Wednesday, June 16, 2021

Why Are Infrastructure Cost So High In The US?

Sorry, but anybody wanting some simple answer on this one, especially an ideologically neat one, sorry, there is not one, Indeed, on this important issue, there is a large problem on this, but not remotely a clear answer regarding why there is this large and important problem.

For numbers on this problem I draw on a Washington Post column yesterday by Catherine Rampell. Here are some of the crucial data. In the early 1930s, just to pick one major infrastructure project, the Oakland-Bay bridge was approved and built within four months.  Yeah, the Great Depression.  But now compared to Europe, where supposedly they have higher labor costs and more regulations, well: a tunnel in Seattle cost three times as much as one in Paris and seven times as one in Madrid. This is not an oddball, this is how it is.  Infrastructure investments in the US now cost multiple times what is does abroad, and these are nations with labor and environmental concerns being taken seriously .

So, what is going on here? The very bright and knowledgeable Rampell confesses that not only does she not know, but she cannot find anybody who can explain it. In a way this looks like the high costs of medical care in the US.  This is  a much more politicized matter, but when one digs seriously into the research there seems to be no single reason, a whole series of matters, not easily resolved.

The issue of infrastructure lacks some of the matters healthcare has, such as how the US is the only nation in the world not having universal healthcare, which many of us think itself would lead to lower healthcare costs for various reasons. But what is responsible for the now high costs of infrastrucuture investment in the US, some of the obvious culprits there for healthcare are not there.

Of course there are many things involved here, which Rampell lays out, but again there is not remotely a "smoking gun," But her list contains the following: "poor planning, complicated procurement processes,  our multilayered federalist system, NIMBY-ism, and risks of litigation." Why all this is worse than so many other high income nations  I do not know. 

She also adds some other matters, such as a tendency of our political system to fund wasteful projects, although this is something that has always gone on, and that I find hard to believe also do not go on in other democratically run nations. Local economic interests have a way of getting their way in democratic political systems, and also do so in non-democratic ones, although even in those places, local economic interests get their way to the degree they get in with the Supreme Leader.

Barkley Rosser 


nobody said...

Alon Levy has done a bunch of work on comparative rail transport infrastructure costs globally. See:

Levy doesn't have any completely firm answers either, beyond exhaustively documenting that the US has an extreme problem with construction costs.

An effort by the US government to get to the root of the problem was, predictably, axed by the incoming Trump administration in 2016. said...

Thanks for your comment, nobody. As I have posted, this is a very difficult and not straightforward problem.

Catherine Rampell suggested that Republicans should get involved in solving this, as they have certainly contributed to this in the past. Given the super party polarization currently dominating the Congress, I fear there will be any serious input from any of them or help in resolving this.

As it is, as Rampell notes, there are parts of Biden's proposal that will raise these costs.

2slugbaits said...

I take it that you're defining infrastructure in the usual way; i.e., roads, bridges, airports, etc. If the US has unusually and inexplicably high costs to build infrastructure, then wouldn't you expect to see unusually and inexplicably high costs to build residential homes, apartments, strip malls, skyscrapers, etc.? After all, the construction inputs are basically the same. said...


I think we are dealing with more regulatory approvals involved in building infrastructure (yeah, the usual definition) than is usually the case for simpler forms of private construction. Shopping malls do not have to jump through nearly as many hoops as does a highway or even a bridge.

S Weil said...

What about concentration among the players in the large public sector construction contract business? This can explain a lot of the differences in costs for telecom services and airfares in Europe vs US