Wednesday, January 31, 2018

9 hour railway station

China builds a railway station in 9 hours (HT Marginal Revolution).

Yes, it's basically a propaganda video, but interesting nonetheless as a reflection on infrastructure.  The video does not say how long China spent on environmental review -- did it disturb wetlands, threaten various species, what's it's carbon footprint -- legal review -- is it paying prevalining union wages, was it bid with proper female and minority headed construction company set asides -- did it have community input, consistency with planning targets and so on. I doubt it was the oh, 10 years or so that takes in the US.

To be clear, I am not saying all that is useless. China has awful pollution,  and our reviews accomplish something.  China doesn't bother with the niceties of private property ownership, eminent domain proceedings, and legal challenges when they want to build a railway. These don't just triple or more the cost of projects, send vast sums of money to well-connected companies and lawyers and lobbyists, and delay projects for decades. But they also have that effect.

It's also interesting as a pin factory visit.  With that many people on a job, I would have thought they would be getting in each other's way. This video seems to deny the Q theory of investment! Some are standing, but a remarkable number are working hard. Of course, the video is edited.

When I watch US infrastructure projects, I see a lot of people standing around or "supervising" the one poor sob who is actually doing the work. That ratio seems a lot lower here.

There are a lot of machines.  The days of China substituting lots and lots of labor for capital are gone. The Chinese have taken Milton Friedman's advice. (On a visit to a dam, Friedman noticed people using shovels. He asked why they didn't use bulldozers. The answer was to give more people employment. Friedman responded, why then don't you make them use spoons?) This is not a new observation, but the video is a good reminder from afar.

8 comments:

  1. Great post. By the way, the Milton Friedman story has become widespread on the internet. There’s some reason to think that someone said what he is quoted as saying; there is little reason to think it was Milton.

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    1. One of many stories so good it would be a shame to look up the facts. Like Churchill quotes. Well, if he didn't say it I'm sure he wished he had.

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    2. I actually had the pleasure of seeing Mr. Friedman talk to students in live unscripted informal interactions in the late 1960s. He was never taken aback and never at a loss for words. He always said witty things they had absolutely no answer for. A friend of mine who was on the U of Chicago faculty from the late 60s through 2010 said that Mr. Friedman was the smartest man on the faculty and always said witty cogent things in faculty meetings. I would place a heavy burden of proof on anyone who claims he did not say something that is witty and consistent with his libertarian views.

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    3. Years ago an economics professor told this story in class:

      A missionary newly arrived in China in the 19th Century is given a tour guide.
      They go to the mouth of the river and see a gang of men who are physically pulling barges through the shallows.
      There is an overseer with a whip who strikes any man not pulling hard on the ropes.
      The missionary protests that this is inhumane and must be stopped.
      The tour guide says: "the men pulling on the ropes are partners, they hired the man with the whip."

      Is there a source for the story?

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  2. Great observation, you are right on the spot. I have dealt with public tendering in two European countries and the factors you signal are introduce huge delays and costs. And from international comparisons, apparently the US is in an even worse situation than EU countries.

    I would add two factors that are considerably hindering public investment and infrastructures works: The fear of being accused of corruption, and administrative restrictions on overdrafts. The combination of the two is introducing complete paralysis in infrastructure in a country like Romania. Officials are wary of signing anything, as the court of accounts and anticorruption attorneys look for any weakness to paralyze projects and indict officials. And normally project budgets are very low and consider a very limited budget flexibility in case of unexpected costs (barely 10%). And there are always unexpected technical difficulties, so projects get paralyzed.

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  3. Well, there is a reason why Trump, in his State of the Union yesterday, called for a drastic streamlining of the approval process of infrastructure projects.

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  4. What I notice about highway construction is many miles of closed highway and millions of dollars of idle capital equipment. There seems to be little appreciation for the impact of construction zones on drivers. I am actually excited about the prefab concrete roadway sections.

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  5. Whether Friedman made the response or not is irrelevant. (It sounds like something he would say.) The real question is who gave Freidman the response about shovels. A guide? A govt minister unfamiliar with the project simply trying to project caring for folks? He was probably embarrassed that there wasn't any more machinery on the project.

    Why are we talking about Freidman? His theories have been totally discredited and he belongs in the footnotes of history.

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