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Beware the Bipartisan Fever for Infrastructure Spending

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Here’s a letter to the Washington Post:

George Will’s warning to temper our enthusiasm for government’s infrastructure projects (“Infrastructure projects aren’t jobs programs [2],” Nov. 27) is justified by the empirical record.  Here’s California State – Northridge economist Robert Krol: “Research shows that transportation project costs are significantly underestimated and traffic flows tend to be overestimated.  These errors are large and are not random, suggesting they are deliberate in order to get projects started.  Furthermore, federal highway funding is excessive and misallocated across states.  Project benefits are concentrated in a state or district whereas tax costs are spread out nationwide.  As a result, legislators embrace inefficient transportation projects because district or state voters do not pay the full project cost.  Projects move forward even when the total cost of the project exceeds total benefits.  Also, funding committee membership and vote trading distorts decisions.  Finally, government barriers slow the adoption of new technologies.”*

It’s easy to imagine all manner of marvels bursting forth from grand, and grandly named, schemes to spend other people’s money.  This ease of imagination, combined with government’s ability to compel payment, ensures that too many such schemes are undertaken, and undertaken to satisfy political rather than economic goals.  And when the towering bridges and ornate tunnels are built, they are easily photographed and oohhed-and-aahhed.  In contrast, it’s practically impossible to discern those enterprises, outputs, and more useful pieces of infrastructure that, because vast quantities of resources are wastefully diverted to the grand schemes, never come to be.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* Robert Krol, “Political Incentives and Transportation Funding [3],” Mercatus Center at George Mason University (December 2014).

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See, relatedly, this post by Chris Edwards [4].

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