It has been almost five years since the $1.2 trillion Infrastructure Investment and Jobs Act became law. Now, there’s another infrastructure bill working its way through Congress called the “Build America 250 Act,” that would authorize more federal money for infrastructure projects.
However, figuring out how much infrastructure American taxpayers actually get for that money is easier said than done.
Leah Brooks, a professor of public policy and public administration at The George Washington University, recently published a paper about the unique challenges of measuring the cost of infrastructure projects over time. The following is an edited transcript of her conversation with “Marketplace” host Kai Ryssdal about that analysis.
Kai Ryssdal: So, I’m going to read you back the title of your own paper. It says, “Measuring the cost of building infrastructure over time: Very hard to do well.” Why that bit after the colon? Why is it so hard to do well?
Leah Brooks: Because it’s so, so hard. It’s hard because there are lots of important things that go into building infrastructure that we can’t measure in a standard way.
Ryssdal: Okay, why? How come?
Brooks: Because if you’re producing a private good like apple juice, you measure the things that the apple juice producer purchases to make apple juice, which could be apples and apple-squishing machines and stuff like that.
Ryssdal: Sure.
Brooks: That’s the producer price index. Then, you can measure a consumer price index for apple juice, which is the price at which the apple juice producer sells the apple juice to consumers. Unfortunately for roads and bridges and ports, it’s not quite so clear, because the government is both a producer in its purchasing, but it’s also the final consumer too, right? If you think about the government as being us — the people who voted in these politicians — first, it’s hard to measure all the parts, and then second, economists like to think about net benefits. So, not just the benefit to you, Kai Ryssdal, driving on the freeway to work, but the pollution and the noise that you give, maybe as you pass the Hollywood Bowl.
Ryssdal: As one does in LA. Right, so all those externalities. But let me ask you something, because this is the thing that confounds the citizenry at large. I’m sure all the time we are told that a new road will cost $1 billion, because that’s what the contractors bid for it, and that’s what it’s going to cost. And then five years later when the road is built, it winds up costing $17 billion because of markups and the cost of the government — all of those things. So, there’s a lot that happens between the initial price tag and taxpayers finally paying the bill.
Brooks: That’s right. And what we do really well is we measure the initial price tag. We’re pretty good at measuring the initial price tag. We are very, very, very bad at measuring the final price tag. Then there’s all the money the government puts into the project, above and beyond the money it’s paid to the private contractor, and that we have little to no visibility on.
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Ryssdal: Is that like administrative overhead? Is that what you’re saying, basically?
Brooks: Yes, but there are so many things that go into overhead. That could be permitting, that could be litigation, thousands of community meetings you have in advance of a project. Those are important and valuable, and we should measure how much they cost.
Ryssdal: We are not — as much as Americans might like to think otherwise — the only country in the world, and we’re not the only country in the world that builds infrastructure. Yet we have a deserved reputation for building it more expensively than almost any other country on the planet, right? The Chinese do it, the Japanese do it, the Europeans do it, and they all do it cheaper than we do. How come?
Brooks: That’s an excellent question, Kai. What Zach Liscow, a professor at Yale Law School, and I have written is that part of the reason it costs so much more in the US than elsewhere in the world is because we give citizens an unparalleled ability to complain. We call this “citizen voice,” which arrived in the in the late ’60s and early ’70s as a response to truly awful things that the federal government did. But in response, we’ve created a system where not only do you give input before a project starts, but you give input endlessly after the project continues, sometimes in the form of litigation. But litigation also drags out projects, and the longer the project takes, the more expensive it becomes.
Ryssdal: I’m having a tough time wrapping my head around this, because it seems so obvious that there are things that need to change, but we’ve been doing infrastructure in this country this way for decades and decades and decades and decades, and one despairs that there will actually be a solution.
Brooks: Well, I wouldn’t say that you’re wrong to be pessimistic. On the other hand, economists and traders say, “the only solution to high prices is high prices.” Maybe it wasn’t bad enough before. At some point, I think it will become so expensive that we realize that the trade-offs we’re making are not the trade-offs we want to make anymore, and that makes the politics change.