Posts Tagged ‘Ahluwalia’

Burn: New UCLA Study Concludes California High Speed Rail Offers No Net Economic Benefits – “Simply Moving Jobs Around”

Friday, June 22nd, 2012

Well this one is hot off the presses of the UCLA Anderson Forecast:

California High-Speed Rail and Economic Lessons from Japan

Jerry Nickelsburg
Senior Economist
UCLA Anderson Forecast

Saurabh Ahluwalia
Anderson School of Management
UCLA

June 2012

Here’s the start and the end – you’ll have to click above to read the whole thing.

“California High Speed Rail (CHSRL) is once
again in the news as the governor and state legislature
take up the issuance of construction bonds approved
by the voter passage of Proposition 1A of 2008.
Under “project vision and scope” on the CHRSL Authority
website are listed three categories of benefits:
economic, environmental and community.

In this article we focus on the economic benefits.
Specifically we look at economic growth and,
by implication, job creation. That is to say, we are
examining the benefit side of the equation and leaving
the cost side to other analysis.

Though CHSR Authority has developed and vetted a forecasting
model and has commissioned a number of economic
impact studies, these rely on relatively strong, though
perhaps plausible, assumptions. As an alternative,
we examine an actual case of high speed rail, one that
has been widely deemed a success, for evidence of
the magnitude of benefits measured by induced GDP
growth that one can expect from the building and
operation of CHSR over the next 40 years.
Our study of the Japanese Shinkansen system
from 1964 to present fails to provide evidence of
induced aggregate growth.

Rather, the evidence suggests high-speed
rail simply moves jobs around the
geography without creating significant new
employment or economic activity. That is not to say that
CHSR is not justified by population growth, pollution
abatement, or other factors. However, the evidence
from Japan is relatively clear. As an engine of
economic growth in and of itself, CHSR will have only a
marginal impact at best.

Governor Brown claims CHSR to be a visionary
project along the lines of the U.S. Interstate Highway
System, The California Central Water Project, and
the Panama and Suez Canals. As with these projects,
Governor Brown claims HSR will result in job
creation, economic development, particularly in the
Central Valley, the accommodation of population
growth and a cleaner environment.
The California High Speed Rail Authority
(CHSRA) has a set of studies demonstrating a sufficient
benefit cost analysis, a business plan that claims
operating costs will be covered by setting prices at
the currently charged airline prices for travel between
Los Angeles and the Bay Area.

The principal economic benefits cited by the CHSR Authority are the
creation of 100,000 construction jobs for the duration
of the project, operation and maintenance jobs for
the running of the trains, and the creation of 450,000
jobs and faster economic growth as a benefit of the
existence of the rail lines.

But, critics of the business plan abound. The
Board of Supervisors from both Tulare and Kern
Counties, counties who would presumably benefit
from the increased connectivity and economic growth
potential of CHSR voted their opposition to the program
as “currently constituted.

Moreover, questions have been raised about construction costs and timing,
environmental impact, operating costs and ridership
forecasts.

The State Legislative Analyst’s Office,
while not taking a position on the desirability of
CHSR, has critiqued the decision making process and
the quality of information available for legislators to
properly evaluate the issue.

 

 

Conclusions
In this study we have looked for, and failed to
find evidence of economic development that could
be clearly identified with the introduction or
operation of high-speed rail in Japan. This is surprising
because, at least for the Tokaido Line, conditions
were ripe for economic development. To be sure the
prefectures along the Tokaido Line grew. The late
60s and early 70s were a period of transformation and
growth throughout Japan. But the data don’t admit a
clear story that high-speed rail was in and of itself a
differentiating contributor.

Is it possible that absent high-speed rail Kanagawa
Prefecture would have grown more slowly? That
is an experiment that can never be performed. But
when we keep in mind that Japan’s growth in the 60s
and 70s were due to exports of goods and Kanagawa’s
main city, Yokahama, is a major port city for the
Tokyo area, it is easy to conclude that the economic
growth would have occurred with existing low speed
rail and truck transport.

The lessons for California are two-fold.

First, high-speed rail tends to create sprawl as it lowers
the cost for commuters and makes more far-flung
locations possible bedroom communities. This may
be considered a benefit by some and a detriment by
others.

Second, the claims that a multiplier effect (or
economic development effect) of 450,000 jobs as a
result of the introduction and operation of CHSR are
not likely to be realized. There may be good reasons
to invest in CHSR including the possibility that
CHSR is the optimal infrastructure investment for a
growing population; but the economic argument, the
jobs argument, does not seem to stand on very solid
ground.