Originally posted on Quora March 2, 2022
The basic economic principle of returns to scale eludes the vast majority of Americans on both sides of the aisle when it comes to the production of infrastructure and public services.
Because our population is spread thinner over larger areas of land necessitating more vehicle traffic and higher per capita maintenance costs. European cities were built around foot traffic while American cities were built around vehicle traffic. The US has more kilometers of road than the entire EU combined while not only having 120 million less people but also a fraction of the population density of the EU, which has an average of 3.5x the population density of the US, and more cars. The US has an average of 22 km of road per 1,000 people while the EU has only 10 km of road per 1,000. It’s not just roads, any per capita infrastructure costs rise with higher length and lower population density. This is just returns to scale principle applied to public sector goods: the same product can be produced at lower costs if the cost of production is spread over more units of production. This is why big companies have a cost advantage over smaller companies and big cities have a cost advantage over small towns. That’s why rural areas receive 37% of federal highway funds but only have 19% of the population. Our suburbs too would not exist without massive federal subsidies for transportation and housing. So we want more expensive infrastructure but we don’t want to pay full price for it hence why according to the ASCE we have some 5 trillion in future maintenance costs. States also tend to spend more money building new roads than repairing old ones. Just recently, my state decided to drop a cool $50 million on a 20 mile 4 lane highway connecting two rural towns with maybe 15,000 people combined even though most of the roads look like they belong in third world countries. There’s a lot of graft in infrastructure that adds to its price tag.