Traffic congestion in the United States cost Americans roughly 3.5 billion hours a day of delay in 2000, and the number gets worse every year. The knee-jerk reaction of politicians in Virginia, as it is elsewhere in the country, is to build more roads. Fortunately for them, politicians are accountable only to voters and journalists, who are ignoramuses for the most part, and not to shareholders, bankers or money managers who might ask the tough question: What Return on Investment are you generating on your capital spending for road and highway improvements?
In a 2006 paper, “The effect of government highway spending on road users’ congestion costs,” two Brookings Institution scholars, Clifford Winston and Ashley Langer, tried to answer that question. Here’s what they found: A dollar spent on highways in a given year generates only 11 cents in reduced congestion costs to motorists.
The issues raised by the paper cannot be ignored. Governments have finite resources. They need to invest those resources where they generate the greatest social benefit. Failure to measure social Return on Investment means that billions of dollars are wasted on marginal programs while critical needs go unmet.
Why is the ROI on highway spending so low? The authors proffer the following:
Highway spending is compromised by inefficiencies related to pork barrel politics, by slow and inappropriate responses to demographic changes, by excessive maintenance expenditures caused by poor road design, and by inflated labor costs attributable to the Davis Bacon Act.
But the most fundamental obstacle to effective highway spending is that the US intracity road system is largely complete and the nation’s urbanized areas have little available land to expand their infrastructure. … In most congested cities, it is extremely difficult or prohibitively expensive to widen major freeways and arterials to reduce congestion or for such construction to keep up with traffic growth.
It is important to remember that 11 percent is an average number, and the return on investment varies widely from project to project. Additionally, one can quarrel with aspects of the Winston/Langer methodology. But the larger implications of their study cannot be wished away: The social Return on Investment for highway spending (and transit spending, for that matter) varies widely from project to project, and many projects could never be justified if gauged on a Return on Investment basis.
Lessons for Virginia: All projects should be ranked and funded according to a Return on Investment basis. Projects should provide a minimal rate of return — otherwise they represent no more than a wealth transfer from citizens to the special interest groups who make the case for them.
(Hat tip: Quintin Kendall.)
