Thursday, August 1, 2019

Zachary Liscow and Leah Brooks on Cost of Highway Construction

building detail

A paper co-written by Associate Professor of Law Zachary Liscow ’15 suggests why Interstate highway construction costs have tripled over time, and the reasons have quickly drawn the attention of observers who follow infrastructure. 

The paper “Infrastructure Costs” was co-written with economist Leah Brooks of George Washington University. In the paper, Liscow and Brooks analyze data from the Federal Highway Administration and find that one mile of Interstate highway construction in the 1980s costs three times what it did in the 1960s, adjusted for inflation.

There are two main reasons, the authors conclude. First is the combination of rising incomes and higher house prices. “A richer population may demand more highways, no matter the cost,” according to a Brookings Institute summary.

The second explanation is what Liscow and Brooks call citizen voice — a combination of legislative and judicial changes, as well as environmental and homeowner-led movements — that increased the ability of citizens to directly affect government decision making. As a result, environmental reviews required in later years have added time to planning and construction processes. These reviews may result in highways taking more costly routes, for example.

Liscow and Brooks rule out widely held theories for rising costs such as increases in materials and labor prices.  Liscow and Brooks found that construction labor costs (construction worker wages) have not increased since the 1970s.

The paper has already attracted responses, including an opinion piece in Bloomberg that deems rising highway construction costs a major threat to the U.S. economy and a report in The Week, which called the paper “a good start in bettering our understanding of infrastructure investment over time.”

“The U.S. spends hundreds of billions of dollars a year on infrastructure, and economists think that infrastructure is a key determinant in economic growth,” Liscow said. “But we don’t know many basic facts about what determines the cost of building infrastructure in the U.S. We hope that this project will help point the way toward better understanding some of those cost determinants, so that policymakers are better informed about what factors drive costs.”