Bent Flyvbjerg, the guru of cost overruns on megaprojects, has posted the first installment of a series examining how people are apparently tricked into backing megaprojects. He starts off by quoting California’s own Willie Brown, in some revealing comments about the Transbay Terminal:
One may argue, as famously done by Albert O. Hirschman, that if people knew in advance the real costs and challenges involved in delivering a large project, “they probably would never have touched it” and nothing would ever get built.* So it is better not to know, because ignorance helps get projects started, according to this argument. The following is a recent and particularly candid articulation of the nothing-would-ever-get-built argument, by former California State Assembly speaker and mayor of San Francisco, Willie Brown, discussing a large cost overrun on the ongoing multi-billion-dollar San Francisco Transbay Terminal megaproject in The San Francisco Chronicle:
“News that the Transbay Terminal is something like $300 million over budget should not come as a shock to anyone. We always knew the initial estimate was way under the real cost. Just like we never had a real cost for the [San Francisco] Central Subway or the [San Francisco-Oakland] Bay Bridge or any other massive construction project. So get off it. In the world of civic projects, the first budget is really just a down payment. If people knew the real cost from the start, nothing would ever be approved. The idea is to get going. Start digging a hole and make it so big, there’s no alternative to coming up with the money to fill it in.”
Rarely has the tactical use by project advocates of cost underestimation, sunk costs, and lock-in to get projects started been expressed by an insider more clearly.
It’s not clear where Flyvbjerg is going with this, at least based on this first installment. So I’ll direct my comments to the Willie Brown quote.
If that’s what Brown believes, then he’s wrong. It is just not true that “If people knew the real cost from the start, nothing would ever be approved.” High speed rail shows this in practice.
The 2008 vote on Proposition 1A could be seen as a classic example of Brown’s theory. Voters were asked to approve a $9.95 billion bond to build a bullet train that was at the time estimated to cost around $30 billion. Many people objected that the real cost would probably be higher, and I always said that was likely to be true.
It didn’t take long for new cost estimates to come out that were ever higher. $43 billion. $68 billion. Over $90 billion. The latter two figures were published at the insistence of Governor Jerry Brown, who understood that truth in advertising matters.
Those changing numbers helped fuel a counterattack against the bullet train, beginning in 2009. They were seized upon by NIMBYs and Republicans who had their own reasons for not wanting to see HSR built. The media, always in the mood to tell a story about government being wasteful and profligate, breathlessly reported on each new estimate as supposedly proving there was something inherently wrong with the project.
The media and the HSR opponents expected that these higher costs would destroy public support for the project. But here’s the crucial point: they never did. Support declined a few percentage points, but there was no mass rejection of HSR.
HSR’s high costs also had no political traction at all. In 2012 Republicans tried to use HSR to defeat several state legislators in close races, and failed every time. In 2014 we witnessed Neel Kashkari try to make HSR a core issue in his campaign – and he wound up losing by 20 points.
Despite some whining in the state legislature, Sacramento came through with key approvals for releasing the HSR bonds in the summer of 2012 – and in the summer of 2014 delivered billions in cap-and-trade funding to the project. The high cost estimates didn’t dissuade legislators from committing ever more strongly to HSR.
But the higher cost estimates did have their…well…costs. We lost years to fighting NIMBY lawsuits and NIMBY-influenced political battles in Sacramento that unnecessarily delayed the approval of the bonds. And while Republicans in Congress would have opposed California HSR no matter how much it cost, the higher cost estimates helped them justify their opposition.
I don’t believe that the California High Speed Rail Authority was deliberately inaccurate or dishonest in its 2008 projections. The federal government made them change their accounting to year of expenditure, which caused projections to rise due to including 30 years of possible inflation. And once the actual details of how the project would be built and precisely where the tracks would go were known, costs rose further.
That being said, had they proposed a much larger figure than $30 billion in 2008, I don’t think voters would have flinched.
Voters don’t actually pay that close attention to costs of megaprojects. Once you’re above $1 billion or so, few people can really comprehend those sums. It all just becomes numbers. Big numbers with lots of zeroes. To most voters, it doesn’t really matter whether HSR costs $30 billion or $43 billion or $68 billion or $90 billion.
Voters make decisions on visions and ideas, not on facts and figures. Wonks never like to admit this, but it’s true, and everyone who’s studied voter behavior knows it to be true. This is not intended as insulting toward voters at all. Instead they make the same decisions we all do when making a big purchase: “is this something I really want? Is this going to make my life better?” The facts and figures matter, but at the end of the day, those are usually not the deciding factors in any big decision.
Politicians would do well to ignore Willie Brown’s advice. Sell a project on its merits. Be up front about its costs and construction timeline. As most people know, it’s better to underpromise and overdeliver rather than the reverse.
The California High Speed Rail Authority is taking the smart approach, being honest about its expectations and not making extravagant promises they can’t keep. And that honest, open approach is one reason why the project has survived six years of attacks.