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Don't Forget It's About More Than Just Safety

On June 17th, 2013 a WSJ article entitled “Rail Safety and the Value of a Life[1]” highlighted the financial struggles that regional transit transportation authorities are facing to address safety concerns: both avoiding train crashes and improving deteriorating bridges.   A federal requirement to install anti-crash gear (Positive Train Control – PTC) for all transit systems that carry over 564 million passengers by 2015 is currently being discussed by the Senate Commerce Committee.   While there is debate over prioritizing schedules of investing in PTC versus the backlog of needed bridge renovations, it highlights the urgent need for overall additional investment in transit infrastructure

The article also explains the methodology of valuing safety investments such as PTC which rests primarily in the Value of a Statistical Life (VSL).  In 2009, the Department of Transportation increased the VSL from $6.1 million to $9.1 million in estimating the economic benefits and costs.  This adjustment enables costlier safety regulations to be justified on “economic grounds” and is part of the standard cost-benefit analysis employed by federal agencies when they issue rules considered “significant” by the Office of Management and Budget.   According to W. Kip Viscusi, a professor at Vanderbilt University who consulted with the Reagan administration to overhaul life valuations in the early 1980s, this change “not only is it good economics, but it increases their benefits by a factor of 10. So it makes their regulations look more attractive than they otherwise would."

This emphasizes the radical changes that can result when input assumptions are adjusted.  The article however, fails to mention that a similar “sensitivity” test used in cost-benefit analysis can also be applied when evaluating deteriorating infrastructure.   Evaluating a range of assumptions to adequately address asset management or risk assessments of failing infrastructure may also indicate that the consequences of neglect may be higher than previously thought.  A thorough review of the range of assumptions grounded in appropriate engineering context and economic theory can indicate the magnitude of costs or benefits at stake when evaluating transportation infrastructure.

EDRG recently authored a series of economic reports sponsored by the American Society of Civil Engineers (ASCE) entitled ‘Failure to Act’ which details the economic consequences of continued underinvestment in our nation’s infrastructure and the losses that may be faced[2].  Because this deterioration has been diffused throughout the nation and has occurred gradually over time, its true costs and economic impacts are not always immediately apparent.  Deteriorating conditions (operations below minimum tolerable levels for the level of traffic they carry) impose costs on American households and businesses through:

  • Increased operating costs due to poor conditions of facilities
  • Vehicle damage due to deficient infrastructure
  • Additional time expended due to slower speeds
  • Unexpected delays from reduced reliability
  • Added cost of repairing deteriorated conditions
  • Increased environmental and safety costs.

In the first report, Failure to Act: The Economic Impact of Current Investment Trends in Surface Transportation Infrastructure indicates that the economic costs of deficient and deteriorating surface infrastructure for Rail transit are estimated to rise from $41 billion in 2010 to $370 billion in 2040.  Costs imposed on Bus Transit conditions are expected to increase from $49 billion in 2010 to $659 billion in 2040, and Inter-city rail costs also are planned to rise from $2 billion in 2010 to $20 billion in 2040.  These costs translate into reduced productivity and competitiveness, forgone household discretionary purchases, and an overall loss in U.S. jobs if decisions are not made to address this problem.  Across the U.S., regions are affected differently by deficient and deteriorating infrastructure and the most affected regions are those with the largest concentrations of urban areas.  To address an overall cost of $1,049 billion in transit costs, EDRG’s analysis determined that a total of $760 billion of investment is needed which includes an increase of $416 billion for current unmet needs.

The results of the ASCE report highlight the need to include evaluations of economic consequences for safety and deteriorating infrastructure both of which are important and should be evaluated using similar methodologies and an appropriate range of assumptions.  The article also calls attention to the status of the U.S.’s transportation system which serves as a vital link to our economy.

 


[1] “Rail Safety and the Value of a Life”. Ted Mann. June, 17th, 2013.  www.wsj.com

[2] http://www.edrgroup.com/about-us/press-releases/asce-failure-to-act-series.html

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