Second Thoughts

Honolulu Star-Bulletin
Gathering Place
Cliff Slater
March 30, 2008

Transit-oriented developments (TODs) proponents envision building or redeveloping higher-density sustainable communities around rail stations that are to be pedestrian-oriented with mixed retail, workplace and residential components together. This provides vibrant communities where people can work, play and live.
There is far less need for automobiles or parking space, since all activities are within walking distance of the rail station. It increases transit ridership, decreases automobile use and thereby reduces traffic congestion.
However, the reality is far different in places that have TODs.
First, the public does not generally value the “higher density, vibrant neighborhood” features of TODs. We know that because home buyers and retailers will not pay the full costs of the apartments, houses and shops that have been built. To make them saleable, taxpayers have had to provide heavy subsidies.
TODs are now often being touted as a major reason for building rail transit even though there are no TODs that are not heavily subsidized. Are our planners and elected officials proposing heavily subsidizing rail transit in order to heavily subsidize TODs? You gotta love the way these folks think.
The problem here is that planners are looking backward, not forward, with rail transit and TODs. For example, rail transit took off in the late 19th century, before there were automobiles, with the advent of electrically powered rail transit. Rapid expansion followed until ridership peaked in 1923 stymied by the growth of automobile ownership. From then on, rail transit ridership declined to today’s levels that, in riders as a percent of city populations, is only 5 percent of what it once was.
TOD websites often show images of old European inner cities with small stores and living quarters over them. In those days the problem was also congestion – people congestion. Planners, needing to improve the health of the population, looked for a way to provide “dispersal,” now known pejoratively as “sprawl” and rail transit was the answer.
With city populations somewhat dispersed by the early 1900s, we were commuting on rail transit to the city center for work and then, once back home, we shopped at the corner grocery. The children walked to school and we adults did not play or exercise that much.
It was the advent of the family automobile and the paved highway that changed our lives so dramatically.
Today, since the first automobile-oriented shopping mall opened in 1923, the supermarkets of the 1950s, the shopping centers of the 1960s, to the big box stores of today, we no longer shop at corner stores. And we go to exercise class, drive our children to school (public or private), and drive them to soccer games..
This is why when we examine the effects of existing Mainland TODs we find, for example, that those in Portland have had little impact on commuting. The percentage using public transportation of any kind there is 6 percent, down from 7 percent before rail or TODs. And two-thirds of those commuters use the bus, not rail.
And the percentage is the key factor. A 100,000 population increase in the work force means that 80,000 more will commute by car while only 6,000 more will use transit of any kind. So, unsurprisingly, Portland had the 17th worst increase in traffic congestion in the nation for 1982-2005.
The dawning realization that “Smart Growth,” TODs and the like are not so ‘smart’ is occurring across the political spectrum. For example, the Progressive Policy Institute, an affiliate of the Democrat Leadership Council, has the following in their Politics of Gridlock:
The anti-auto coalition through masterful use of rhetoric and oversimplified analysis, have succeeded in dramatically influencing not just federal, state, and local policies, but the entire orientation of the transportation debate. Terms like “smart growth,” “increasing access to choices instead of building freeways,” and “sustainable, holistic solutions” sound great. Yet these are code words that mask an anti-automobile, anti-highway agenda.
These anti-highway “Smart Growth” policies are being surreptitiously promoted by planning and political alliances without much awareness on the public’s part of what is going on. These social-engineering policies are damaging to our quality of life if allowed to progress.
Cliff Slater chairs HONOLULUTRAFFIC.COM where the footnoted version of this may be found.

By Cliff Slater
Gathering Place, Honolulu Star-Bulletin, November 13, 2007
A pdf version for printing is available at:
www.honolulutraffic.com/GatheringPlace2.pdf

One of the primary reasons given for building a rail transit line is that on average rail uses less energy than a regular automobile. Rail uses 2,750 British Thermal Units per passenger mile (BPM) and automobiles 3,445 BPM.[i] While this difference holds true for the U.S. as a whole, it is unlikely to be the case for a new rail transit line in cities like ours.

What transit agencies mean by average is weighted average — the BPM of large rail passenger carries more weight than small carriers. New York carries 57 percent of all U.S. rail transit trips and is an energy-efficient rail system at 2,200 BPM.[ii] Accordingly, on a weighted average basis it swamps the dismal performance of other rail lines, many of which are energy inefficient relative to the automobile.

If we do a simple un-weighted average, while still including New York, the average nearly doubles to 4,400 BPM from the weighted average of 2,750 BPM, such is the impact of New York on the weighted average.

Essentially, we must examine the details (the devil is always in the details), to find that among light rail cities, the energy usage ranges wildly from an efficient San Diego at 1,900 BPM to a grossly inefficient Baltimore at 8,400 BPM.

Heavy rail has the same kind of spread from New York’s 2,200 BPM to Miami’s 6,600 BPM with both heavy and light rail averaging 4,400 BPM on an un-weighted basis.

Judging whether a new rail system, such as that for Honolulu, is likely to be an efficient energy user relative to the automobile depends on the kind of average occupancy it is likely to achieve.

The U.S. Dept. Energy recognizes this and says, “Because of the inherent differences in the nature of services, routes available, and many additional factors, the energy intensity of transit rail systems can vary substantially among systems.”[iii]

The efficient systems, such as New York, have a great deal of traffic going in both directions in their core areas in the off-peak while the energy-inefficient systems, such as Miami, tend to be those that are highly directional during the peak hours — full going from suburbs into town in the morning and empty going back out, with the opposite being true in the afternoon.

Rail transit cannot just discontinue service during the off-peak hours as our suburban express buses do, and so a certain amount of passengers during the off-peak is critical for energy efficiency. In New York, London and Hong Kong the relative difference between peak-hour passengers and off-peak passengers is much less than those rail lines with a heavily suburban orientation.

What also needs to be taken into account is that BPMs are calculated on the miles traveled by the vehicle, not as the crow flies. The route traveled by passengers on transit vehicles tend to be more circuitous and thus longer, especially where transfers are involved, than the door-to-door travel by automobile. For this reason, automobile BPMs must be adjusted down for the difference in trip mileage between autos and rail transit if we are to compare them accurately.

In short, the City must do a great deal of work during their current environmental impact process to persuade us that the projected Honolulu rail line will be as energy efficient as our automobiles. At the moment, it appears they have their work cut out.

Cliff Slater’s footnoted op/eds can be found at www.cliffslater.com. He is grateful to Randal O’Toole, Senior Fellow at the Cato Institute, for developing the detailed data of energy use by passenger mile and to UH Prof. Panos Prevedouros for refinement of the data.

Endnotes:
[i] http://cta.ornl.gov/data/tedb26/Edition26_Chapter02.pdf Tables 2.12 & 2.13
[ii] http://www.honolulutraffic.com/BTU_per_PM.xls
[iii] http://www1.eere.energy.gov/vehiclesandfuels/facts/favorites/fcvt_fotw221.html

The Honolulu Advertiser carries two op/eds today side by side. Mine and the other from the City’s Toru Hamayasu. My footnoted op/ed is at www.honolulutraffic.com/FTACPARAdv.pdf and Toru’s is at the Honolulu Advertiser. You may judge for yourself which is the most credible. For further reading on the issue go to the Honolulutraffic.com website.

An op/ed in last Saturday’s Wall Street Journal detailed the success of the KIPP (Knowledge Is Power Program) Schools, of which there are 65 in the U.S. The phenomenal success they have had in turning around schools in high poverty areas is worth reading about. The op/ed is available for download here.

“Something has to change.

I work, they pay me. I pay my taxes and the government distributes my taxes as it sees fit.

In order to earn that pay check, as I work on a mine site or a Wellington [New Zealand] construction project, I am required to pass a random urine test, with which I have no problem.

What I do have a problem with is the distribution of my taxes to people who don’t have to pass a urine test. Shouldn’t one have to pass a urine test to get a welfare check because I have to pass one to earn it for them??

Please understand – I have no problem with helping people get back on their feet. I do, on the other hand, have a problem with helping someone sit on their ass, drinking booze & smoking dope.

Could you imagine how much money the state would save if people had to pass a urine test to get a public assistance check?????

On reading the OHA’s 2003 poll conducted by Ward Research, one is struck by the seemingly contradictory answers given by both native and non-native Hawaiians alike. One could infer from some of the answers given that both groups favor Hawaiian nationhood until you get into questions that start spelling out what it really means. Then you have to agree with the conclusion of the Executive Summary, “Clearly, non-Hawaiians are not prepared to accept the creation of a Hawaiian nation in the near future.” (original emphasis)

You can download and read the Executive Summary an see that the sentence quoted (on page 7) is not taken out of context.

Today’s Star-Bulletin has an op/ed by me correcting Rep. Marilyn Lee’s July 5 op/ed in which she lauds the new Tren Urbano line in San Juan, Puerto Rico. It has been one of the worst disasters U.S. transit history. The fully footnoted version of the op/ed can be downloaded here.

The arguments made in John Williamson’s recent Honolulu Advertiser op/ed (6/22) in support of rail transit are the epitome of “truthiness”* — the Merriam-Webster Dictionary’s recent ‘Word of the Year’ recently coined as, “the quality of preferring concepts or facts one wishes to be true, rather than concepts or facts known to be true”

For example, Williamson criticizes the Advertiser Public Affairs Editor Jerry Burris’s neo-skepticism of our bus ridership in light of recent national outcomes and says, “Clearly, the trend locally appears to be more, not less, transit ridership.” This is truthiness.

The fact is that, according to the State Data Book, bus ridership peaked at 77 million in 1994 and declined to 70 million last year — down 10 percent — despite a three percent increase in Oahu’s population and a 15 percent increase in bus service.(See 2006 State Data Book Tables 18.25 & 1.06.)

Then Williamson says, “Roadway congestion and market forces will generate the demand for the fixed rail transit system.” That’s a nice thought but from what evidence does he derive that conclusion? Or is it truthiness?

If we examine ridership data from those U.S. rail cities whose traffic congestion significantly increased over the last 20 years, what do we find? None of them, not a one, increased the percentage of commuters using public transportation after they built rail, despite the increases in congestion. Even under extreme traffic congestion conditions, people still find their cars take less time door-to-door than transit.

Then he adds, “Likewise, the trend in gas prices will ultimately force commuters to reconsider their transportation options. If $3 gas hasn’t brought about a substantial change, we can be sure that $4 or $4.50 will.” Sounds quite logical, or is it more truthiness?

Review the 1970-1980 period when pump prices rose 60 percent to $3 a gallon in today’s money. Given the change in incomes since then, this was the equivalent of an increase today from $3 to $4.50 a gallon. What happened in the 1970s? Commuters using transit declined significantly from 8.9 percent to 6.4 percent of all workers. Instead of using transit they bought smaller cars.

And the European experience with their $6 a gallon gas has resulted in the same general shift from public transportation to autos that we continue to experience in the U.S.

Then Williamson tells us we must make the effort “to meet the challenges in a world where our primary energy source is disappearing.” Truth, or truthiness?

If we examine the U.S. Department of Energy’s data we find that, far from disappearing, worldwide oil reserves have more than doubled in the last 25 years while usage is only up a third. Even proven oil reserves in North America have tripled in the last 25 years while demand has remained flat.

Senator Inouye said recently that the $1 billion cost for the city to upgrade our waste treatment plant to comply with federal standards will bankrupt the City. But the rail transit line would cost over $6 billion and would incur ongoing and significant operating losses.** Would that not bankrupt the City?

Whatever else we know about rail, it will certainly have a profound financial impact. For this reason we have to start dealing in truth, not truthiness. We must separate facts from opinion and truth from truthiness and wishful thinking.

It is one thing to waste millions of dollars in City funds, but for rail we are talking about billions. The whole matter is far too important an issue for us to accept the City and its hired guns indulging in the kind of spin and obfuscation that has become their stock in trade.

Notes:
* Truthiness is a satirical term created by television comedian Stephen Colbert to describe things that a person claims to know intuitively or “from the gut” without regard to evidence, logic, intellectual examination, or actual facts. Colbert created this definition of the word during the inaugural episode (October 17, 2005) of his satirical television program The Colbert Report, as the subject of a segment called The Wørd. It was named Word of the Year for 2005 by the American Dialect Society and for 2006 by Merriam-Webster.
By using the term as part of his satirical routine, Colbert sought to criticize the tendency to rely upon “truthiness” and its use as an appeal to emotion and tool of rhetoric in contemporary socio-political discourse. He particularly applied it to United States President George W. Bush’s modus operandi in nominating Harriet Miers to the Supreme Court and in deciding to invade Iraq in 2003.
** The City is currently projecting $5.2 billion for the UH to West Kapolei Locally Preferred Alternative. Given the history of cost overruns by rail transit projects generally, and Hawaii public works projects in particular, you may pick your own number for the eventual cost overrun.

Wall Street Journal COMMENTARY

Bill Gates’s Charitable Vistas
By ROBERT BARRO
June 19, 2007; Page A17

Bill Gates is the richest man in the world, helped create a revolutionary computer software company, and earlier this month collected an honorary degree from Harvard University. But he may not understand the vital role wealth creation plays in society.

In collecting his degree, Mr. Gates delivered a commencement address that focused not on the information age, the rise of personal computers or the relentless efficiency his software has brought to nearly every industry. Instead, he focused on his own personal philanthropy. His implicit theme was that so far what he has accomplished may have been good for him and Microsoft shareholders, but it has been no great contribution to society. He suggested that with a personal fortune of about $90 billion (including what he has transferred to his foundation) it is time for him to give something back.

I find this perspective hard to understand. By any reasonable calculation Microsoft has been a boon for society and the value of its software greatly exceeds the likely value of Mr. Gates’s philanthropic efforts.

Here is a sketch of a simple model of Microsoft’s social value. The market value of the company’s stock recently hit $287 billion. In 2006, its revenue was $44 billion, with earnings of $13 billion. This money was generated by creating something consumers value. Only Microsoft’s competitors could believe that this much market value, revenue and earnings would have been created by delivering products that have little value to society.

Suppose that a copy of a new version of Windows sells for $50 (and is typically charged as part of the price of a personal computer). Microsoft’s revenue from Windows would then equal $50 multiplied by the number of copies consumers snap up. Microsoft’s earnings are the revenue less production and development expenses. But that’s not the social value. That comes from the increase in productivity created when businesses and households use the software. The social benefit equals the value of the extra product, less the total paid for the software. Almost by definition, the benefit has to be positive. Otherwise, why would consumers willingly pay for Windows?

A conservative estimate, in a model where software serves as a new variety of productive input, is that the social benefit of Microsoft’s software is at least the $44 billion Microsoft pulls in each year. When capitalized with the same ratio (22) that the market applies to earnings, this flow corresponds to a valuation of $970 billion. Thus, through Microsoft’s future operations, Mr. Gates is creating a benefit to the rest of society of about one trillion dollars — or more than 10 times his planned donations. And this counts only the likely future benefits, giving no weight to the past.

Mr. Gates has pointed out that it’s difficult to give away such a large sum of money in a productive way. This isn’t exactly true. He could cut a $300 check to everyone in the U.S., or donate the money to the U.S. Treasury with the aim of reducing the national debt. The last method is easier but has different effects on income distribution.

But Mr. Gates’s plan is, instead, to use the Bill and Melinda Gates Foundation to reduce world poverty, with an emphasis on advances in health. This is a noble goal. But it will likely just supplement the much larger existing programs of aid and debt relief that have been carried out for many years by international organizations and governments. These programs have, at best, a checkered record. Although Mr. Gates is probably smarter and more motivated than the typical World Bank bureaucrat, he likely won’t do much better.

To find policies that are likely to alleviate poverty, it is best to look at actual successes and failures. In recent decades, the biggest single accomplishment is the post-1979 (post-Mao) economic growth in China. Xavier Sala-i-Martin (“The World Distribution of Income,” Quarterly Journal of Economics, May 2006) finds that the number of persons below a standard poverty line fell in China by about 250 million from 1970 to 2000. This massive poverty reduction occurred despite an increase in the Chinese population of more than 400 million and rising income inequality within China. The second-best story is the economic growth in India, where the poverty count fell by around 140 million people from 1970 to 2000.

Also illuminating is the greatest tragedy for world poverty — the low economic growth in sub-Saharan Africa. In this case, the number of people in poverty rose by around 200 million from 1970 to 2000.

These examples suggest that the key question for poverty alleviation is how to get Africa to grow like China and India. An important clue is that the triumphs in China and India derive mainly from improvements in governance, notably in the opening up to markets and capitalism. Similarly, the African tragedy derives primarily from government failure. Another clue is that foreign aid had nothing to do with the successes and did not prevent the African tragedy.

One reason for this is that foreign aid is typically run through governments and, thereby, tends to promote public sectors that are large, corrupt and unresponsive to market forces. Perhaps the Gates Foundation will run more efficient aid programs than we’ve seen in the past, but I wonder.

Ironically, Mr. Gates’s inspiration to “give back” apparently comes from the world’s second richest person, Warren Buffett, who recently promised to donate much of his fortune to the Gates Foundation.

I say ironic because one can make a much better philosophical case for a give-back of Mr. Buffett’s $52 billion than for Mr. Gates’s $90 billion. Mr. Buffett’s money came mostly from being a good stock picker. Whether his fortune is the product of luck or skill, the social benefits are hard to pin down. These benefits have to derive from improving company management practices or investment decisions.

Of course, Mr. Gates is free to do what he wishes with his $90 billion. But I think he is kidding himself if he believes that the efforts of the Gates Foundation are likely to provide society anything like the past and future accomplishments of Microsoft. And, frankly, I would have preferred to get the $300 per person “Gates Grants.”

Mr. Barro is an economics professor at Harvard University and a senior fellow at the Hoover Institution at Stanford University.

URL for this article:

http://online.wsj.com/article/SB118222027751440041.html

Copyright 2007 Dow Jones & Company, Inc. All Rights Reserved

Wall Street Journal LETTERS of 6/29.2007

Do Something for Other People by Getting Very, Very Rich

Robert Barro’s commentary on Bill Gates illustrates again why the late economist Joseph Schumpeter was so gloomy in his assessment of the question: Would capitalism survive? (“Bill Gates’s Charitable Vistas,” editorial page, June 19). Not likely, he argued, because intellectuals would (out of envy) delegitimize entrepreneurial wealth creation, while the entrepreneurs would not be allowed to realize their actions are virtuous in themselves. Thus, the confused language of, “Now that I’m rich, I must give back something to society.” That there are few activities as valuable as wealth- and knowledge-creation in a world where poverty and ignorance are still far too dominant seems to pass by Bill Gates and his peers.

Traditional philanthropy is collective, tribal, even. The donor feels noble; paternalism reigns; poverty is perpetuated. Extending the institutons of economic liberty — even to the limited degree that this has occurred in China and India — has done more good than would have been achieved had Mr.Gates liquidated Microsoft and shipped all that money to Africa.

The tragedy of Gates-style philanthropy is less that it will do little good but, rather, that he has abandoned the entrepreneurial skills used so creatively in his truly significant wealth-creation work at Microsoft. Had he employed similar skills in dealing with the problems of Africa, he would not — as Mr. Barro notes he is largely doing — simply replicate the tried and failed policies of traditional paternalistic aid. Rather, he would be examining the barriers — political, cultural, tribal — that block entrepreneurial activity throughout Africa and explore ways to remove them. Could we, for instance, out-compete the oligarchs and tyrants by creating prizes that would bypass the bureaucracy and achieve success in health- and wealth-creation, in reducing corruption?

Fred L. Smith Jr.
President
Competitive Enterprise Institute
Washington

Alas, Mr. Gates may be the richest person on the planet, but the immutable laws of economics bow to no man. Mr. Gates has nothing he needs to “give back” because he has taken nothing. To the contrary, he has added phenomenal wealth to world.

I would propose an alternative way for him to productively give away billions of dollars — spend the money teaching the world basic economic laws. Among these:

1. Wealth is not created at the expense of others.

2. Free markets and free trade always lead to wealth-creation for poor and rich alike.

3. Redistribution of wealth always leads to wealth-destruction for poor and rich alike.

4. Trade deficits are arbitrary and meaningless measures.

To the extent this education sticks, is believed and is acted upon, trillions of dollars of wealth creation will result in Africa and the world, and will dwarf anything he did at Microsoft or will do philanthropically.

George Pope
St. Paul, Minn.

It is the free enterprise system that has allowed Bill Gates and Microsoft to change society, raise the standard of living for probably billions of people through, as Mr. Barro pointed out, productivity increases and increased communication and knowledge.

Mr. Barro writes that “The triumphs in China and India derive from improvements in governance, notably in the opening up to markets and capitalism.” And on the other side, in sub-Sahara Africa, dictatorial centralized decision-making (bringing wide-scale theft) and control, crushed capitalism along with the white middle and upper classes. For what end? Tragedy, deeper poverty and death to millions of people. Only the free enterprise system can improve their lot; how many billions has the U.S. blown there in “foreign aid”?

For the American citizenry and Bill Gates, it was the free enterprise system (or lack thereof) that allowed all this to happen. To you, Bill, spread the word of capitalism and the free-enterprise system even though it is not a popular subject. And to you, Americans, vote for those who support the free enterprise system, the life-blood of our success and prosperity. Don’t vote for those who diminish it.

And to you, Bill, thank you.

Theodore M. Wight
Seattle

Stephen Moore’s column in Saturday’s WSJ has the following:

“Business owners are beginning to get fed up. In Hawaii, the chamber’s cheerleading for higher taxes has caused hundreds of small business members to quit. (Since the early 1990s the chamber has supported three major tax hikes, including a recent a 12% increase in the state gross income tax to fund boondoggle transportation and rail projects.) In Maryland, small business membership is falling. Ellen Valentino, director of the Maryland National Federation of Independent Business, says that while the Maryland chamber provides PAC funds to its political adversaries, “Our membership wouldn’t tolerate that.”
“I used to think that public employee unions like the NEA were the main enemy in the struggle for limited government, competition and private sector solutions,” says Mr. Caldera of the Independence Institute. “I was wrong. Our biggest adversary is the special interest business cartel that labels itself ‘the business community’ and its political machine run by chambers and other industry associations.”

You can read the whole column here.