Notes on Growth and Transportation

Reading Strong Towns, and other related things

Aug 05, 2023

The Great Depression and the subsequent New Deal have given us an implicit understanding that big spending packages, financed by government debt, is how we create growth
But while the New Deal was the correct solution for the Great Depression (where the problem was a runaway positive feedback loop), large government investments (note the qualifier "large") are not generally the correct solution for growth
Growth has always happened incrementally. As places grow, wealth accumulates, and this wealth is reinvested into further growth
Large government investments funded by public debt attempt to speed growth by jumping into the "reinvestment" stage at a massive scale, more often than not results in mal-investment, because:
- All the parts of the system have to grow together, so massively investing in only one part causes problems and yields underwhelming expected results
- Part of the wealth accumulation process is discovering which investments work and which don't work
While massive one-off investments seem impressive, they are dwarfed by the total amount of wealth needed to make a place prosperous. The purpose of investment is not transformation by itself, but "starting the engine" of growth, by creating positive feedback loops
We care about wealth, not the flow of money. But because we don't have a good measure of wealth and have a good measure of flow of money (GDP), we overemphasise the latter. This leads to projects which create a lot of short-term money flow, while destroying wealth through maintenance cost in excess of revenue leading to the growth Ponzi scheme:
- After World War II, America was prosperous. So prosperous that it was thought that every American should own their own home (Yay!) on their own piece of land (Hmm...)
- Suburbs were subsidised with generous government funding from state and federal governments, where a city might only pay for 25% of the upfront cost of development. Because the city collects tax revenues up front, they are incentivised to build lots of suburban developments, even if they don't make long-term financial sense (or only make long-term financial sense under magic growth projections)
- Suburban developments are extremely inefficient. Because suburbs are spread out and have low population density, we need much more road, water pipes, electrical lines, sewage plants etc. to serve much less people. It would be fine if suburban residents accepted lower living standards (septic tanks for everyone!) or paid much more taxes, but they don't
- This efficiency is not immediately apparent because infrastructure decays over time. It's only when the big maintenance bills come twenty years later, that it becomes very obvious the whole development (to someone who didn't consider these costs while planning) is in the red
- The red ink of individual developments is covered up by fresh tax revenues from new developments with low maintenance costs, hence it is a Ponzi scheme. They are also further covered up by cities funding maintenance with debt and government bailouts
- Raising taxes is not sufficient to address the scale of the problem e.g. Tampa, Florida, needs to raise $3.2 billion to repair (just) its water systems, about $10,000 per resident, while already paying more in debt payments than on repairs

Another type of investment that governments often use is transportation investment. But transportation investment is seen as an ends in itself, and not as a means to an ends, which is why we end up with trains to nowhere and carparks nobody use, while unglamorous bus routes are underfunded
- Engineers have a concept of mobility (throughput) vs ease of access, with a hierarchy of different types of streets/roads with increasing mobility at the cost of decreasing access. This makes some sense, since the quiet streets in front of a suburban house can't handle a lot of traffic. While a busy highway can't be easily entered into/exited from
- But the framing of mobility vs access obscures a more fundamental division. We can think of physical space as divided into "productive places" (streets with low mobility and high access) and "things which connect productive places" (roads with high mobility and low access). There's a bimodal distribution of value. When we build streets/roads which are neither fast nor easy to access (so-called stroads), we are building streets/roads of little value
  - Tangent: The dichotomy of "productive places" and "things which connect productive places" feels very fundamental to how complex systems are organised in general, though I don't really know to expand that feeling usefully. In Computer Science, we talk about nodes and vertices. In Economics, companies are little islands of internal dynamics that interact with other companies through the market. In Chemistry, atoms are tight knots of particles that are loosely connected with other atoms. I've been playing with the idea of mnemonics being shortcuts that serve as a bridge between knots of connected ideas that are otherwise very difficult to logically link (and therefore are hard to remember). I feel like as long as there are types of things which attract each other and repel other things, this "sparse bunching" pattern will appear
- Bad transportation investment is exacerbated by bad calculations of an investment's value. "Time saved" calculations add up minutes saved each day for each commuter and multiplies that by a median wage to come to a large dollar value to justify investments. But this is absurd:
  - We can't pay taxes in saved time
  - Commuters, given free choice, often prefer to sit a few more minutes in traffic than to pay a toll
  - The cost of the project is still more than dollar value of "time saved", and dividing that cost by each commuter results in absurd per commuter costs
  - Induced demand means that more people will use a road if it's faster, which slows the road down, so no time may be saved at all
- Transportation investment is also justified through unbelievable projections of "economic development". More fundamentally, "time saved" and "economic development" are are opposed. Adding malls to the sides of roads means access points have to be created, in addition to inducing more demand, slowing down the roads
- Induced demand means that the typical justifications for public transportation don't really work either. Any drivers who switch to public transportation, reducing commute time and polluting less, merely make space for other drivers. The purpose of public transportation is growth, plain and simple. If we imagine public transportation as an act of charity, to help poor people, or the environment, it will always be a bottom priority
- Transportation fares must be tied to operational costs. These fares are, in effect, the government recouping the costs of infrastructure investment from the benefits commuters derive from the investment. This disciplines the government to only invest in projects which have outsized benefit, and not chase shiny large-scale debt-driven projects (This is in fact the fundamental feedback loop of growth. Investment leads to outsized returns which leads to more investment. If investment is just a black hole, there cannot be growth)
  - In fact, recouping of infrastructure investment from skimming off land improvements was how railroads were built across America. Railroad companies built empty towns which they sold to speculators, under the expectation that by connecting these towns with railroads, the town would develop and land values would increase
- The point on operational costs is probably where Strong Town diverges the most from other popular pro-public transport Youtube channels, where the idea is, public services don't have to be "profitable", in the same way the military doesn't have to be profitable. Some public services are worth the cost. I think I agree with Strong Towns here:
  - In theory, "profit" may be disconnected from "benefit". Something may be very beneficial, but because the beneficiaries are poor, or because the benefit is only apparent at a long time scale
  - But public transportation does not suffer from these problems. Build a new connector that commuters will want to use, and commuters will immediately switch to it. And in good public transportation systems, the middle class regularly commute on public transportation (unlike in bad public transportation systems, which are so unpleasant that only the poor have no choice but to take). It cannot be feasibly argued that middle class commuters cannot afford to pay their share of the investment
  - Governments, in the traditional view, exist to solve coordination problems. There are things which are good which cannot be independently achieved by individuals working alone due to mistrust or lack of scale. By creating win-win solutions, governments create growth, or an increase in material wealth (Growth is a much maligned word, partially because it's been too often used to refer to an increase in GDP at the cost of material wealth)
  - Because governments create growth which improve living standards, the purpose of government has morphed into improving living standards, period. Thus the socialist motto of "seize the means of production" has morphed into "subsidise my cost of living"
  - I really dislike the common discourse (on Reddit, which is the main platform I use, so the discourse I see might be biased) where the expectation is that the government should keep costs low and every failure to do so is a failure on the part of the government. The other annoying part of the discourse is the pointing out of some other source of tax revenue that could be used instead of increasing costs, or imagining that every beneficiary of public services is a poor grandma who eats porridge with salt every day
  - The most frustrating thing is that I can come up with logical arguments why thinking like that would result in bad outcomes (loss of discipline in investment and operations, failure to prioritise other public services which also require funding), but these arguments have no emotional resonance
Simple maintenance is extremely undervalued. Bad maintenance of connections to productive means less people will go to productive places
Where I disagree with Strong Towns the most is probably on the growth loop being generated by increased land values as a place develops. I generally dislike the ownership of land, since if a government spends money on building roads near a plot of land, the landowner profits from doing absolutely nothing. Though I suspect Strong Towns would probably endorse Georgist "improvement taxes" similar to what the Singapore government does, where it collects taxes from nearby landowners when it builds a road
Even so, the idea of a growth loop being generated by increased land values sounds strikingly similar to Singapore's policy of putting a subsidised house in every Singaporean's hands and letting house prices rise over time to give each Singaporean a slice of the country's growth
- Having read Strong Towns, I can see how the policy of giving each Singaporean "land ownership" might be good
- But it contradicts with the very strong sense I have that housing should be a "public good" (the terms is actually problematic, since things can be good for the public without being public goods, leading to a lot of confused thinking), and that affordability of housing and wealth growth through increasing house prices seem to be mutually contradictory
- The root cause of not being able to resolve these two views probably comes from confused definitions. House prices could increase through increased productivity making Singapore a more valuable place to live, or due to rampant speculation and bad planning of housing supply
- I think I'm more inclined to disagree with Strong Towns, since housing prices becoming divorced from wages (and therefore affordability) just seems extremely bad, whereas the growth loop still works if wages increases, therefore people can save more, therefore there can be more investment. It might make sense to let housing prices float up with wages (both implicitly being tied to productivity), rather than artificially suppress housing prices, though that begs the question of what ratio of housing prices and wages we consider "affordable" and how exactly do we maintain that ratio without causing even more problems

Sources

Not Just Bikes, Why American Cities Are Broke -

Not Just Bikes, How Bankrupt American Cities Stay Alive -

Strong Towns: A Bottom-Up Revolution to Rebuild American Prosperity
Confessions of a Recovering Engineer: Transportation for a Strong Town
Kyle Harrison, King-Making vs. Taste-Making -