Viewpoints

California’s high-speed rail promoters should heed the wisdom of rats

The Cedar Viaduct of California's high-speed rail project with Highway 99 in the foreground is under construction in Fresno, July 2017. A $20 billion segment between Fresno and San Jose is scheduled to open by 2025.
The Cedar Viaduct of California's high-speed rail project with Highway 99 in the foreground is under construction in Fresno, July 2017. A $20 billion segment between Fresno and San Jose is scheduled to open by 2025. TNS

California’s high-speed rail project has broken more promises than ground. At every stage, the project has underestimated costs and overestimated benefits.

Travel times are up 40 percent. Ticket prices have risen 78 percent. Construction costs have nearly doubled – from initial estimates of $33 billion to $64 billion. So far, roughly 1,000 construction jobs have benefited the Central Valley – a far cry from the 160,000 construction-related jobs and 450,000 permanent tourism jobs originally promised.

California’s high-speed rail is a classic case of a sunk cost trap. In behavioral economics, the sunk cost fallacy describes that uniquely human circumstance by which we throw good money after bad ideas, persisting with a losing proposition because it’d be a waste to walk away now, after all we’ve spent.

In behavioral economics, the sunk cost fallacy describes that uniquely human circumstance by which we throw good money after bad, persisting with a losing proposition because it’d be a waste to walk away now, after all we’ve spent. Rail executives have turned the sunk cost fallacy into their sales pitch.

Rail executives have turned the sunk cost fallacy into their sales pitch. In a revealing interview this summer, Dan Richard, chair of the California High Speed Rail Authority, conceded that the project’s funding plan relies on it.

“By 2024, we’re going to be deep into construction. We’re going to be on the verge of opening the first service. We’ll be seeing Google and others making massive investments in areas around high-speed-rail stations,” he said. “The case will be there for the importance of continued funding.”

That sunk cost argument was enough to persuade the Federal Transit Administration to provide $647 million in federal grants to electrify a 51-mile stretch of Caltrain tracks that transports workers between San Jose and San Francisco.

While the tech oligarchs reap the immediate benefits of improving their daily commute, the beleaguered Central Valley gets grand promises of economic revitalization. As a remedy for the Bay Area’s sky-high housing prices, rail proponents are selling a new vision of Central Valley worker bees transported via high-speed rail to the Silicon Valley.

“Why not build new communities, well-designed communities, sustainable communities in the Central Valley?” asks Jim Wunderman, president and CEO of the Bay Area Council. “[Why not] have more folks live there and have an efficient and pleasant train commute into the Bay Area?”

The idea that tens of thousands of workers will spend hours commuting to Silicon Valley is fiction. Tech companies don’t create jobs for the masses. When Snapchat went public last year, the $31 billion company employed fewer than 2,000 workers. Compare that to the 58,000 employees of retailer Ross Stores, or 55,000 employees of engine manufacturer Cummins, Inc., both of equivalent market capitalization.

Of the few jobs created by technology companies, even fewer will take a train to the Central Valley. “Most new jobs are not near transit,” the San Francisco Bay Area Planning and Research Association concluded in its latest report. “Despite efforts by regional planners to incentivize transit-accessible locations, only 28 percent of new office development has occurred within a half-mile of regional transit.”

With construction costs up and job creation down, California should bite the bullet on the bullet train boondoggle, like rats abandoning a sinking ship. The behavior, first observed by Pliny the Elder in the 1st century A.D. and later canonized by Shakespeare in The Tempest, is based on sound economic theory.

New research published last month in the Journal of Behavioral Processes has found that rats behave optimally in a sunk cost task. Unlike human beings, rats aren’t emotionally invested in their past mistakes. When the ship starts to sink, they don’t worry about the resources already expended.

Rats! If only California high-speed rail executives acted as rationally.

Shawn Steel, a former California Republican Party chair, is the California’s committeeman for the Republican National Committee, shawnsteellaw@gmail.com.

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