Monday, April 09, 2012

Incomplete analysis

High-speed rail for California is silly beyond words.  But we live in a Bootleggers and Baptists (B and B) world.  Some people accept implausible stories for religious reasons and others practically live at the public trough. 

Here is an interesting graphic from the Silicon Valley Mercury NewsIf you accept that the project will be built for $68.4 billion and if you accept that the current 83% shortfall will be met by a combination federal money and private investors (who will have to be teased into this deal by still other goodies not currently budgeted anywhere) and if you accept that California cap-and-trade revenues will materialize and if you are ready to assume that these moneys will be funneled to California HSR ...  Where to stop?

The B and B alliance does not require serious arguments.  The studies and the budgets and the projections are only there so that politicians and their acolytes can pretend that this is serious.

The bigger point is that economists and others note that there are negative externalities in the world which are not internalized by private action (see previous blog post).  Policy makers can act to internalize these via Pigouvian taxes or via cap-and-trade.  But who administers either of these?  That question is asked much too rarely.  The latest California HSR news suggests an answer. 

Why is the conventional textbook presentation so naiive?