosive mistake and poisons society from the bottom up. Infrastructure -- health care, transportation (of people, material goods, of data), housing -- should be a nation's pride! Until NIMBYs are forced to relinquish the obstructionist powers that they so preciously hold, infrastructure construction/maintenance will keep being expensive and inefficient. Any reform that doesn't explicitly address NIMBYs (either via the carrot or the stick) will fall prey to NIMBYs who will somehow reintroduce inefficiencies so their goals of preventing construction will be met.

meddlepal 9y ago
NIMBYism exists because home ownership is basically the most accessible mechanism to grow personal wealth in the US. People are not willing to risk their financial stability and future by allowing basically anything they view as a threat to their primary wealth generation asset in life. More housing, bad views, whatever all challenge people's bottom line.
- rwallace 9y ago
  That is indeed what such people believe to be their motive, but they have forgotten something very important: when you start a war of all against all, retaliation can take any form, not just the same form you used. Previous poster remarked concisely that NIMBYism is incompatible with a high-trust society; once that unfolds, the dream of 'growing personal wealth' at everyone else's expense will become a hollow victory indeed.
  - zkms 9y ago
    It also need not be everyone who fights against {cell towers, high-density housing, clothes lines, airports, railways, wind farms} -- the relevant laws/regulations/procedures let a sufficiently motivated minority have a pathological amount of influence when it comes to obstructionism. For example, there's a pathologically minuscule number of people who file the overwhelming majority of airport noise complaints; 6852 out of 8760 complaints for DCA in 2015 came from one single person, and this pattern holds for many airports: https://www.mercatus.org/sites/default/files/screen_shot_2016-10-17_at_9.17.00_am.png https://www.mercatus.org/sites/default/files/screen_shot_201... How many excessive tonnes of fuel burned in circuitous flight paths, how many years of administrative work wasted, how many near misses are we risking -- just to please this sort of goddamn wingnut who makes 18 fucking airport noise complaints literally every single day? This is what NIMBY nonsense looks like.
- jogjayr 9y ago
  > NIMBYism exists because home ownership is basically the most accessible mechanism to grow personal wealth in the US. That has to be due a lack of financial education and knowledge of what options exist to grow personal wealth. You need at least $50k to put 20% down on a median US home. You need only $2.5k to start an index fund account with Vanguard. Guess which one will give you a better return on average and is more liquid?

analog31 9y ago

With health care, I have a hunch that it's so expensive because the system is such a tangled web of business entities, that we have no idea where the money is actually going, or what anything costs. As a result, everybody can accuse everybody else of gouging us. I wonder if infrastructure is the same way. However, one difference is that infrastructure, while expensive, costs all of us more or less progressively, even if it costs too much. In a sense, I like that better than the health care system, which is designed to place individuals at risk of ruinous costs.

ryanmarsh 9y ago
> we have no idea where the money is actually going This is what auditors do. If anyone in government really gave a shit some auditors could get to the bottom of it in a matter of months.
- jonknee 9y ago
  > If anyone in government really gave a shit FWIW the government gets a better deal for healthcare than private insurers do (e.g. Medicaid is cheaper per person than if they were covered in a private plan). So I would say they do give a shit and have gotten to the bottom of it. It would be cheaper still if Medicaid covered everybody.
  - JBReefer 9y ago
    The coverage is substantially worse than most private plans - Medicaid looks worse than my crappy ACA plan.
    - jonknee 9y ago
      That depends on where you live, but also your income. If you don't have the cash, Medicaid wins no matter what. A ACA plan with a co-payment that you don't have is worthless.
    - kurthr 9y ago
      That is why in every country that has single payer there are additional coverage plans that allow you to have even better coverage... and it's still cheaper! See Canada, Australia, England, Germany, Japan... well, basically everywhere else. What is really amazing is that it also returns Emergency Rooms back into a place where you go in an emergency so you can actually get treatment in 15min rather than wait for a few hours at 3am as you drip blood on the floor through the towel you've wrapped your arm in, and watch in horror as the lady next to you screams and shakes on the floor as she passes kidney stones (yes you would recognize the world renowned hospital where this happened).

chrismealy 9y ago

We know it's cheaper outside of America. Instead of playing Not Invented Here why not just ask what other countries are doing better?

the_mitsuhiko 9y ago
Same reason that does not happen with healthcare: the mindset is different. In many ways changing the system means giving up some things Americans value more than citizens of other countries.
- dasil003 9y ago
  In the case of healthcare it's not because of American values directly, it's because the entire conversation has been framed in a way so the majority of Americans don't even understand what the possibilities are and the debate is entirely centered around a series of fantasy narratives put forth by lobbyists for the status quo. I mean the whole conservative argument about the value of the free market for moderating health care costs is completely blown up by the most cursory look at the value you get for private health insurance in the UK due to the fact that they have to compete with free. But there's no attention span in the political debate to put forth an argument like that because it doesn't align with an established narrative and therefore can be triggered by a sound-bite-sized emotional appeal. You need a years-long strategy and talking points to chip away at it, but the people with the knowledge and facts to do so are not good political strategists, and the people with the time and inclination to do so all have vested interests in the current system.
  - the_mitsuhiko 9y ago
    > I mean the whole conservative argument about the value of the free market for moderating health care costs is completely blown up by the most cursory look at the value you get for private health insurance in the UK due to the fact that they have to compete with free. I disagree that they have to compete with free because they effectively compete with free footing parts of the bill and that is ideal. If you take the UK and you have a private insurance (like Bupa) you don't have private insurance instead of the NHS (the public one) but in addition to the NHS. One the one hand this means that I have the choice as a customer to go with an NSH or Bupa service, but I also know that the NHS will always take me and Bupa knows that I will think like that. Bupa knows that people are very unlikely to charge the private insurance for an ambulance (because why would I? The gov pays). However they know I will use their services when I had a mountaineering accident and need a helicopter. They fundamentally operate in largely different areas that just happen to overlap in some parts. Sometimes people use a private insurance because they don't want to wait. But that often also means they don't have to wait not because they will die because then the state system (unless it's temporarily broken) will prioritize you anyways. I think splitting the problem into two (emergency care vs. 'lifestyle' care) would work in the US but that's not the conversation that is taking place and that is a cultural thing more than it is a problem of politics.

Robotbeat 9y ago

The article is very high level, looking at root causes and (correctly) pointing out the flawed incentives in how America builds infrastructure. Here are some lower level observations: I've been watching construction and similar projects at a government site lately. It seems that there are always more people watching than working. But that's not too bad, as often construction projects will languish with no one working on them for months (meanwhile, the site gets dirty due to rain water filling the site, etc) due to red tape requiring certain people to do certain parts of the job (such as cost exceeding a certain amount and thus the work needs to be put out to bid instead of using the on site contractor). The exception is if it's something simple, like erecting a temporary meeting tent rented by some company. In that case, it seems like EVERYONE is busy and is doing something. Stuff gets done rather quickly. Maybe they have a lot more practice? I bet they also do multiple types of job, i.e. a guy doesn't just tie the tent down, but also helps unroll the fabric from the truck or moves chairs to the seating area, etc. Regular road projects seem to be not so bad, more people working than during a building construction. But I noticed another thing: huge machines which must cost almost a million dollars sitting idle with no one using them. I think the secret might be just to ensure that work starts and finishes on a project as soon as possible, that both people and expensive equipment have work ready for them so they can keep busy constantly until the job is finished. This probably would require a responsive, competitive, well-managed, and very well practiced company to do this. And maybe it'd help if people were cross-trained to do multiple trades, so that after one task is completed, they could immediately go work on another. But if people & machines were simply kept busy constantly on the project, I've gotta think the project could be done for far, FAR less money (and time). And the author is correct that the way to establish those is via the proper incentives. Constructing a building by contract with a government agency is not a very dynamic environment. Renting a meeting tent, on the other hand, is something very amenable to competition even if the customer happens to be the government. I'd really like to see some sort of study that simply observed construction projects and crews, on-site, in multiple locations in the world and multiple types of projects. We could get some decent answers.

dilemma 9y ago
What you describe is lean management applied to the construction industry. I'm certain that it is possible but I've never heard of it being practiced. Possibly by Broad Sustainable in Chiba.

solatic 9y ago

TL:DR - the way to combat rising costs is to constrain the supply of capital. This isn't going to work. Infrastructure contractors will just turtle up and say that it can't be done at the lower price. Lowest-bid mechanisms are intended to harness Adam Smith's invisible hand, but aren't working as intended. The essay touches upon two distinct points: a) the private developer cared deeply about how his money was spent, but the public developer did not b) general incompetence of public management, by misunderstanding how contractors manipulated costs to reach their estimates and establishing perverse incentives The way you typically solve this kind of problem, at least in the private sector, is to set up a way for the manager to personally earn a fraction of what he saves the organization - the organization still saves a lot of money overall, even after paying the bonus. But if you bring up the concept of performance-based pay for public employees, you find massive opposition - both from a public worried about corruption and graft, and from public employees themselves, many of whom were drawn to public work in the first place specifically because of the stability and security of a public paycheck. That's when you understand that what really needs to be talked about is a culture change in public work culture, and when you understand that, you understand just how high the mountain is that needs to be surmounted.

mahyarm 9y ago
But why do public organizations in developed europe & co have infrastructure projects for cheaper then? Don't they have similar or even stronger public work cultures?
- lmm 9y ago
  European view: the US in general seems to have a really procedurally-oriented way of doing things. There are good sides to this but it does sometimes break down: in particular the legal system seems to focus a lot more on whether the process was followed rather than taking a step back and asking whether this is the just outcome. I understand the rationale for low-bid rules. But actually the US has pretty low corruption and a good public work culture; IMO those rules do more harm than good. If you were willing to trust the people evaluating the bids a little more and empower them to use their judgement and pick the overall best bid (and maybe pay them a little more), you'd get better outcomes.

throwaway-1209 9y ago

Because of the law of budgets: use it or you'll get less next year. We have a few streets here which have been undergoing "repairs" pretty much constantly for the past decade. They aren't getting wider or better, perfectly serviceable pavement gets torn up again and again, several times a year. Why? Hell if I know. The most plausible explanation is someone needs to "use up the budget".

tgjsrkghruksd 9y ago
You must live in a funny-mirror version of my world. I'm in the pothole belt and there is never enough in the budget to fix all our roads. Yes, for various reasons, sometimes a stretch gets replaced that's in much better condition than other deplorable streets (usually because it coincides with some other development), but the funding is never there to fix all the outstanding urgent problems much less ripping up and redoing good pavement.
- throwaway-1209 9y ago
  Actually same here: there are plenty of potholes elsewhere, but only these few good roads get continually torn up and repaved.
marcosdumay 9y ago
> The most plausible explanation is someone needs to "use up the budget". The only plausible explanation I know is that somebody in gov is friend of somebody on the contracted company.

known 9y ago

"If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." --Reagan

matt4077 9y ago
People use this quote as some sort of insightful attack on the failures of government, but, in a certain light, it's exactly what government is supposed to do.
- fivestar 9y ago
  Any thinking person should question the insipid nature of government because it never seems to get perfected but is always and everywhere just a blunt object which bludgeons us into cooperating with it one way or another.

scythe 9y ago

>The more lane miles a state has, the more federal transportation dollars that state qualifies for. What is the incentive? It is, of course, to build more lane miles. Add to this the fact that federal transportation programs generally pay 90%+ for new construction, but only ~50% for maintenance, and we have a system that encourages states to build more than they can ever maintain. This is a microcosm of a larger systemic problem with state budgets that started with the Sixteenth Amendment. Not because income taxes are bad (they're fine) but because that was the first step in a process where nearly all revenue in the United States is collected by the federal government. This was a shift from the original situation where the government was funded by excise taxes and most taxes were collected by the states. This didn't become a problem however until the federal government's fiscal advantage became so large that federal outlays began to dominate state budgets. The result is a growing clusterfuck of incentives that would make Roman Polanski blush. State governments used to get more money by growing their states' economies. Now they pursue the twin goals of getting more money from Uncle Sam and generating more of the kinds of economic activity that they can most easily derive revenue from, because federal income taxes are too high for states to collect very much money from income tax, and because states compete against each other to lower taxes to attract businesses so are better off seeking federal funds than raising taxes. If a state raised its own taxes to build roads they'd never overbuild the network like this. It's completely insane. It's possible that the election of Senators by state legislatures also served to prevent this slow transfer of fiscal power from happening during the first century of our country's existence.

rzimmerman 9y ago
I think you make a very interesting point that the direct election of senators removed an important protection by effectively shifting representation in the senate away from state governments directly to the people. Direct election was opposed when writing the US Constitution for this very reason.
maxerickson 9y ago
States and local governments collect lots of revenue. http://www.usgovernmentspending.com/ http://www.usgovernmentspending.com/ And for the point you are making, it would be sensible to pull out some spending as "other" (Social Security, maybe Medicare, some portion of defense spending).

BjoernKW 9y ago

Lack of accountability is an important, perhaps even the most important, part of the problem: With private projects if a project is overdue or if it is exceeding the originally projected costs either of the parties will be held accountable, either through civil liability enforced by a contract or in simple economic terms. With public projects there generally is no such accountability. If a public project is delayed and it costs more than planned the public purchaser (the state, city, you name it) - and by extension taxpayers will simply cough up the money, put up with the inconvenience of yet another unfinished and out-of-repair piece of infrastructure and move on. If we want to change that creating the right incentives is only one side of the coin. The other side is holding both civil servants and politicians accountable for the public projects they're responsible for. Given the amount of money typically involved in these projects personal financial liability wouldn't be practical. Disciplinary consequences for gross negligence or the outright nepotism rampant with that sort of projects shouldn't be out of the question though. I find it unacceptable that civil servants and politicians who demonstrably and deliberately waste tax money continue to climb the ladder with apparently no care for the damage they cause.

matt4077 9y ago
I've seen quite a few articles and studies that say that government projects aren't actually more expensive than private projects. The impression is created because (a) the media will report on a government-run project over budget because they actually get that data (unlike private cost overruns), and the public cares more about these projects. And, (b), government projects are more likely to start with an initial estimate that is too low, because that's beneficial to getting a project approved. Speaking to your argument about accountability: Do you think the CEO of GE is really more afraid of the shareholders than the mayor of some city in Kansas? Politicians are plenty accountable. And for something like the federal government, projects are managed by employees, who are managed by agency heads. The latter get a budget and have to work within it. Say you're the head of the National Park Service: If your new visitor centre at Yellowstone gets swallowed in a geyser, will you not face exactly the same consequences as someone at Disneyland tasked with building a new ride?
- 9y ago

mschuster91 9y ago

In ye olde days in Germany, the municipalities had their own construction teams, employed by the municipality. That meant that e.g. road constructions were done by the government - which also means that the "feedback loops" were way shorter, and there was no incentive for the construction teams to delay the construction or similar. Now, with the privatization trend and "cheapest-bidder-wins", it's a catastrophe. Especially when construction companies from foreign countries are involved (thanks to EU-wide tender crap)... the language barrier is a huge issue. One thing the article totally leaves out: in ye olde days, there were next to no changes to a project when it was approved. Now replannings in all stages of a project are common - be it due to politicians trying to gain something, NIMBY morons, environmental protection or, the worst case as can be seen at BER, changing technological requirements. Every replanning causes delays and cost overruns.

detaro 9y ago
BER and "changing technological requirements"? BER (primarily) got doomed because they rearranged the layout to be able to sell more shopping space halfway through and didn't properly plan out the consequences of that change.
- mschuster91 9y ago
  I didn't mean to allude to this, rather to an article I read half a year ago that when the construction permit expires before the thing is built that they'd have to rip it half apart AGAIN because regulatory frameworks changed :'D Your point more fits into "politicians and personal gain", imho.

adekok 9y ago

Because in badly managed projects, the managers have no idea what the project is about. They don't know how anything works. They can't distinguish good work from bad work. Instead, they rely on rote rules and checklists to "prove" they've done their job. This happens in both public and private sectors. For example, a friend's employer got bought by a large multinational. The multinational imposed all kinds of processes, checkpoints, checklists, etc. to "ensure product quality". They then got upset that the bids were triple the cost they were previously, and took twice as long. And that's of course coupled with the fact that no one from the parent company paid any attention to the day to day activities of the (now) division. Instead, they relied on paperwork. Well, paperwork is no substitute for feet on the ground. One of my favorite books is "On the psychology of military incompetence". It uses military examples to show how organizations are run (bad vs good), and what quantitative differences there are between bad leaders and good leaders. Paying attention to details, and ignoring superficial forms is a major differentiator between good leaders and bad leaders. This is echoed in the story. The city didn't pay attention to the project, while the developer did.

fivestar 9y ago

I think a major point was missed: The reason for infrastructure projects is the meta effect called "jobs." There are no projects that don't take into consideration how many blue collar jobs get created/maintained. You look at all the road and bridge projects and everything else and those projects are rarely centered around need but rather "how many jobs are preserved or created." That's what Obama's "shovel ready projects" were about. A lot of jobs are a form of welfare doled out by government. Unlike the true welfare recipients, there are people who prefer to work because it gives them a sense of satisfaction but similar to out and out welfare queens, they are recipients of a further form of welfare which they do trade labor for. But, unlike the true private sector, those who oversee these workers make sure that some new project springs up each year to keep them employed. It's a weird system...

vlehto 9y ago

>Tolls, maintenance districts and direct user fees are less popular but actually more empowering for people in that it allows them to speak their preferences more forcefully and clearly. How about land tax? This way you can still provide free movement to poor people, but you can collect funds very locally. ( I can admit I'm die hard Gergist.)

devwastaken 9y ago

The first part of the article talks about Healthcare with this: "Which is why, on the healthcare island, the conversation is about costs. Your preferences don't matter, except where they are aligned with the objectives of those on the island. Substitution doesn't matter; there are no competing services. Obscene profit margins don't invite competitors; they invite consolidation. Justifying costs to third party payers, instead of prices to patrons, is the name of the game. It's a bizarre world that doesn't make any sense to people like Goldhill when they take a critical look at it." I haven't read the book, but it looks to me they're making the age-old argument that 'third parties' shouldn't pay for healthcare because thats why its screwed up now. But, this is far too simplistic to be true. Healthcare is not a product, its a service. That service changes depending upon the person. Its not mass-producable or competable down because of demand in many cases. And, even if it were a product, you still have the eternal problem that people cannot negotiate for their own healthcare. You can't. You physically need it, and may die without it, and there is no process by which to negotiate or even many times know what price you will be paying. That is what universal healthcare strives to solve in other countries, and does so decently.

canes123456 9y ago
The vast majority of health care decisions are not life and death. Many times it is still hard to know how much something will cost and it is hard to price shop. But the same thing applies to auto repair. You need a car to get around and it is extremely expensive to toll your car to other body shops. You need to take the price the person offers you a lot of the time. But in medicine some times it is not time critical and you can shop around. We don't do it know because we don't pay.
- CPLX 9y ago
  All healthcare decisions are life and death. Just not necessarily directly. That fact complicates matters significantly.
  - paulddraper 9y ago
    All decisions are life decisions

andrewaprice 9y ago

I feel like the blame too often goes to insurance companies, but insurance companies are a natural player in a free market system. When you are sick, last thing you will do is shop around 10 different doctors and compare prices, instead insurance companies do this for you. They negotiate a price with the provider, and if the insurance company isn't happy the provider risks not being in-network and loosing a large pool of patients. In an ideal world, this system should work. What I'm worried about is hospital consolidation. https://image.slidesharecdn.com/annenberg-frakt-150324142714-conversion-gate01/95/austin-frakt-changing-how-we-pay-for-care-webinar-31915-7-638.jpg?cb=1427207315 https://image.slidesharecdn.com/annenberg-frakt-150324142714... We have created a regulatory environment with high fixed overheads, so: a) consolidation lowers the fixed costs, encouraging entities to centralize these fixed costs to minimize them b) makes it difficult for new independent players to enter the market Rather than a metro area having 8 independent hospitals all competing against each other (giving insurance companies a lot of leverage in negotating prices with providers), that metro area might have 2 companies with 4 hospitals each, so you have 2 companies that know what the other's hospital charges for services, and in their own interest of profit aren't interested in getting into a price war with the other.

dadvocate 9y ago

because in good old days they got-by by exploiting cheap labor (in other words slavery). Things went down south since they couldn't do it anymore legally.

woodandsteel 9y ago

Interesting and disturbing article. The author ends with some ideas about how to solve the problem. I would like to make a suggestion. To start, I think it is a good principle that whenever there is a problem in this country, we should look at other countries to see if they handle it better, and if any do, look in detail at how they do it, and then think about adopting their methods to the US. My suggestion is simply we do this with the infrastructure construction problem.