oltmannd Sam1 The national government awarded the contract through competitive bidding. It contains strict performance standards that must be met or the contractor must pay a failure to perform penalty. Thus, the operator has an incentive to get it right. Based on my experience, they do a good job of getting it right. As long as it doesn't turn into "what's the least I can do and still get a gold star on my performance standard report." Do more = get more. I'd like to see revenue be the incentive. It makes the game simple. The responsibility for generating ideas for cutting cost and improving revenue will come from the one with most to gain and the floor for the subsidy might be lowered during the next bidding round. If you wanted to bid out the equipment supply piece, then you'd likely have to do the spelled-out performance standards and incentives contract.
Sam1 The national government awarded the contract through competitive bidding. It contains strict performance standards that must be met or the contractor must pay a failure to perform penalty. Thus, the operator has an incentive to get it right. Based on my experience, they do a good job of getting it right.
The national government awarded the contract through competitive bidding. It contains strict performance standards that must be met or the contractor must pay a failure to perform penalty. Thus, the operator has an incentive to get it right. Based on my experience, they do a good job of getting it right.
As long as it doesn't turn into "what's the least I can do and still get a gold star on my performance standard report." Do more = get more.
I'd like to see revenue be the incentive. It makes the game simple. The responsibility for generating ideas for cutting cost and improving revenue will come from the one with most to gain and the floor for the subsidy might be lowered during the next bidding round.
If you wanted to bid out the equipment supply piece, then you'd likely have to do the spelled-out performance standards and incentives contract.
The overseas subsidiary of my employer, where I worked for five years, used market share as a metric to judge its performance. Unfortunately, they lost sight of the cost side of the game, and they lost a lot of money before management figured out that it is the whole accounting equation that is important. The same would happen if the focus was on revenues.
To survive a business must generate sufficient revenues to cover its costs and meet the expectations of its shareholders. If it does not do this over the long run, it goes out of business, unless it can get the government to prop it up.
A successful business model starts with a concept, followed by a robust assessment of the costs to produce the goods and services. Once the costs have been identified, the pricing experts can determine how to price the goods and services.
This may appear to be a rigid model. It is certainly a demanding one. Ask anyone who has been in business. People who cannot hack it turn frequently to a variety of non-economic arguments, i.e. the model is unfair, it fails to consider the broader needs of society, it ignores our national heritages, etc. The pleadings are endless.
Paul Milenkovic Maglev Passenger trains like the Empire Builder could be cost-effective depending on how you define the costs. Does an operator of passenger trains have to pay full costs of track and dispatching? What about big city stations? Or would the operator just staff the cars and determine the routes and schedules? There's the nub of my point of view. Let's level the playing field vis-a-vis cars and planes that get "free" highways and "free" airports. Yes, there is the matter of "free" meaning being supported through mo-gas tax and av-gas tax, and then there is the retort of the high level of cross-subsidization going on and the complaint "if they are going to cross-subsidize within a mode, why can't they cross subsidize across modes and spare some transportation budget for Amtrak. So let's set these concerns aside and say that Amtrak gets the tracks for "free", because outside of the NEC they pretty much do as the track payments are a small part of their total cost structure. So the train gets the tracks and the dispatching for free. And yes, let's throw in the stations, and if people, say, in Wisconsin or Montana want the Empire Builder to stop anyplace in their fine states, how about those states pay to operate all of the stations within their borders. There are such fine points as gate charges and other user fees for airports, but let's just stipulate that they get that part for free. The train gets to pay for everything above the wheel/rail contact patch. That means the costs of all of the onboard crew, insurance, not only the maintenance of locomotives and Superliners but also the mortgage payments on them as well, fuel, yes that too because the point is how high gas costs will drive motorists into wanting to ride the train, everything above the rail. So that's my plan -- the states operate stations if they want the train to stop anywhere within their borders, the Feds spring for the trackage costs, and the trains pay their way for everything above the wheel contact patch. Give or take, this is pretty much the deal that motorists, the bus companies, and the airlines get: do I have any takers for this plan?
Maglev Passenger trains like the Empire Builder could be cost-effective depending on how you define the costs. Does an operator of passenger trains have to pay full costs of track and dispatching? What about big city stations? Or would the operator just staff the cars and determine the routes and schedules?
Passenger trains like the Empire Builder could be cost-effective depending on how you define the costs. Does an operator of passenger trains have to pay full costs of track and dispatching? What about big city stations? Or would the operator just staff the cars and determine the routes and schedules?
There's the nub of my point of view.
Let's level the playing field vis-a-vis cars and planes that get "free" highways and "free" airports. Yes, there is the matter of "free" meaning being supported through mo-gas tax and av-gas tax, and then there is the retort of the high level of cross-subsidization going on and the complaint "if they are going to cross-subsidize within a mode, why can't they cross subsidize across modes and spare some transportation budget for Amtrak. So let's set these concerns aside and say that Amtrak gets the tracks for "free", because outside of the NEC they pretty much do as the track payments are a small part of their total cost structure.
So the train gets the tracks and the dispatching for free. And yes, let's throw in the stations, and if people, say, in Wisconsin or Montana want the Empire Builder to stop anyplace in their fine states, how about those states pay to operate all of the stations within their borders. There are such fine points as gate charges and other user fees for airports, but let's just stipulate that they get that part for free.
The train gets to pay for everything above the wheel/rail contact patch. That means the costs of all of the onboard crew, insurance, not only the maintenance of locomotives and Superliners but also the mortgage payments on them as well, fuel, yes that too because the point is how high gas costs will drive motorists into wanting to ride the train, everything above the rail.
So that's my plan -- the states operate stations if they want the train to stop anywhere within their borders, the Feds spring for the trackage costs, and the trains pay their way for everything above the wheel contact patch. Give or take, this is pretty much the deal that motorists, the bus companies, and the airlines get: do I have any takers for this plan?
Then, does above-the-rail Amtrak give up its "easement" on private sector railroads?
Sam1The overseas subsidiary of my employer, where I worked for five years, used market share as a metric to judge its performance. Unfortunately, they lost sight of the cost side of the game, and they lost a lot of money before management figured out that it is the whole accounting equation that is important. The same would happen if the focus was on revenues.
No, no. Not write some incentive around revenue. Don't write any incentive clauses at all. Just let the operator KEEP ALL the revenue he can collect and absorb all the cost.
The winning bidder gets paid a flat subsidy that should set the floor at roughly break even. His efforts to reduce cost and increase revenue go directly to him - dollar for dollar.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
There are many city pairs which might attract passengers and express business, but they are poorly served by Amtrak. The eastbound leaves Seattle so late that no matter where you're going, it's an overnight ordeal; and the great city of Minneapolis only has one train to Chicago. Local traffic is probably unwelcome anyway on this train...
"Make no little plans; they have no magic to stir men's blood." Daniel Burnham
jclass Then, does above-the-rail Amtrak give up its "easement" on private sector railroads?
The freight railroads get paid whatever fees through whatever contracts out of Federal money to allow passage of passenger trains. One mode is to buy them out as was done at great expense with the NEC. Another arrangement is Amtrak's "easement" where they get trackage rights for cheap, and it could be argued that this constitutes a "taking" from a private concern, but that argument is for another day and another thread. Yet another is the kind of arrangements that Metra has with its host railroads. Don't know what the deal is, but I understand it is less coercive than the Amtrak arrangement.
That's my point. The Feds provide through one mechanism or another the rails, the states chip in the stations, and whatever is above the rails has to be paid through fares. And above the rails includes everything above the rails -- maintenance and interest and amortization of all rolling stock, and yes, the reservation system and advertising. The states can chip in station agents as required to keep stations open.
I am talking a level playing field here. I am curious, however, if there are any takers for this arrangement and whether passenger trains could thrive, or whether my modest proposal would be regarded as a plan to do away with trains.
If GM "killed the electric car", what am I doing standing next to an EV-1, a half a block from the WSOR tracks?
schlimm I rather wonder why folks like sam1 participate in these forums?
I rather wonder why folks like sam1 participate in these forums?
According to Webster's Desk Dictionary and Style Guide, a forum is 1) the public square of an ancient Roman City and 2) an assemble, program, etc. for the discussion of public matters. No where in the definition is there a requirement that the participants hew to the majority view to participate.
Trains have a comprehensive set of rules for its forum participants. They do not require participants to agree with the majority opinions or refrain from iconoclastic views.
Competitive markets remain the best way to allocate scarce economic resources. Left to their own devices, they would not take into consideration many if not most societal values, i.e. environment quality, consumer protection, etc. That's why they require smart, albeit not crushing, regulation.
I began my career with an investor owned electric utility that was a regulated monopoly. It looked like a government agency, walked like a government agency, and talked like one. The waste was unbelievable, because no one had any incentive to do things better, faster, cheaper. Then competition came to the electric utility market in Texas. And the winds of change blew strong. Amongst the first things that they blew out was most of the waste, including thousands of people who could or would not adapt to a competitive environment. This is what competitive markets do.
Free markets are not a panacea. They are just much better than the alternative. And this is true for all forms of commercial transport if the politicians would just take their hands off of it. Fat chance!
Sam1 They do not require participants to agree with the majority opinions or refrain from iconoclastic views.
Thank goodness for that!
Paul Milenkovic I am talking a level playing field here. I am curious, however, if there are any takers for this arrangement and whether passenger trains could thrive, or whether my modest proposal would be regarded as a plan to do away with trains.
For LD trains - no takers.
For corridor trains - it would depend entirely on the market and speed. Faster service is more valuable and fast equipment turns can help keep costs down. Isn't this about how Virgin operates in the UK?
Sam1 I began my career with an investor owned electric utility that was a regulated monopoly. It looked like a government agency, walked like a government agency, and talked like one. The waste was unbelievable, because no one had any incentive to do things better, faster, cheaper. Then competition came to the electric utility market in Texas. And the winds of change blew strong. Amongst the first things that they blew out was most of the waste, including thousands of people who could or would not adapt to a competitive environment. This is what competitive markets do.
Don't know if that is the best analogy to Amtrak or transportation.
Even as regulated monopolies, I don't ever remember electric power companies receiving direct government subsidies. They may have been inefficient, but there was enough demand for electricity at rates that covered costs. That bit about knowing the price of everything and the value of nothing? Consumers knew enough about the value of electricity to be willing to pay a price that covered the costs.
The other thing is that I remember the 1990's as a time of flat electric rates, perhaps declining in inflation-adjusted terms. I remember the 200'0's as a time of vigorous rate increase -- a doubling for me and much more for others. There are people in California paying in excess of 30 cents/kWHr if their usage is any more than a "lifeline level" -- that is if you choose to use your airconditioner in a hot desert climate.
The other thing I remember about deregulation is that I used to get a bill that said X kWHr, Y cents/kWHr, please pay X*Y/100 + Z dollars monthly connection charge. These days I get a monthly statement of daily and kWHr charges, adjustments, surcharges, and rebates broken into so many categories only an accountant could be pleased, and I haven't a clue as to my electric rate from looking at my statement without breaking out a calculator. IEEE Spectrum Magazine trumpted the coming of "retail wheeling", which I guess meant that you would get phone calls in the dinner hour asking you to switch your "transmission company" and your "generation provider." That would make a light bill look like a phone bill, and like a phone bill, you might end up getting a bill from two or three separate companies.
It seems that electric rates are driven more by the world oil market and its spillover on natural gas prices along with the costs of environmental regulations, which will be even more onerous once there are CO2 controls. If giving Homer Simpson a layoff notice has saved any money, I haven't noticed it.
If Amtrak had to compete against other providers, ala Great Southern Railway example in Australia, I believe it would be more efficient. Competition and shareholder expectations tend to drive out inefficiencies. Without these drivers an organization like Amtrak only has to respond to political pressures.
Managing Amtrak must be a nightmare. Management has to answer to the official Board of Directors, which is top heavy with lawyers, and must be a trying exercise. But on top of that it has 536 unofficial directors, to wit: 435 Congressman, 100 Senators, and one President.
As a result of competition in the Texas electric utility industry, with which I am reasonably familiar, the number of employees in our company was reduced from approximately 17,500 to 10,250 during the initial phases of competition. Subsequently, for a variety of other reasons, the workforce was reduced to approximately 8,500 employees, with some of the job duties being outsourced to domestic and foreign suppliers. Equally impressive, the layers of management were reduced from 13 to approximately six.
In Texas fuel is the largest single operating expense for an electric utility. In other parts of the country it may not be. In the Northwest, which generates a significant amount of power from hydro, the cost of labor tends to trump the cost of fuel.
During the initial phase of competition incumbent rates were kept high to encourage other retailers to woo the incumbent's customers. Now, however, the transition period has expired, and rates have been falling. However, they have not fallen as much as expected because the cost reductions referred to above have been offset in part by the run-up in the cost of fossil fuels. When the price of oil escalates, as it did last summer, the price of natural gas and coal tend to follow suit.
Giving Homer Simpson a layoff notice was only part of the significant cost reductions that were implemented by my company due to competitive pressures. We revamped every one of our business processes and saved hundreds of millions of dollars as a result. Had we not implemented these changes, the cost of electric energy would be considerably higher than it is.
oltmannd Sam1The overseas subsidiary of my employer, where I worked for five years, used market share as a metric to judge its performance. Unfortunately, they lost sight of the cost side of the game, and they lost a lot of money before management figured out that it is the whole accounting equation that is important. The same would happen if the focus was on revenues. No, no. Not write some incentive around revenue. Don't write any incentive clauses at all. Just let the operator KEEP ALL the revenue he can collect and absorb all the cost. The winning bidder gets paid a flat subsidy that should set the floor at roughly break even. His efforts to reduce cost and increase revenue go directly to him - dollar for dollar.
Tell a potential contractor that you will write her a check for the difference between potential revenues and her costs, assuming that the costs will not be covered by the revenues, without any profit other than what she can wring out of her costs; she will game the costs. After playing this game for years, we changed our modus operandi.
We entered into strategic alliances with our major contractors. We opened our books to them and in turn they were required to open their books to us. No more game playing.
Once we understood the contractor's costs, we agreed on prices (revenues) that were designed to recover the costs and provide a modest return to the contractor. We agreed on a variety of performance standards, including customer satisfaction metrics, which would enable the contractor to increase his returns if he exceeded them. The contractor could also increase his returns through additional costs savings that he initiated. But the contractor had to share the cost savings with us to help prevent him from cutting corners and allowing quality to suffer.
The process works because it takes most of the gaming out of the contracting processes. And to keep it out, we had a right to audit clause, as did the contractor, to look at her books whenever we wanted and vice versa.
A key to this process is that both sides understand and do not game the cost structure.
A couple of comments here: Based on appearances, it would appear that the airlines are guilty of using market share as a metric. Look at how fares drop when a discounter enters a market, even a discounter like Southwest which usually has more staying power than some other startups. Since this usually boils down to a war of attrition, it will definitely put a sizable dent in the bottom line and it may not run the discounter off.
Regulation is often a response when consumers feel that they are being gouged. Consider the thread a few years back related to Montana wheat rates and similar issues. Also consider the Crows Nest Pass rates, incredibly non-compensatory but there was no political will to adjust them, farmers had more allies than railroaders.
Ultimately, government support is needed for continued success of trains like the Empire Builder. That means a clearly defined transportation policy, but we would also need changes to the current system.
What are the goals of Amtrak? What is its marketing plan? For example, in Vietnam the government goal is 20% of travel by train in 20 years. In order for the United States to achieve anything like that, we would need open access: Amtrak would become the American track system. Then the private operators would come knocking. A couple routes, such as Tennessee and Raton Passes, could be dedicated to passenger only, while one-way operation on other lines would increase capacity.
Here is an example of a goal: reduce I-95 traffic by expanding Auto Train. I thought the Interstates were a defense network. But they are clogged with too much traffic! "Oh, General Washington is stuck in a traffic jam; ask the invaders to wait...!"
I think open access has worked in Britain, but they have a much better developed transportation system. They run double stacks carrying passengers on the freeway! I did not realize until an earlier post how much the bus system has dwindled in the United States.
(Note: I think American Orient Express had a president Mr. Bose. I am not aware that we are related. I also have no connections with CSX, although a Louisville to Florida Auto Train is a persistently popular idea.)
Sam1 Once we understood the contractor's costs, we agreed on prices (revenues) that were designed to recover the costs and provide a modest return to the contractor. We agreed on a variety of performance standards, including customer satisfaction metrics, which would enable the contractor to increase his returns if he exceeded them. The contractor could also increase his returns through additional costs savings that he initiated. But the contractor had to share the cost savings with us to help prevent him from cutting corners and allowing quality to suffer.
You can greatly simplify the process and not need all those messy customer satisfaction metrics, et. al..
It's this simple.
You specify:
-train schedule
-car and locomotive supply agreement (X$ per loco per day and or mile, Y$ per coach per day....)
You ask bidders:
-how much to I have to pay you for you to run the scheduled train on this route?
The only caveat is that the winning bid has to be less that current level of subsidy AND be less than cost to operate "bare bones" sevice, so the bidder does not have incentive to take the money and run away.
Winner gets paid a periodic lump sum. Winner sets fares, collects AND KEEPS all the revenue.
Any cost savings, HE KEEPS.
Any revenue gains thru better service, amenities, advertising, tour packages, etc. HE KEEPS.
If he cuts corners on cost, it kills his revenue and he loses, so he won't do that.
It's just like a regular old, for profit business. Efforts to improve service (and therefore revenue) are rewarded. Efforts to cut costs are rewarded. No messy performance standards and rating systems and schedule of incentives and endless bargaining and hauranging
You win because the bid costs you less than current subsidy level.
Operator wins because he has incentive to improve the margin by working the cost and revenue side of the equation.
You win when the again when it comes time to rebid the service because better practices will have been found and exposed and following rounds of bids should come in lower. Good'ol competition.
I cannot imagine a contractor expecting to earn any money off of the current Amtrak system. The speed, frequency and breadth of service make it a trivial part of our transportation system.
Take Auto Train as an example. One train a day in each direction is not the best use of crew and facilities. I believe this idea could be popular elsewhere (it worked in Canada in 1975 and Britain in 1990). Would a private contractor be allowed to abandon The Empire Builder in favor of a Louisville to Sanford train?
I note that you live some 120+ miles from Houston. This was the home at one time of ENRON. I really hope your utility did not receive benefits either directly or indirectly from that terrible company. Enron engaged in many accounting tricks that soaked the customers especially in California. Fortunally I was in CA during that Jan meltdown and read enough not to get burned on their stock. A lot of their charges and discounts were attributed to competition but when the bubble burst it all came down to greed and Maniupliation of the market..
My point is that a competetive industry with no regulation benefits no one except a "royal" few. Examples: S&Ls,(1970s) Enron, Madoff,(2000s) Stock brokers, Golden Parachutes, Lehman, Bank America, etc. It appears that this country for whatever reason cannot learn its lesson about banks, derevatives, bank holding companies, very slim liquidity margins, quick sales at below market value, hedge funds, insurance underpayments, etc. It appears that one US's political party tries to enable a golden few to line their pockets by not keeping .
oltmannd Sam1 Once we understood the contractor's costs, we agreed on prices (revenues) that were designed to recover the costs and provide a modest return to the contractor. We agreed on a variety of performance standards, including customer satisfaction metrics, which would enable the contractor to increase his returns if he exceeded them. The contractor could also increase his returns through additional costs savings that he initiated. But the contractor had to share the cost savings with us to help prevent him from cutting corners and allowing quality to suffer. You can greatly simplify the process and not need all those messy customer satisfaction metrics, et. al.. It's this simple. You specify: -train schedule -car and locomotive supply agreement (X$ per loco per day and or mile, Y$ per coach per day....) You ask bidders: -how much to I have to pay you for you to run the scheduled train on this route? The only caveat is that the winning bid has to be less that current level of subsidy AND be less than cost to operate "bare bones" sevice, so the bidder does not have incentive to take the money and run away. Winner gets paid a periodic lump sum. Winner sets fares, collects AND KEEPS all the revenue. Any cost savings, HE KEEPS. Any revenue gains thru better service, amenities, advertising, tour packages, etc. HE KEEPS. If he cuts corners on cost, it kills his revenue and he loses, so he won't do that. It's just like a regular old, for profit business. Efforts to improve service (and therefore revenue) are rewarded. Efforts to cut costs are rewarded. No messy performance standards and rating systems and schedule of incentives and endless bargaining and hauranging You win because the bid costs you less than current subsidy level. Operator wins because he has incentive to improve the margin by working the cost and revenue side of the equation. You win when the again when it comes time to rebid the service because better practices will have been found and exposed and following rounds of bids should come in lower. Good'ol competition.
We restructured our procurement and contracting processes on advice from Booze, Allen, and Hamilton, McKinsey & Company, and Planmetrics. It produced the results that we wanted. I am sticking with their advice, backed by 15 years of successful contract administration.
Our experience taught us severable valuable lessons. One, the process is not as simple as you imply, especially for complex projects. Two, you can outsource everything (contracting is outsourcing) except management. Three, if the other guy can do it cheaper than you can, you need to ask why you cannot do it as cheaply. There are many good answers to this point, but since this is not a forum on contract administration, I think it is time to end it.
blue streak 1 Sam1 I began my career with an investor owned electric utility that was a regulated monopoly. It looked like a government agency, walked like a government agency, and talked like one. The waste was unbelievable, because no one had any incentive to do things better, faster, cheaper. Then competition came to the electric utility market in Texas. And the winds of change blew strong. Amongst the first things that they blew out was most of the waste, including thousands of people who could or would not adapt to a competitive environment. This is what competitive markets do. Sam1::: I note that you live some 120+ miles from Houston. This was the home at one time of ENRON. I really hope your utility did not receive benefits either directly or indirectly from that terrible company. Enron engaged in many accounting tricks that soaked the customers especially in California. Fortunally I was in CA during that Jan meltdown and read enough not to get burned on their stock. A lot of their charges and discounts were attributed to competition but when the bubble burst it all came down to greed and Maniupliation of the market.. My point is that a competetive industry with no regulation benefits no one except a "royal" few. Examples: S&Ls,(1970s) Enron, Madoff,(2000s) Stock brokers, Golden Parachutes, Lehman, Bank America, etc. It appears that this country for whatever reason cannot learn its lesson about banks, derevatives, bank holding companies, very slim liquidity margins, quick sales at below market value, hedge funds, insurance underpayments, etc. It appears that one US's political party tries to enable a golden few to line their pockets by not keeping .
Sam1:::
Enron was not a utility. It was a wholesale power broker. Its management operated outside the law and was caught. The responsible executives paid a stiff price for their malfeasance, as did many innocent victims, e.g. employees, buyers, suppliers, etc.
Market based capitalism has produced it fair share of bad actors. Unfortunately, these are the guys and gals that get the headlines.
The current economic dust-up was brought on by 10 to 15 bad actors the Fortune 500, i.e. four major banks, AIG, two car companies, two government sponsored agencies, and a couple of investment bank, as well as several others that don't come to mind. This leaves approximately 485 firms in the Fortune 500, not to mention tens of thousands of others, that have played by the rules.
Ironically, those who point out the flaws in the competitive market system, at least on these forums, are writing their thoughts on computers that were designed and brought to market by some of the best corporate examples our system has to offer. Do you really believe that these products would have surfaced in a tightly controlled non-competitive market? They never seem to get mentioned.
As I have noted consistently, the key to a level playing field, whether is for passenger railroads or any other economic entity, is smart but not crushing regulation.
Deep down where they live, I suspect, many of Amtrak's apologists, as well as supporters of passenger rail projects that have little probability of covering their costs (high speed rail), know that they could not compete in the market place. This is why they seem to take delight in digging out the bad actors, which make up a minority of the players, and ignore those who do the right thing. Or find 101 reasons why passenger trains are not and should not be subject to market forces.
Long-distance trains such as the Empire Builder need to be preserved for the following reasons:
--to preserve rights-of-way and stations for possible future need;
--for educational utility and historical continuity;
--and because it does serve some transportation need not supplied by autos, planes, buses, or ships.
In another thread, I have tried to argue that a core national passenger network was necessary for civil and military defense, but the idea wasn't supported by anyone. I honestly sense our freedom of transportation is threatened now.
By maui_67photos, shot with Canon EOS DIGITAL REBEL XT at 2009-06-25
SAM1::::Enron was not a utility. It was a wholesale power broker. Its management operated outside the law and was caught. The responsible executives paid a stiff price for their malfeasance, as did many innocent victims, e.g. employees, buyers, suppliers, etc.
My memory is somewhatr fuzzy on this:
Agreeded -- But by their very power brokering the caused certain generating plants to go off line and had other long distant plants take up the slack at an excess charge with Enron getting a healthy cut.?? My question is "did your utility ever benefit directly or indirectly from these "tricks"?. Of course you may not have been in that end of the accounting stream. Also did any of your executives ever get charged in any of Enron's schemes?
SAM1:::::Ironically, those who point out the flaws in the competitive market system, at least on these forums, are writing their thoughts on computers that were designed and brought to market by some of the best corporate examples our system has to offer. Do you really believe that these products would have surfaced in a tightly controlled non-competitive market? They never seem to get mentioned.
I/ll agree that Steve Jobs and Bill Gates did an excellent job of developing computers but even their companys are now getting the once over (EU fine)
SAM1:::::As I have noted consistently, the key to a level playing field, whether is for passenger railroads or any other economic entity, is smart but not crushing regulation.
Agreeded but how do you define a level playing field?. My main concern is that we (the US) does not put all its marbles in one basket. I feel that is going on too much as present whether it be GPS, Automobiles, petroleum energy, one source for anything, etc..
blue streak 1 SAM1::::Enron was not a utility. It was a wholesale power broker. Its management operated outside the law and was caught. The responsible executives paid a stiff price for their malfeasance, as did many innocent victims, e.g. employees, buyers, suppliers, etc. My memory is somewhatr fuzzy on this: Agreeded -- But by their very power brokering the caused certain generating plants to go off line and had other long distant plants take up the slack at an excess charge with Enron getting a healthy cut.?? My question is "did your utility ever benefit directly or indirectly from these "tricks"?. Of course you may not have been in that end of the accounting stream. Also did any of your executives ever get charged in any of Enron's schemes? SAM1:::::Ironically, those who point out the flaws in the competitive market system, at least on these forums, are writing their thoughts on computers that were designed and brought to market by some of the best corporate examples our system has to offer. Do you really believe that these products would have surfaced in a tightly controlled non-competitive market? They never seem to get mentioned. I/ll agree that Steve Jobs and Bill Gates did an excellent job of developing computers but even their companys are now getting the once over (EU fine) SAM1:::::As I have noted consistently, the key to a level playing field, whether is for passenger railroads or any other economic entity, is smart but not crushing regulation. Agreeded but how do you define a level playing field?. My main concern is that we (the US) does not put all its marbles in one basket. I feel that is going on too much as present whether it be GPS, Automobiles, petroleum energy, one source for anything, etc..
The company I worked for did not have any inappropriate dealings with Enron. Neither did most other electric utilities. And to the best of my remembrance, the California utilities that were fleeced by Enron did not knowingly participate in any wrong doing.
I favor retaining or adding passenger rail to our transport mix where it makes sense. From my perspective that means relatively short, high density corridors. It should be able to cover its operating expenses and contribute to the capital costs ala the NEC.
Ideally, all forms of transport would be required to pay their share of the facilities cost at the pump or ticket counter. And all forms would be required to cover the tab without any subsidies. Unfortunately, given the political nature of transport in the U.S., it is not likely to happen.
I see no economic or social justification for long distance trains. Some argue that the Empire Builder, for example, is part of our national heritage. Following this line of argument, the Butterfield Stage Coach lines and the Pony Express should be put back in service. Surely someone thinks that they are national heritages. Well, at least Hollywood did when I was a kid.
Maglev:
I agree; a sound ground transportation system (including speedy passenger rail) is essential for a strong nation. It is not just a heritage luxury belonging only in Hollywood. Why is China, a large country not like Europe or Japan in distances, but more like the USA, building an advanced network all over the land at a considerable infrastructure cost?
Sam1:
I guess I have failed to make clear my underlying point. It is simply that there actually are efficient mechanisms of resource allocation besides the free market, smartly regulated or totally unregulated. Sometimes the marketplace may not be the most appropriate choice in certain theaters. I'm only saying, therefore, that we cannot look at this with the unchallenged assumption that "one size fits all." In any case, the trend in the USA and elsewhere over the past 30-40 years has been a gradual erosion of regulatory safeguards, new instruments beyond the existing regulations, etc. that have led to an almost total current breakdown. For example, how successful in the end has deregulation of the airlines been? Many are nearly insolvent, service is getting worse and worse. There was a period of great prosperity for them, but no more.
C&NW, CA&E, MILW, CGW and IC fan
schlimmWhy is China, a large country not like Europe or Japan in distances, but more like the USA, building an advanced network all over the land at a considerable infrastructure cost?
I'll hazard a guess or two. They have the 3X the populaton of the US. They don't have automobile - based suburban sprawl. So, China looks more like Europe in terms of populaton density and concentration. Trains make more sense than highways because the population doesn't already own automobiles to go the first and last miles.
schlimm For example, how successful in the end has deregulation of the airlines been?
Bad for the legacy carriers. Good for consumers. Everybody flies now, not just businessmen and upper middle class vacationers. The cost to start up an airline is so ridiculously low and start ups aren't budened with large pension costs. So startups can eat the legacy carrier's lunch - at least until they are no longer a start-up and some new start-up comes along and eats their lunch. Deregulation plus not having to own any of the equipment or infrastructure makes this so. Everything is pay as you go.
The lousy service comes from how the patrons value the service. More room and better service reliability can be had at a cost (more planes, better staffing, more spacious seating, even an airline going and building their own terminal). If people were willing to pay the extra cost for this, we'd have it. But people who fly value trip time and cost most. Trip time doesn't (and can't) vary much airline to airline, so the big variable is cost.
I'd say the market is working pretty well for consumers. The market space set up by the government by what services they provide and the mechanism they provide for paying for them plus the constraints of labor laws, etc. causes the working business model to be one of continued cycles of start-ups.
There really are no level playing fields anywhere, nor any such thing as a "free market". There are only spaces bounded by and conformed to regulation, law and custom within which "free market forces" act. They can be small, large, have hard or soft edges, be tilted, irregularly shaped, lumpy and can change in the middle of the game. But, they are never dead-flat-level and unbounded.
The biggest trouble comes when playing field is so badly contructed that the market forces cause badly skewed results.
A contract operator of a transit agency would be an example. He only has control of the cost side of the equation. Revenues are fixed. The only remedy is to layer on a whole bunch of incentives based on performance measures. No free market forces here - just a very strictly defined set of targeted forces trying to emulate a free market. The construction, maintenance and subsequent negotiations over the performance measures add a layer of "no value added" work to the whole process. (I better watch my step here. This is what I do for a living!) This guy will do the bare minimum to fulfill his contract and cherry pick the performance payments he thinks he can get. He'll also try to "manage the measures" and question the data since this is usually easier than really doing something.
Another example is Amtrak. The forces that act on them cause them to concentrate on getting their subsidy each year. Cutting cost is a zero sum game - it just means less subsidy. So is improving revenue. Customer satisfaction is only required to keep the noise level of complaints to congress down.
Sam1This leaves approximately 485 firms in the Fortune 500, not to mention tens of thousands of others, that have played by the rules.
We hope. Maybe a bunch of them haven't been caught.
Sam1 Deep down where they live, I suspect, many of Amtrak's apologists, as well as supporters of passenger rail projects that have little probability of covering their costs (high speed rail), know that they could not compete in the market place. This is why they seem to take delight in digging out the bad actors, which make up a minority of the players, and ignore those who do the right thing. Or find 101 reasons why passenger trains are not and should not be subject to market forces.
I think you are pretty much on target, here. Although Amtrak sure doesn't seem to act like they know they are in a market place -- or the market place they operate in has little to do with moving passengers. They seem dead on their feet and the only time they change is when they are shoved into it.
oltmannd schlimmWhy is China, a large country not like Europe or Japan in distances, but more like the USA, building an advanced network all over the land at a considerable infrastructure cost? I'll hazard a guess or two. They have the 3X the populaton of the US. They don't have automobile - based suburban sprawl. So, China looks more like Europe in terms of populaton density and concentration. Trains make more sense than highways because the population doesn't already own automobiles to go the first and last miles. schlimm For example, how successful in the end has deregulation of the airlines been? Bad for the legacy carriers. Good for consumers. Everybody flies now, not just businessmen and upper middle class vacationers. The cost to start up an airline is so ridiculously low and start ups aren't budened with large pension costs. So startups can eat the legacy carrier's lunch - at least until they are no longer a start-up and some new start-up comes along and eats their lunch. Deregulation plus not having to own any of the equipment or infrastructure makes this so. Everything is pay as you go. The lousy service comes from how the patrons value the service. More room and better service reliability can be had at a cost (more planes, better staffing, more spacious seating, even an airline going and building their own terminal). If people were willing to pay the extra cost for this, we'd have it. But people who fly value trip time and cost most. Trip time doesn't (and can't) vary much airline to airline, so the big variable is cost. I'd say the market is working pretty well for consumers. The market space set up by the government by what services they provide and the mechanism they provide for paying for them plus the constraints of labor laws, etc. causes the working business model to be one of continued cycles of start-ups. There really are no level playing fields anywhere, nor any such thing as a "free market". There are only spaces bounded by and conformed to regulation, law and custom within which "free market forces" act. They can be small, large, have hard or soft edges, be tilted, irregularly shaped, lumpy and can change in the middle of the game. But, they are never dead-flat-level and unbounded. The biggest trouble comes when playing field is so badly contructed that the market forces cause badly skewed results. A contract operator of a transit agency would be an example. He only has control of the cost side of the equation. Revenues are fixed. The only remedy is to layer on a whole bunch of incentives based on performance measures. No free market forces here - just a very strictly defined set of targeted forces trying to emulate a free market. The construction, maintenance and subsequent negotiations over the performance measures add a layer of "no value added" work to the whole process. (I better watch my step here. This is what I do for a living!) This guy will do the bare minimum to fulfill his contract and cherry pick the performance payments he thinks he can get. He'll also try to "manage the measures" and question the data since this is usually easier than really doing something. Another example is Amtrak. The forces that act on them cause them to concentrate on getting their subsidy each year. Cutting cost is a zero sum game - it just means less subsidy. So is improving revenue. Customer satisfaction is only required to keep the noise level of complaints to congress down.
Excellent summation! Thank you.
I'd like to add that reports show Chinese auto sales are strong.
http://news.xinhuanet.com/english/2009-05/08/content_11338765.htm
http://www.chinacartimes.com/2008/04/08/how-many-drivers-in-china/
You want to see traffic jams, try Beijing, Shanghai or almost any other Chinese city. Lots of folks have cars now and all in the last 15 years. But they are building or have completed several high speed lines where none existed plus much subway construction. It is really something to hear all this chest-thumping about how everything here is so great and we can't or shouldn't do anything to change that when in many areas of infrastructure, we are beginning to look like some underdeveloped country in the 3rd world. The USA has many things to feel proud of. But that doesn't mean we need to retreat to a defensive jingoistic narcissism where we are unable to "borrow" foreign concepts. "Welcome to Lake Wobegone, where everything is above average!!"
How about those of us who won't fly. There is no way I will give any of the lousy and unsafe airlines any of my money. Service is very poor to say the least. I don't care to be strip searched and my suitcase dumped out on the floor. If I have a ticket for a certain date and time I expect to go on that plane not another when the airline gets around to it.
As for subsidies all airports are owned and operated by a taxing district of some kind. Portland Oregon Airport is owned by the Port of Portland which collects taxes from the residents of Portland for operating the airport. The air traffic control system is tax supported and is operated by the FAA that gets it's money from the Federal income tax. IMHO the airlines are very poorly operated and should be shut down tomorrow.
The railroads get no federal money and pay taxes. When the track needs repair the railroad companies pay for it. When a runway at a airport needs repair the taxpayers pay for it. The airlines should own and operate the airports at the airlines expense.
I'm not afraid to fly I just don't care for the hassle and lousy service.
The previous photo, and that below, are from the 100th Anniversary of Rosario celebration on June 21, 2009. I am not sure what railroad was preferred by Robert Moran for travel East from Seattle, but he understood how industry must be of service to our nation, and vice-versa. The plaque below refers to his yacht SanWan, which he built at Rosario; it is on the fireplace of Moran's final cottage and is rarely seen. Rosario is open daily to the public.
By maui_67photos, shot with Canon EOS DIGITAL REBEL XT at 2009-06-26
Mr. SP How about those of us who won't fly. There is no way I will give any of the lousy and unsafe airlines any of my money. Service is very poor to say the least. I don't care to be strip searched and my suitcase dumped out on the floor. If I have a ticket for a certain date and time I expect to go on that plane not another when the airline gets around to it. As for subsidies all airports are owned and operated by a taxing district of some kind. Portland Oregon Airport is owned by the Port of Portland which collects taxes from the residents of Portland for operating the airport. The air traffic control system is tax supported and is operated by the FAA that gets it's money from the Federal income tax. IMHO the airlines are very poorly operated and should be shut down tomorrow. The railroads get no federal money and pay taxes. When the track needs repair the railroad companies pay for it. When a runway at a airport needs repair the taxpayers pay for it. The airlines should own and operate the airports at the airlines expense. I'm not afraid to fly I just don't care for the hassle and lousy service.
Unfortunately for you, that puts you in a small and shrinking minority. The security hassle is not so much the fault of the airlines as the fact that the citizenry of the United States expects perfect security and is apparently willing to put up with a lot of indignities to assume that they're getting it. As far as service is concerned, I find it adequate.
Our community is FREE to join. To participate you must either login or register for an account.