World's worst investment: why urban highways destroy wealth

Infrastructure investment is often seen as a good way to stimulate the economy and to provide facilities to allow the economy to grow. It's a pretty uncontroversial responsibility of government to provide for such infrastructure. However, even as a left-winger, I know that we have to be careful with government investment and make sure the money spent is spent effectively. Since government has a huge ability to spend and subsidize, it can effectively maintain unprofitable, wasteful ventures almost forever, taxing the rest of society to subsidize them, creating a drag on the economy. In the private sector, this is much less likely as actors do not have the financial capacity of government and so trying to support an unprofitable venture will inevitably bankrupt them, forcing the venture to halt.

Now, sometimes unprofitable ventures still have social benefits or moral imperatives that justify them. So I'm not condemning every government spending program here. But clear-minded reflection and analysis is necessary to make sure money is well-spent.

Which brings me to the matter of urban highways, which is the single most glaring example of an infrastructure spending that is ill-advised, wasteful and yields no positive outcome for society. They are largely the single most wasteful infrastructure spending project that we nonetheless keep doing over and over.

An example: highway vs subway, case of Montréal

The 1960s in Montréal were a time of big public projects, like in most of North America. In 1967, Montréal was slated to receive the International Exposition, and in order to welcome the world, projects that had been on ice for years finally got funding from governments now afraid to look like incompetent buffoons in front of an international audience. Consequently, two major transport projects were launched and done in the same lapse of time. The first was the Décarie Highway, a trench highway built along a previous boulevard, minimizing expropriations, and the second was the first 25 km of the Montréal Metro. 

This provides a good comparison of the costs and capacities of highways versus rail-based transit (though Montréal's metro is on tyres), as in both cases, the projects would be built underground, one in a trench, the other in tunnels. Too often, people claim that highways are cheaper than transit, or at least act like they are, but they do so comparing highways built on the surface in suburbs or fields with underground subways, which is an apple-to-oranges comparison.

Without further ado, let me present the Décarie Highway:

Décarie highway, 3 lanes per direction in a trench located in a densely inhabited section of Montréal

Décarie highway on a map of Montréal, connecting the A-40 to the north to A-20 to the south

Now, some numbers:

• The highway is 6,4 km long
• With 3 lanes per direction, it offers a passenger capacity of roughly 7 000 to 8 000 people per hour per direction
• Its cost was 370 million 1967 Canadian dollars, or about 60 million dollars per km
• In 2014 dollars, the cost would be 2,6 billion dollars, or 405 million dollars per km
• If the highway had to be funded entirely through tolls, the toll would likely have had to have been around 35 cents per km, or around 60 cents per mile (in 2014 dollars).

 At the same time, the initial Metro network was built, opening also for the 1967 Expo:

The original three lines of the Montréal Metro, opened for the '67 Expo, versus the current system

The system was built entirely underground. Even if we wanted to take it on the surface, we likely couldn't due to the rubber tyres and the harsh winter (Sapporo does it but by covering the surface lines entirely).

Some numbers for the Metro:

• The original network was 25 km long, including a tunnel under the St. Lawrence River.
• Each train has up to 9 16-meter-long wagons (54 feet) with a capacity of 100 people per wagon, 150 in crush conditions, and a frequency of up to one train per 3 minutes. That is a capacity between 18 000 and 29 000 people per hour per direction.
• This original network cost 214 million dollars in 1967 Canadian currency, or 8,5 million dollars per km
• In 2014 terms, that is 1,5 billion dollars, or about 60 million dollars per km

Just for fun, let's mention the Expo Express, to my knowledge the first fully-automatic Heavy Rail Transit line in North America that ran on a line 5,7-km-long, built for 18 million dollars (125 millions in 2014 dollars), with a capacity of around 20 000 people per hour per direction. Unfortunately, after the Expo, the line went from nowhere to nowhere, and so the service was discontinued in 1972.

So, to sum up...

• The highway was 7 times more expensive per km than the subway to build
• The highway passenger capacity was 3 to 4 times less than the subway
• So overall, the highway is 20 to 30 times more expensive to build per capacity-km

So what does that say about what is the better investment? Sure, some people can point out the highway is also used for freight, but with the passenger capacity of subways, this allows freight an easier time to navigate surface streets.

The reasons for the higher costs of highways are simple: they take more space, thus when land is expensive, they will be more expensive to build, likewise when you need to build elevated structures or to dig in the ground. Otherwise, laying tracks or building highway-grade pavement is roughly the same price. Subways also include the cost of wagons, of electrification and of maintenance centers too, which makes highways even more expensive because these costs have to be paid by its users and not accounted for when you build them.

OK, it was more expensive, but is it worth it? Did it create wealth?

Something being more expensive doesn't necessarily make it a bad investment. A pickup truck is more expensive than a compact car, but to some people, it may be a better investment if they need to haul a lot of stuff for their work. So, do urban highways help create exponentially more wealth than transit?

First of all, please note that I speak of URBAN highways, highways built in inhabited areas and that cut across them in order to facilitate commuting and movements inside the urbanized area, and not highways between cities that allow movements BETWEEN cities to be done faster. These are two completely different beasts.

Anyway, urban highways have a terrible legacy regarding wealth in the cities they have been built in. In almost every case, the areas adjacent to highways have become blighted by their presence. Highways achieve this because:

• They cut off parts of the city from the rest of it, making it harder to get on the other side for residents, which makes living in the area less desirable.
• They create a lot of nuisance through increased traffic and visual and aerial pollution, making the areas even less desirable.
• They suck out traffic from existing healthy commercial arterials, which eliminates pass-by trips to the businesses on these arterials, weakening them and even leading to their closure.
• As people require cars to use the highway, any business or service that is not in a car-oriented area will not benefit from them, so older urban areas with few parking spots cannot cater to highway users. Buildings have to be destroyed to make way for parking lots in order to attract highway users, but doing so eliminates a lot of business and services, reducing the area's vitality and the amount of wealth in them.
• Since the highway is so fast, proximity matters less, and as greenfield developments are always cheaper than urban infill development or redevelopment, it makes housing and businesses in sprawl cheaper and more convenient in comparison to urban development, so development money flees to undeveloped areas, leading to under-investment in existing areas and their decline.

Elevated and underground highways can reduce the impact, but they are extremely expensive to build, as the Décarie Highway clearly demonstrates. 

An elevated highway in Nagoya, tall and narrow to minimize impacts on the area... but with a toll around 1$ per mile traveled

Urban highways do not create wealth, they rather destroy the wealth of the areas they're built in. However, for short-sighted suburban mayors and officials, they bring development to their suburbs as they favor greenfield development. Yet, this "development" needs to be called what it actually is, "displacement". Every new mall in the suburbs tends to be balanced by dying malls or commercial areas in the city.

On a macro level, there is no link between the amount of highway lanes per capita and the wealth of metro areas. San Francisco is very rich yet has next to no urban highways. Vancouver famously has no highway within the limits of the core city and is doing extremely well.

The richest metropolitan areas in the US are San José, San Francisco, Seattle, Boston, Washington, Houston, New York, Portland, Hartford and Salt Lake City. Areas with relatively few urban highways are overrepresented in that list, with Houston being the one big exception.

Meanwhile, transit is well-known for generating plenty of development around it and revitalizing areas it is built in. This is actually hurt by zoning in much of North America, but the few places that have embraced it like Arlington in Virginia or Vancouver seem to be positively booming.

Conclusion

So overall, urban highways, which are supremely expensive compared to alternatives for urban passenger trips, do not seem particularly efficient at creating wealth for society at large, they even seem to actually hurt wealth creation. Worse, highways help create a donut effect where the old neighborhoods at the center of a metropolitan area decline and become blighted as wealth flees to the periphery.

So as far as public infrastructure investments are concerned, urban highways are certainly one of the worst ones. They are expensive and yield very little benefit for society overall. However, they do benefit a certain group of people who naturally gravitate to suburbs, at the expense of city residents. Fairness dictates then that highway users have to shoulder the cost of them rather than highway costs being collectivized regardless of use. Tolling urban highways should therefore be the preferred way ahead for cities stuck with them.

An even better way forward for highways in North America would be to give highway construction and maintenance over to public State corporations rather than highways being directly built and maintained by DOTs and ministries of Transport. The State corporation could rely on the government's line of credit to borrow funds but would be asked to self-fund itself through tolls or other revenues. That way, highways would be built only where drivers would be willing to pay for their full cost. If they do not, then highways would not be built. If alternatives exist to do the job for less, they would stand an higher chance of seeing the light of day.