Not that
we’re looking to move. It’s a fine home
in a good neighborhood. We enjoy the
folks living around us. There are
schools within walking distance, along with a small grocery, pub, and deli. And, if the weather is conducive to a longer
walk, downtown is also reachable on foot.
We both had
careers in fields that gave us insights to the housing market. And we indeed expected that the market was
near the top, with little room to go higher because many buyers had reached
their financial limits. But we didn’t
realize the extent of the misbehavior underway on Wall Street. So we didn’t anticipate the extent of the
decline. Now we sit, waiting for and hoping
for a recovery.
Except for a
bit of pique at Wall Street, we’re not particularly angry about the housing
bubble. Bubbles are the nature of free
markets. When times are good,
commodities become overpriced. When
reality asserts itself, adjustments follow.
Nor are
bubbles a recent economic phenomenon. In
the early 17th century, tulips bulbs were selling in Holland for up to ten
times the annual salary of a skilled craftsman.
Less than a century later, the South Sea Bubble in Great Britain, which
was more about speculation in government debt than about the South Seas, caused
economic upheaval and the transfer of great wealth.
So, if we
can create bubbles in tulips, government debt, and housing, is it possible, as
StrongTowns argues, that there can be an infrastructure bubble? Given the way in which we’ve made
infrastructure decisions in recent decades, the only surprising thing would be if
there wasn’t an infrastructure bubble.
And the fact that infrastructure isn’t a free market doesn’t really help. Central planning can also create
bubbles. (See the USSR.)
I was recently
an advisor during the scoping of an infrastructure project. The funds were coming from a federal
grant. As a result, our conversations were
about the best use for all the dollars in the grant. Never did anyone ask whether the resulting
project was truly needed or whether its maintenance might be a long-term
problem for the local government.
I’m not
criticizing the result of the scoping process.
I think we reached reasonable and appropriate decisions. And I believe that the infrastructure will
serve well. I’m just astonished that at
no time during the process did anyone, myself included, even question whether
spending the entire federal grant was appropriate.
Instead, we
acted as if the federal government couldn’t have possibly given us more grant
funds than we truly needed. We worked on
the implicit assumption that the federal government has never wasted money. It was a dubious assumption.
And if the funding mechanism for a small local
improvement can make us to forget to ask fundamental financial questions, think
how much worse it would be for enormous infrastructure projects with broad political
ramifications. Decades of thinking that
money from the federal government is “free” has distorted our financial good
sense.
The question
shouldn’t be whether some of our infrastructure is unjustified, but how much
is. Is it two percent? Or is it 30 to 40 percent? My instincts tell me that the latter is more
likely.
This isn’t
an argument that infrastructure is inherently evil. That’s not at all true. Infrastructure is essential to our
lives. But not all infrastructure is
good. We need to return to making infrastructure
decisions on a rational basis. The same
way the Dutch dealt with tulips. No
longer paying exorbitant amount for a single tulip bulb, but still retaining
tulips as an essential part of the national character. (See the above photo of a Dutch tulip field.)
Returning to
good infrastructure decision-making won’t be easy. There will people and businesses who will be
harmed. But our future requires us to
make the effort.
Which is all
the more reason to pay attention to StrongTowns when founder Charles Marohn makes
his appearance via internet in Petaluma next week. Join
us at 5:30 on Tuesday, February 12 at Work Petaluma, 10 4th Street in downtown
Petaluma, to listen to and to ask questions of Marohn. RSVPs aren’t required, but would be
appreciated so we have enough seating for all.
As a last
thought, Alex Steffen, a known expert on sustainability, recently tweeted about
infrastructure. This is what he had to
say.
“Lots of U.S. infrastructure—especially
roads—makes no financial sense now, even before we talk climate emissions and energy
vulnerability.”
“I'd put to you that having highway
construction companies and sprawl developers tell us how things work is
unlikely to create a true model.”
I concur. Listening to a developer of drivable suburbia talk about the need for more infrastructure is akin to listening to a 17th century Dutch tulip middleman talk about the value of tulip bulbs.
As always, your questions or comments will be appreciated. Please comment below or email me. And thanks for reading. - Dave Alden (davealden53@comcast.net)
(Note: The
photo of tulip fields is from a blog post on Likecool.com.)
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