Stanford management professor predicts high-speed rail will lose money

Stanford University economist Alain Enthoven has made a career of fighting wasteful spending in the public and private sectors. Recently, he published a report lining out the financial ramifications of the high-speed rail project, concluding that it will most likely never be profitable.
Professor Emeritus at Stanford, Alain Enthoven has been an advocate for fiscal reform since the 1950s. (Photo: Doug Ray)

Entering Alain Enthoven’s office can be a disorienting experience. His walls are adorned with an eclectic mix of mementos: A photograph of John F. Kennedy awarding him a medal for distinguished federal civilian service hangs next to a Nepalese flag he collected in the Himalayas. Piled on his desk is a seemingly chaotic mélange of economics papers, books and reports, often more than a foot thick.

“I wish I could read faster,” said the smiling octogenarian, whose subdued demeanor masks an intense passion for public policy research.

Enthoven, an emeritus professor of public and private management at Stanford University, is more than half a century removed from his first job at Santa Monica’s RAND Corporation. Yet he still maintains a high profile among peers and associates; his focus the past three decades has been on healthcare policy.

In Enthoven’s long career in the private and public sectors, he has often been an outspoken advocate for what he believes to be more sensible fiscal policies. He began that fight five decades ago, at the age of 30, when he was appointed deputy comptroller of the Department of Defense under then-President Kennedy.

Now, he’s taken on a contentious issue much closer to his Atherton home: the economics of high-speed rail.

In a recent report titled “The Financial Risks of California’s Proposed High-Speed Rail”  — co-authored by William Grindley, a former analyst at the World Bank, and local finance consultant William Warren — he advances a case for why the project authorized by state voters most likely will never be able to turn a profit. The report has garnered both praise and criticism from across California, where he has lived since 1969.

The proposed high-speed rail line is planned to connect San Francisco and Los Angeles in less than two and a half hours. Much of the opposition has come from the San Francisco Peninsula region.

With California facing financial problems, it seemed odd to Enthoven that the state would want to spend taxpayer money building a transit apparatus that he believes will never live up to the potential ridership statistics published by the High Speed Rail Authority. He cited research by the Congressional Report Service that concluded: “With two possible exceptions, every high-speed rail line in the world has been a money loser.” (The two examples were the Paris-to-Lyon line in France and the Osaka-to-Tokyo line in Japan.)

Enthoven said he was initially motivated to study the project’s finances “because I could see it was just going to devastate our Peninsula communities.”

Noting his home address, supporters of high-speed rail have dismissed Enthoven’s report as a selfish effort. “He says quite openly he is a homeowner near the tracks and he’s worried about his property value, so I think that needs to be kept in mind when assessing that report,” said Robert Cruickshank, chairman of Californians for High Speed Rail.

“[This report] doesn’t break any new ground, and it doesn’t provide any real evidence that suggests the project costs are unsustainable,” Cruickshank said.

Adorning his wall are mementoes from Enthoven's long career in education and public service. (Photo: Doug Ray)

Enthoven countered: “I anticipate that at some point I will be testifying before some entity, and the first question would be, ‘Well, what do you know about trains? Have you been an expert on trains?’ And I would reply, ‘I’m the little boy who says the emperor has no clothes, except I have a Ph.D. in economics and I was Deputy Comptroller, then Assistant Secretary of Defense. I’ve got a certain amount of experience at this.’”

“We have 70 prominent local business leaders around here who read our report and said, ‘this is right; I endorse it.’ We could get a lot more,” he added.

Enthoven is an alumnus of Stanford, Oxford and MIT. After serving in the Defense Department during the Kennedy administration, he was promoted to Assistant Secretary of Defense for Systems Analysis by President Lyndon Johnson. More recently, he has made his name as a respected healthcare economist. “Health spending is doing huge damage to our economy and society,” he said. “It’s wrecking public finances from my little town of Atherton to the federal government of the United States.”

With his wife of 54 years, Rosemary, he has six children and seventeen grandchildren. He and his wife still enjoy the outdoors and are avid skiers. He has made numerous trips to pursue his passion for adventure, from Wyoming to Nepal. “We didn’t climb Mount Everest, but we got up to the base camp area,” he said.

It is unclear whether Enthoven’s report will slow down or alter the proposed high-speed rail project as currently proposed, but that doesn’t deter him. “I’ve never been scared away,” he said, “from fighting long odds.”

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12 Comments

  1. says: TheTruth

    A Nimby is a Nimby..PHD or not. Truth is this person lives near the Caltrain tracks..besides I dont want any 70year old deciding how things will be 30 years after their dead

  2. says: What about roads!!

    Funny how no one expects roads to make a profit!! Roads are heavily subsidized along with the airlines (airports, fuel, etc.) Every high speed rail in the world, even the not so true Acela on the east coast, more than covers it’s operating costs and is paying back the initial construction investment with the profit being made. ROADS LOOSE MONEY!!

    Just because the author is a professor, doesnt automatically make him correct. He is an aging baby-boomer who only cares about the status quo, making him adament to chage.

  3. says: John mcnary

    “I was important five decades ago, and I have a doctorate” ??? Those are your credentials. Sorry, doctor. You a a NIMBY of the worst sort. You place your parochial self-interest over that of the public need. Pathetic.

    I hope they build an 8-lane freeway down Alma Street some day…. I have a doctorate and I Am important too. So there.

  4. says: Scott

    Facts are facts. Good for CA or not, I highly doubt it will ever get to the point of self-sustainability. As far as his age, what does that have to do with anything? With your logic, none of us should have any say on any issue that will persist past our expected lifespan. Lets leave the tackling of global climate change to kindergartners, shall we?

  5. says: Danielle

    Enthoven is obviously biased. High speed rail is a great thing for California and the world’s future. Oil-burning cars and planes are not. Great to see the trains going ahead.

  6. says: poncho

    Ph.D’s in economics are the cheapest people on earth, all they care about is what is the absolute cheapest. Its people like this guy who have determined that a company could make a little more money shipping jobs and production overseas. Yeah HSR may not make money, our roads dont either, thats ok these are public goods that benefit the larger economy and real estate market. HSR will unite Southern California and Northern California, the coast and the valley into a single economic powerhouse.

  7. says: Blake Carrington

    High Speed Rail is a disaster. You don’t need a PhD to understand basic math.

    First, ridership numbers. They say between 88 million and 117 million passengers a year. That’s between 10,000 and 13,300 passengers PER HOUR, 24/7. Who believes that? Anyone.

    Second, cost. This is projected to be one of the cheapest high speed rail projects in history. I would have thought the Chinese (cheap land, cheap labor) would have owned this. But Caltrans thinks they can bring it in on time and on budget. The bay bridge is $5 billion over it’s $1B budget. Who thinks they’ll come in at only twice the budget?

    Finally, the “green” argument. This simply won’t make people drive less. How much driving that you do is between LA and SF? If you want to protect the environment, raise the tax on gas. Or expand commuter rail.

    California needs critical investment. Our schools and levies are falling apart.

    This program does nothing but weaken our state and drain us of cash. I live nowhere near a railroad, and I can see that plain as day.

  8. says: Truth To Blake

    First, you sould really think about your math. The total daily ridership you pointed out is nothing. BART has 300,000+ daily riders!! And that is just the bay area, not the state!! Which, if you do some math, comes out to over 100,000,000 riders a year. Again, that is just the bay area. So the ridership numbers are not far fetched for HSR.

    Second, just because the Bay Bridge is way over budget, does not mean the high speed rail system will. The recently completed subway lines in Los Angeles came under budget.

    You statement on green is completely illogical. High speed rail is not meant to replace cars or plains. It is there as another alternative, which runs on electricity. Cars and plains use petroleum. Electricity can be produced many different ways and leaves production option only as far as the imagination can think of ways to make power.

    You are right, California does need critical investment. The project will create 150,000+ construction jobs at a time when the state is scratching and clawing to lower the unemployment rate.

    Apparently you cannot see things “plain as day” as you said.

  9. says: Daniel Bartsch

    Train projects consume large amounts of cement, and steel to build, and the production of Portland cement and steel are large global producers of carbon dioxide release. Estimates for cement range approximately from five to ten percent of global carbon dioxide release. Steel requires a big pile of coal to make one ton of steel. The public structures around the tracks will be steel reinforced concrete. Moving earth is a source of diesel fuel smoke particulates, and causes permanent and ongoing heart and lung damage for life, during and after exposure. Noise, even if not noticed at the time, is now medically proven to raises blood pressure, and damage the cardiovascular system.

    Smart electric cars, that electronically form aerodynamic “trains:” using GPS and other navigation, on already existing freeway surfaces, are the future of high speed tech, transportation. No deficit spending required.

    The future of work is already here, with telecommuting, and computer communications. The ridership will be too low, and the rider projections are based on old models of how our economy works. The system will be obsolete if built.

    This project will have cost over runs, and at the same time will compete with airlines, and the next thing there will be an outcry to bail out the airlines. One boondoggle leads to an imbalance, and the next fiscal emergency. Supporters of more trains, please read the long history of train projects. Trains have their place at times, but the history is full of overbuilt situations, that caused serious financial troubles for states, taxpayers, investors, and central governments.

    I built my own electric vehicle, so please do not call me a NIMBY, as I am walking my talk.

    Regarding the previous posts, with accusations of NIMBY. I ask. Are native peoples who are impacted by road incursions into their lands called NIMBY’s? No. So it appears that there is a double standard on residential civil rights, and civil discourse.

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