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The railroad dilemma: Speeding into disaster

By Elia Ching
web posted September 25, 2017

Around ten years ago, former President Barack Obama proposed the idea of extending a high-speed rail system through California. He managed to convince just enough of the right people to put his plan in action. His reasoning? That the project would create jobs and boost the economy. According to Obama, building the somewhat expensive but stunning rail line would create jobs in both construction and maintenance. What President Obama and other proponents of the high-speed rail failed to see was that this so-called “economic stimulus plan” would not benefit the economy, but would however, harm it. Most would not observe any similarities between a broken window and a high-speed rail line, but upon closer examination, we can clearly see that the recent development of the Amtrak system in California is a prime example of Frederic Bastiat’s parable of the broken window.

To further understand how the Amtrak problem plays out in an economic setting, we must first explore what Bastiat’s parable is. In 1850, a French economist introduced the concept of the broken window in his essay, entitled That Which Is Seen and That Which Is Not Seen. The parable starts with a young boy breaking a window pane and shattering the glass everywhere. Most people would say this was in fact a good thing, as it gives maintenance men something to fix. Let’s say the man who fixes the window receives five dollars as compensation, he could then spend those 5 dollars at a movie or at a shop buying a small snack, in turn giving business to those producers. Overall, the economy is benefited, right? Well, Bastiat argues against this, bringing up the unintended consequences of the shattering of the window. “Destruction is not profit,” he says, saying that in the end, capital does not increase and the value of the window is lost forever.  With all things considered, wreckage of property does not translate into economic benefit.

Now, we can examine the similarities between the Amtrak plan and the broken window. I had not heard of the Amtrak issue until I attended a seminar a few months ago where various speakers stated their opinions on transportation policy. One of those speakers was the Vice President of a conservative think tank, and in his speech, he vehemently attacked the general idea of the high-speed rail line in California. Humorously enough, the very next speaker happened to be the Ben Tripousis, the North California Regional Director of the High-speed Rail Authority himself, who seemed very offended by the previous man’s comments. I left the seminar very intrigued and now aware of the high-speed rail line that was being built in my own state. Personally, I thought the Amtrak system would be a failure for several reasons. Firstly, both speakers agreed that the construction would be somewhat costly, with experts estimating at least 60 billion dollars in expenses. Additionally, only 53% of the Californian population voted in favor of the project, with 46% opposed. (1% abstained.) Studies also found that ridership on the train line would be relatively low, as a majority of Californians already were accustomed to other forms of transportation such as driving, biking, or even flying on commercial airlines. All things considered, it seemed very clear to me that the project was destined to be a financial fiasco.

However, at the conference, Mr. Tripousis insisted that even if there was low ridership, the project in itself would be a stimulus to the economy, as it would create jobs. This is where I found fault with his argument. Considering the studies showed low ridership, it would seem that overall, the project would be a vacuum, taking money and resources but not giving any benefit at all. Essentially, the project would more or less be a waste and/or destruction of property, similar to the window. If people would use the train, this would be a completely different story, but we have to remember the studies that predicted low usage of the high-speed rail line. With this considered, the jobs artificially created would not be a benefit, as the Amtrak system is just the broken window parable on a much larger scale. When the project is finished, the artificial and temporary jobs will be gone, and 60 billion taxpayer dollars will have been lost in a financial disaster. As the train will not be used for various reasons, it cannot be considered capital, but can be considered a destruction of resources.

In conclusion, we can see that California’s high-speed rail line is an perfect example of Frederic Bastiat’s parable of the broken window. This issue has been a particular thorn in my side because of the drastic implications it has on my own state. Many other similar programs have also been attempted throughout history, stemming from FDR’s New Deal projects. However, with such a relevant issue, I finally realize how government intervention in the form of stimulus projects is truly a harmful task. Bastiat’s simple concepts will always hold true. ESR

Elia Ching is a high school student studying AP macroeconomics. This is his first contribution to Enter Stage Right. © Elia Ching

 

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