Tag Archives: infrastructure

What is infrastructure?

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This apparently is a political question. I am not an expert on all types of infrastructure, or a financial expert, but I am somewhat of an expert on urban water infrastructure. The definition of infrastructure I typically use is from the Statement No. 34 of the Governmental Accounting Standards Board: Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments. Here is how it goes:

As used in this Statement, the term capital assets includes land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, works of art and historical treasures, infrastructure, and all other tangible or intangible assets that are used in operations and that have initial useful lives extending beyond a single reporting period. Infrastructure assets are long-lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems. Buildings, except those that are an ancillary part of a network of infrastructure assets, should not be considered infrastructure assets for purposes of this Statement.

GASB 34

This seems like as good a definition as any. So Biden’s proposed bill is really a capital assets bill. Which doesn’t have much of a ring to it. But neither did infrastructure, it’s a bizarre word that we’ve just been saying a lot so it has started to sound less bizarre. Capital assets, I learned in my undergraduate economics classes, are the economy’s food, and as it consumes them we have to add more just to keep the amount of them level (maintain, repair, rehabilitate, or replace when the time comes). We can increase economic output up to a point by adding even more capital assets to increase the absolute level, although there is such a thing as adding too much (looking at you, old Soviet Union, and possibly modern Japan), and we are almost certainly way below the point that would be too much. It makes total sense to borrow at a reasonable interest rate and invest in capital assets that will provide a return on that investment, and if you can borrow at no interest or even a slight negative interest rate, and you are below that optimal level of capital assets, warm up those printing presses! You can also, in theory, incentivize the private sector to make appropriate capital investments on their side. Investments in education, training, research and development then round out the investment in capital assets by providing the work force and capacity to innovate that set the stage for long term investment. Oh, and you want to try to do all this without irreversibly fucking up the atmosphere and oceans. Easy peasy!

What infrastructure is definitely not is only roads, bridges, and highways. That has been the limit of imagination of many of our elected officials when talking about infrastructure. So good for this administration for taking a more expansive view, and seizing the initiative. We’ll see if this is the one big thing this administration manages to get done in its two year “grace period”. Why do we have a system where we can only do one thing every 8 years?

March 2021 in Review

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Most frightening and/or depressing story: In the U.S. upper Midwest (I don’t know if this region is better or worse than the country as a whole, or why they picked it), electric blackouts average 92 minutes per year, versus 4 minutes per year in Japan.

Most hopeful story: I officially released my infrastructure plan for America, a few weeks before Joe Biden released his. None of the Sunday morning talk shows has called me to discuss so far. Unfortunately, I do not have the resources of the U.S. Treasury or Federal Reserve available to me. Of course, neither does he unless he can convince Congress to go along with at least some portion of his plans. Looking at his proposal, I think he is proposing to direct the fire hoses at the right fires (children, education, research, water, the electric grid and electric vehicles, maintenance of highways and roads, housing, and ecosystems. There is still no real planning involved, because planning needs to be done in between crises and it never is. Still, I think it is a good proposal that will pay off economically while helping real people, and I hope a substantial portion of it survives.

Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both: One study says 1-2 days per week is a sweet spot for working from home in terms of a positive economic contribution at the national scale. I think it is about right psychologically for many people too. However, this was a very theoretical simulation, and other studies attempting to measure this at the individual or firm scale have come up with a 20-50% loss in productivity. I think the jury is still out on this one, but I know from personal experience that people need to interact and communicate regularly for teams to be productive, and some people require more supervision than others, and I don’t think technology is a perfect substitute for doing these things in person so far.

what would a forward-looking infrastructure plan look like?

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The U.S. has neglected its infrastructure for decades and is falling apart. Unemployment and inequality are high, and people are hurting. Real interest rates are negative, there is virtually no risk of inflation, and the U.S. dollar remains strong and stable for the near future. Warm up the printing presses and helicopters! Don’t take it from me, take it from Larry Summers, who is normally in the headlines for cautioning against this sort of thing:

we propose a crude way to take account of this by excluding a specific set of programs and investments from the constraints of pay-as-you-go when strong evidence from academic research implies they would plausibly pay for themselves in present value. This includes well-designed investments in areas like children, education, and research. Infrastructure would ideally be paid for with Pigouvian revenue measures that improve infrastructure utilization, but it too could get an exception to the pay-as-you-go principle.

a paper by Larry Summers and another guy you haven’t heard of

Under these conditions, just directing the fire hose of federal money at infrastructure projects, any infrastructure projects, can’t hurt. It might be good to do that rather than spend too much time coming up with a plan to do it the best possible way. And yet, it could be done better. We could take the time to plan when we are not in a crisis, and then be ready to turn on the taps when a crisis hits (or just crack the taps open to a slow drip when a minor challenge hits and we need to nudge the country back on course.)

Too many proposals about infrastructure just boil down to throwing money at pork barrel highway projects, or else a buzzword soup about things like sustainability and equity without specific proposals. Here is one new proposal from Rice University with some specifics. One thing they propose is that project proposals come from leaders at the metropolitan or regional scale rather than the federal government. I completely agree with this. They suggest focusing on transportation (including public transportation), public facilities (including health facilities and parks), water and wastewater, energy (including renewables), and communications (including broadband). They then get down to a laundry list of specific projects at the local scale that would benefit from funding. Pulling all of this together is a pretty good accomplishment.

These basic categories sound okay to me. I might leave “health facilities” out of it – the U.S. needs a comprehensive, universal health care system now and that is a big enough topic to deserve its own legislation and program. Education is similar. I might add housing. Housing is a huge topic and it is excluded from most definitions of public infrastructure, but it is so intertwined with infrastructure and land use that its problems almost need to be solved at the same time. I like that they included parks – I might broaden this to include other forms of green infrastructure like street trees. Maybe “green infrastructure” is a too buzzwordy term – nothing wrong with “parks and trees”, except maybe there is a gray area whether are talking about any type of park or recreation facility (an urban playground or basketball court?) or whether it has to be quasi-naturalistic. I think I would go with the broader definition. I might add “urban food infrastructure” to the list – this is somewhat nebulous, but again intertwined with the larger infrastructure system and land use issues. You don’t really want the ag industry lobbyists involved, hence the “urban” term.

A bunch of projects do not make a plan. A good plan needs to have a definition of the system that is being planned for, and measurable goals for the state or function of that system that is desired. Then any package of inter-related projects can be evaluated to see how well they meet the goals and at what cost. Then finally, a specific package of projects can be chosen and put in priority order, and funding and implementation details can be worked out. Lots of “plans” skip right to the last step I just mentioned, while others fail because the last two steps are not well enough thought out.

As far as goals, they should be set at the local level, but the basics are fairly obvious, I think:

  • Provide reliable and affordable water, energy, communication, food and waste disposal services for everyone. (This can get wonkier – you want to keep infrastructure in a state of good repair, set and meet level of service goals, and minimize the cost of each component over its life cycle by making smart maintain/repair/replace/upgrade decisions.)
  • Minimize the expense and time of moving people and goods where they need to go. (I think of this as infrastructure minimizing “friction” in the workings of the economy.)
  • Minimize the negative impacts and maximize the positive impacts of the infrastructure system on the environment and public health, or if we want to be more buzzwordy, maximize ecosystem services.
  • Make the transportation system as safe as possible for everyone. (You could roll this into either the transportation or health goals, but it is so near and dear to my heart I give it its own bullet. If we made this an explicit goal, we would not be designing our streets and highways the way we are today in the U.S. By the way, active commutes are very nice and a lot of people might like them if they had the option to give them a try.)
  • Housing – I don’t know enough to articulate this. Basically, everybody needs to be able to afford a decent roof over their heads.
  • Be prepared to react, manage, and recover from disasters and other disruptions that occur. The buzzword is resilience. (Climate change mostly fits under this goal. The words “climate change” are not a goal or a plan in and of themselves. Some bad things that happen are related to climate change, and some are just random bad luck, and some are mixes of the two. We need to be ready for all of them.)

A few more principles I think are important:

  • The federal government could fund this planning at the metro scale. The planning itself would create some government, professional, and academic jobs and build technical capacity. Something similar is already done for transportation so it could be expanded. The plan would need to be on the books, with a goal-based analysis justifying a prioritized list of specific projects selected, to be eligible for federal funding.
  • The funding should go from the federal government directly to metro areas, without passing through state politicians. Otherwise they will use the helicopters to scatter the money over rural areas where it will not do as much economic good or help as many people. States could be given a fair amount of money to plan and implement in areas unable or uninterested in doing it themselves.
  • The metro region needs to have skin in the game. The federal government should match local investments – it could match at a higher or lower rate depending on economic conditions, but something short of 100%.
  • Funding for maintenance needs to be included, and set aside in some sort of trust fund. This would need to include funding for existing infrastructure through the end of its service life, and then funding for new infrastructure to be maintained as it replaces the old. In fact, funding maintenance of existing infrastructure would be the single easiest way to benefit people and the economy right away without the considerable time and effort it takes to get new construction projects up and running. Maybe I’ll rethink my earlier proposal to leave out education, and include maintenance of public schools which would instantly improve the lives of millions of children, parents, teachers and staff. We could hit this hard and have a decent public school system in this country (again) by fall 2021.

So there’s my infrastructure plan. If you are a powerful politician reading this, please feel free to steal it and say you thought of it. My reward will be living in a decent, modern country with a growing economy and a pleasant environment.

fun stats on U.S. blackouts

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Electric blackouts are yet another area where the hard data shows the U.S. is slipping behind other developed countries.

To put it bluntly, this kind of situation doesn’t happen everywhere. In fact, it happens more often in the U.S. than in any other developed country, according to the University of Minnesota’s Massoud Amin, a founding expert in smart-grid technology. Amin has found that utility customers lose power for an average of 4 minutes annually in Japan, compared to 92 minutes per year in the Upper Midwest.

“We are behind all other G7 nations in our infrastructure, including the power grid,” Amin said.

Yale Climate Connections

One simple (i.e. low tech but expensive) solution suggested is to bury power lines, which provides protection against both storms and freezing. I have always thought it would make sense to put utility tunnels under roads and streets. Then you could put all your utilities in there (electric, gas, water, sewer, communications) and have access to them through manholes rather than having to dig up the street. Of course, this would require up front planning and expense, it might be hard to retrofit an existing city this way, and it would require coordinating the patchwork of mostly uncoordinated public and private entities that fund and operate our infrastructure systems. Or we could try to untangle that patchwork into something that makes more sense.

We’ll need to figure something out just to keep the system functioning as it ages. At the same time, extreme weather and other disasters seem to be getting worse. There is talk of electrifying vehicles on a large scale, and some locales are shifting away from natural gas and toward electrifying more homes and businesses. Then we have the move toward more decentralized, intermittent sources of energy. And finally, there is the risk of cyber attacks and plain old fashioned attacks, whether by a serious foreign adversary or just mischief makers. Right now, foreign adversaries and mischief makers may just be sitting back and laughing at the United States as we manage to spread deadly biological agents and let our critical infrastructure fail from neglect without their help.

metropolitan planning organizations

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If you live in a decent sized metropolitan area, your metropolitan planning organization forces local officials and other stakeholders to get together across political jurisdictions and make decisions about how to prioritize transportation projects in the context of a long term plan. The results then get sent up to the state, which uses it to allocate funding.

The article has a number of criticisms. MPOs have tended to favor highways over other forms of transportation, and these have often disrupted disadvantaged communities. They have tended to favor suburban areas. They have tended to favor new construction over maintenance of what is already constructed.

I have always thought MPOs are good even if they are imperfect because (1) they force stakeholders to work together at the right geographic and economic scale for infrastructure planning, (2) they force some kind of long term plan to be put down on paper, (3) they force the prioritization of site-level projects to be justified in the context of that long term plan, and (4) they bring in state and federal money to get projects in the ground based on the priorities of local actors that have “skin in the game”. In the absence of this process, either political jurisdictions would plan in isolation, or more efficient but less democratic structures would be created that largely cut out elected officials, voters and taxpayers. Engineers and officials not trained in planning would tend to jump right to analysis of site-level projects without a real plan. State and federal funding either would not happen at all or would be based on political lobbying. Corruption would likely be more common. And systems that are less in public view would tend to be neglected until major, obvious failures occur that affect peoples’ lives.

What I just described covers the state of water infrastructure in the U.S. pretty well. I think we should expand MPOs to cover other kinds of infrastructure rather than just transportation. MPOs are one of the reasons that politicians and the public think infrastructure=transportation and transportation=infrastructure. They do some rational planning and economic analysis at roughly the rate geographic scale and time period, then feed that into a messy political process to rank site-specific, short-term projects, then direct taxpayer money to projects that are likely to benefit the citizenry, while sharing the wealth at least a little bit. Unless you want to go authoritarian, it’s a reasonable approach to get infrastructure done in a democracy. I think it’s better and more equitable than the ratepayer-funded utility model followed in the water, energy, and communication industries.

July 2019 in Review

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Most frightening and/or depressing story: Most hopeful story: Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both:
  • I laid out the platform for my non-existent Presidential campaign.

automatic fiscal stabilizers

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This doesn’t sound like an exciting topic, but I have been thinking, if the federal government decided to match metro-scale infrastructure projects say, between 25 cents and 75 cents on the dollar, and vary that amount based on economic conditions, what kind of trigger would you use for the economic conditions. My initial thought is to base it on unemployment – maybe 25 cents on the dollar if unemployment is below 5%, 50 cents if it is 5-7%, and 75 cents if it goes over 7%. But I just made that up based on no data other than a vaguely remembered undergraduate economics class in the 1990s. Here is a serious idea called the Sahm indicator:

The “Sahm indicator” measures the difference between the three-month moving average of the unemployment rate and its minimum over the prior 12 months (see chart). The use of the unemployment rate avoids the long lags (and frequent large revisions) associated with other indicators (like GDP). Since 1970, whenever the Sahm indicator crossed the threshold of 0.5%, a recession was underway―there were essentially no false signals. Moreover, the trigger occurred early in these downturns (on average within 4 months of the start). Sahm also proposes using an unemployment rate test to turn the stabilizers off. To avoid a premature return to fiscal austerity, she suggests deactivating programs when the unemployment rate falls to a level that is less than 2 percentage points above the initial trigger.

The infrastructure projects have to be ready to go, and part of plans, not just projects. Maybe you could set aside some of the money in a maintenance trust fund, which gets released to local metropolitan area governments to give them some relief in tough times. Maybe federal or state workers could be trained to do basic maintenance tasks. This is really the issue we saw after the 2007-2008 recession – how do you get people hired and trained and contracts and construction plans all in place fast enough to make a difference economically. It’s hard to do that and still build smart, thoughtful, future-ready infrastructure. But catching up on unglamourous deferred maintenance – think fixing potholes, lining leaky pipes, etc. could make sense.

is the U.S. becoming a developing country?

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This Bloomberg article has a list of areas where the U.S. is following behind its peer group of developing nations.

  • roads, highways, bridges
  • high construction costs for all types of infrastructure, particularly high speed rail causing planned projects to be canceled
  • health care costs and outcomes
  • life expectancy
  • maternal mortality
  • rents rising faster than inflation
  • opioid addiction
  • suicide
  • lead in drinking water
  • poverty and hunger

The article offers the cautionary tale of Italy, which has been sliding backward over a decade or so following many years of similarly flashing warning lights before that.

April 2019 in Review

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Most frightening and/or depressing story:
  • The most frightening and/or depressing story often involves nuclear weapons and/or climate change, because these are the near-term existential threats we face. Oliver Stone has added a new chapter to his 2012 book The Untold History of the United States making a case that we have lost serious ground on both these issues since then. In a somewhat related depressing story, the massive New Orleans levy redesign in response to Hurricane Katrina does not appear to have made use of the latest climate science.
Most hopeful story: Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both:
  • Genetic engineering of humans might have to play a big role in eventual colonization of other planets, because the human body as it now exists may just not be cut out for long space journeys. In farther future space colonization news, I linked to a video about the concept of a “Dyson swarm“.