Richard Florida
by Richard Florida
Wed Feb 24th 2010 at 11:05am UTC

How High-Speed Rail Can Help Expand the Economy

TrainToyTravelLifestyleTechnology

It’s been hard to justify high-speed rail (HSR) projects in terms of conventional cost-benefit analysis. But, it may be time to rethink – and broaden  - the way we think of the benefits of HSR. HSR’s benefits are usually thought of in terms of lowering transport costs by reducing problems like gridlock, pollution, and travel time. But the real benefit of HSR may turn on its ability to expand economic growth, according to a new analysis by my colleagues at the Martin Prosperity Institute.

There are three main mechanisms through which high-speed rail can help expand the economy, according to the MPI study. First, HSR expands the labor pool available to firms, bringing talented workers from nearby centers within commuting distance and thus expanding the quantity and quality of available employees. Second, HSR makes more jobs available to workers without making them have to relocate and move to a new home. Third, HSR extends the benefits of other expensive, productivity-enhancing infrastructure such as airports across broad regions. International airports, major research universities, and reference libraries are all more financially viable and internationally competitive when they serve a larger population. High-speed rail allows them to build the scale they need to achieve world-class excellence and also spreads their high costs across a wider population.

The MPI report is here.

14 Responses to “How High-Speed Rail Can Help Expand the Economy”

  1. Global Urbanist Says:

    It’s great to see someone talking about the benefits of HSR in terms of expanding economic opportunities of a region. Often HSR discussion centre around connecting point A to point B in X amount of time.

    The real value in HSR is creating nodes for transportation and services. Amsterdam’s Schiphol airport is Belgium’s trans-atlantic airport because of efficient rail lines running directly to the airport. In Canada luxury hotels like Toronto’s Fairmont Royal York are a bi-product of the rail lines. Today the hotels play as much a part of attracting economic activity as Union Station does. Note the G-20 chose the Metro Convention Centre because of its close proximity to several high-end hotels, and not because of the rail lines next door.

    I hope future discussions of HSR put the focus on developing the stations and intensifying their surrounding land use instead of how long it takes to get from parking lot to parking lot.

  2. Michael Wells Says:

    Another productivity benefit of HSR is being able to work on the train. If I’m going from Portland to Seattle:
    • I can fly — being at the airport an hour early, crowded for 45 minutes on the plane, then another half hour ground transportation to downtown.
    • I can drive — 3 hours when I can listen to the radio.
    • I can take the train and work for the 3 hours, or with HSR the 1 1/2 hours from downtown to downtown.

    The advantages for those with 50-100 mile commutes is they can do this every day.

  3. Paul Says:

    Sounds like HSR is a great way to expand the part of the economy that is “winner take all.” The best firms, the best universities, and the most productive workers all stand to benefit by being much more closely linked to one another, which will certainly promote economic growth. However, what impacts will it have on average workers? Will it benefit workers without a college degree? I have a feeling that it will only further widen the gap between the haves and the have-nots.

  4. Michael Wells Says:

    Paul, good point. Has anyone looked at HSR in Japan and Europe to see if there are class breakdowns in ridership? I know in California it’s often the working class who have longer commutes because they can’t afford housing in the cities, so they might benefit from faster and easier commutes.

  5. 高速鉄道のメリット » 経済学101 Says:

    [...] How High-Speed Rail Can Help Expand the Economy – Creative Class It’s been hard to justify high-speed rail (HSR) projects in terms of conventional cost-benefit analysis. [...]

  6. Daniel Carins Says:

    This is timely for us in the UK, where the government’s consensus with the opposition (who are tipped to win in June) is breaking down over a new High Speed line linking the high speed Eurostar terminus in London (linking Paris and Brussels) with Birmingham, and then onwards to Manchester, Leeds, Liverpool and then onto Scotland.

    There are already three options by rail from Birmingham to London. The fastest takes 1.5 hours on a limited stop intercity service. The slowest is essentially a local train that takes ages, but is very cheap. The new High Speed line will be more expensive. I doubt the travelling habits of those who take the slow train will change at all following the introduction of HS2, if it’s ever built.

    To be brutal, I think the principal drivers are civic boosterism of the “core cities” (Birmingham, Leeds, Manchester, Sheffield etc) that want the kudos of a direct link to Europe (many of those cities spend lots on lobbying the EU and rent office space in Brussels); and also the economic outputs from the actual construction (which will be a new line rather than faster trains on existing track).

    Of course due to the relative proximity of UK cities, the economic value of high speed rail is entirely different to North America and continental Europe. Distance to London I suspect is the main factor, rather than distance to other major cities. For example, Birmingham both gains and suffers from being the closest to London – firms and government offices do not see the merit of branches so close to London, and so leapfrog to Manchester or Leeds; however, the southern suburbs and exurbs of Birmingham are close enough to house extreme commuters and close links to London.

  7. Daniel Carins Says:

    This report on High Speed Rail has just been published, which is strangely coincidental!

    http://www.greengauge21.net/assets/uploads/research-reports_7_2422186523.pdf

  8. Kam Says:

    Paul: You make a good point.

    I’ll offer up that I think making the best university and best workers even better is an important part of helping everyone. It can be misused if those high flyers choose to hoard all the benefits (monetary and otherwise) for themselves.

    But they’re also the ones who most frequently found businesses, start initiatives and run for office. If the super-productive people share those benefits with the rest of their communities (and there’s no guarantee to be sure), something like HSR can have much broader positive effects.

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  10. Daniel Carins Says:

    Kam,

    Could you provide some evidence that “the best university and the best workers” are “the ones who most frequently found businesses, start initiatives”?

    I’d be keen to know.

    Here in the UK, the Bangladeshi community has far higher than average rates for business start ups, and yet are far less likely to be graduates.

  11. Alan Says:

    Interesting what Paul says – would another effect be that the wealthy buy houses way out of cities and price locals out of the housing market? I seem to recall something similar happening in London…

  12. Daniel Carins Says:

    Alan,

    An interesting point – but this research out today:

    http://www.regen.net/bulletins/Regen-Daily-Bulletin/News/987193/Second-home-hotspots-drive-house-prices-survey-shows/?DCMP=EMC-Regen%20Daily%20Bulletin

    shows that the top five places with the highest number of second homes are all in areas with very poor rail connection (i.e. remote areas with great coastal or highland views etc).

    Perhaps this could suggest that people who want second homes are moving even further out for tranquility, whilst living in what was their second home as a first home, due to improved transport links…

  13. Kam Says:

    Daniel:

    Here’s some work from the US on the profile of entrepreneurs with successful business in high-growth industries:

    http://www.kauffman.org/research-and-policy/the-anatomy-of-an-entrepreneur.aspx

    And here’s some work on South Asian businesspeople in the UK:

    http://www.springerlink.com/content/0777q1210u4336j6/

  14. Bharat Bajaj Says:

    I am always amazed at the Cost Benefit Analysis of rail projects (whether high speed or otherwise).
    Rail projects are not economically feasible, because they tend to be capital intensive. No one ever questions the cost benefit of expressways. The US government spends $80 billion every decade or so improving roads….improving. If Eisenhower had not built the expressways during the cold war so that the military could get from point A to point B fast, most expressways would not be economically feasible.
    If there were no expressways, would that change the economics?
    I have looked, but not yet found, a study that removes the cost of land acquisition and rails from the project and then runs the numbers. Meaning, if the government were to supply the same infrastructure to the rail operators that it does to drivers (land and paving/rails) would the numbers come out in favor of high speed rails.

    PS: If someone could point me to such a study, I would be grateful. If someone wants to join me in undertaking such a study, let me know.
    All this, without taking into account the benefits mentioned in other posts – pollution, time saved…..etc., etc.