Germany launched an 86 billion euro ($95 billion) plan to modernize and expand its creaky railway system, a move billed as an effort to make transportation greener. The 10-year plan is not only to upgrade rails, bridges and carriages but also build out capacity and electrify more routes so as to lure passengers from cars and planes. The federal government will finance 62 billion euros and state-owned Deutsche Bahn AG is to come up with 24 billion euros... DB, as the railway operator is also known, has been under pressure in recent years to improve punctuality and service standards as its fleet of aging trains failed to keep up with rising passenger numbers and its federal owner kept up pressure on the company to secure dividends. Currently only 58% of rails run on electricity and punctuality on long-distance trains was around 76% in 2019, up one point from a year earlier. Rail travel emits less CO2 pollution than air or road traffic. The company already slashed travel prices across the board by 10% on Jan. 1, after the government ordered a cut in value-added tax on tickets.And so on. I like trains, really I do. Although I don't use them much any more (mostly, I'm happy to say, because I just don't travel that much any more). However, is what they've done a good idea? How would you even know? If your answer is "yes it's obviously a good idea" then my reply is "but would $195B be better?" Because if it would be, then they've made a distinctly sub-optimal choice, so calling it "good" is odd. If you believe that pols are generally not just wise and well advised, but also able to put aside lobbying pressures and party politics, then you might believe that they've picked the right number. Presumably you'll also believe that HS2 is also a great idea. And can I interest you in this fine bridge I have for sale?
How might we do it otherwise, and use something other than the undoubtedly unsurpassable wit and wisdom of pols? Well, if you don't like hairyplanes because they emit CO2, then you should tax CO2. Which would increase the costs of hairyplanes. If people still flew too much after that, then you'd know that Johannes Public doesn't agree with the pols.
Which brings me back to a rather short conversation with mt on Twatter recently. Well, less of a conversation and more him posting something and me replying. And my reply was to push the prices-as-information theory a-la Hayek. Of which DB's upgrade is not an example. People can signal how they wish to balance cost and convenience by whether they choose to buy plane tickets or train tickets. At the moment the Govt thinks they are buying too many plane tickets. Given that preference, you'd expect investment money to flow into hairyplanes, and that seems to be true. Deciding that you don't like that, and just dumping a wodge of money on DB, is likely to be inefficient. Because how will they know just what to spend it on?
* The collection of resources for government financed or sponsored investment often has a substantial disincentive effect on saving, effort and enterprise... Peter Bauer, Dissent on Development.