January 21st, 2010

RRR

Railroads, revisited, or redux, or reanimated, or whatever.

I've been continuing to read _Railroads & American Law_, particularly now that I'm finally done with _Getting There_ (I'm sure you can find a joke in that). I'm about 80 pages in. It isn't that the book is bad, poorly written, or anything like that. It doesn't have a lot of narrative thrust, but it isn't boring. No, the problem lies in me, the reader, and it has at least two major components to it, which are themselves related.

The first problem is simple: I keep running across little bits of information that make me want to tear my hair out. Early rail charters, for example, often had a clause saying that railroads were a public highway, a common carrier, so anyone could use them. And the government got to use them for free. While you might think the details of the phrasing would matter, since the whole thing went to court repeatedly anyway (surprise), and the justices decided that the charters didn't mean what they clearly meant (further, surprise. Not.), the precise language is not particularly material. After a bunch of wrangling, litigation and legislation, for a while at least the decision was to give the government what was effectively a 50% off coupon. Then, inevitably, the government proceeded to argue about whether they could apply their 50% off coupon to already reduced rates, or if it only applied to the "regular" rate.

Yeah. You read that right. Our government, the idiot with the coupon arguing with the underpaid clerk at the checkout counter. It's hard to get past this image. Well, at least it is for me. Particularly since they were still arguing about this when the government was the single largest shipper in the country.

And lest you think this got resolved in some sort of expeditious way, the arguments started shortly after the Civil War and it didn't end completely until 1940. That is a long time.

The second problem is that I keep finding parallels between why people wanted to regulate railroads, and how that all worked out, and our current desire to regulate/reform the [mumble] health [mumble] industry. I'm not even going to get into that here. Instead, I'm going to take a tangent off into the realm of public/private partnerships. This _is not_ slowing me down in reading -- it's one of the main things keeping me going.

For a while now, there's been an idea floating around that government is expensive, private enterprise is efficient, and if the government hired private enterprise to do what the government needs to accomplish, it'll be good for government (cheaper) and good for business (make money). This is not a new idea; it was the motivating principle for chartering railroads. I don't know exactly when I really realized this, but several of the books I've read keep coming back to this, and it isn't just libertarian/Republican/whatever bias on the part of the authors (well, it might be, but they have some compelling documentary evidence from the right time periods). Ely mentions some sidelights on this that are, honestly, a little shocking. Many of those early charters included an option for the government (usually the state, not the federal) to _buy the railroad after it was built_ for cost plus 10% or thereabouts. When governments chartered railroads, they really thought they were hiring someone to build something for the community, and they were retaining the right to take it over entirely. No one ever actually exercised this right, because when New Hampshire asked for an opinion on this (why am I not surprised), the justice said, uh, no, at this point, it is exercising eminent domain and you have to pay market price.

Returning to our idiot at the checkout with the 50% off coupon, railroads were envisioned at the beginning as roads made of metal. They weren't envisioned as track + rolling stock + whatever managed the rolling stock to keep bad things from happening. This is hardly surprising: while there was some awful traffic back in the mid 19th century, it was managed by the individual carters and teamsters. The legislators probably figured the same thing would work out on railroads, not really taking into consideration that while it isn't easy to pass an oxcart while driving a coach and four on a rutted country road, it's really damn hard for one train to pass another on a single track. I don't care what the gauge is. When those charters said, and the government can use it for free, the legislators had in mind that the government would be running its own cars and just wouldn't have to pay toll. The legislation and charters also made provision for tolls booths along the tracks, which just goes to show how far they were taking this analogy.

Summing up: the government thought they were hiring someone to build them a highway that anyone could use with their own equipment, just like any other road. They figured it was reasonable to expect to be able to buy that highway from the builders for cost + 10% a decade or so down the road; after all, the builders had been collecting tolls all along. Who knows what early railroaders were thinking -- it turns out that railroads have always attracted wacky people with wackier dreams and they probably always will. In any event, what the world got were special-use paths that either didn't get finished or gained dramatically in value while simultaneously increasing everyone's economic dependence upon them.

That idiot at the checkout counter is now starting to seem a little more sympathetic. Turns out that idiot paid _a lot_ for that coupon. While it would be tough to prove fraud, one nevertheless can sense that when the idiot bought the coupon, they were expecting something very, very different.

In fact, given how that whole coupon thing worked out, I'm starting to understand why a whole series of presidents and a lot of very shark-like bureaucrats were in such a hurry to build "free" roads, using eminent domain and public funds to buy the land for them (thus taking tax-revenue-enhancing land and turning it into a tax-black-hole). They probably overpaid, but at least this time they got exactly what they wanted: a public highway that anyone could use with their own equipment, no management, no dispatch. You can even get a glimmer of why they decided to eliminate tolls while they were at it.

Dude's still a moron. But you can almost see what they must have been thinking at the time.

how DVC is like cars and roads

A while back, I posted numerous times about DVC, Disney Vacation Club, which is sort of a timeshare altho not really. I was attempting to figure out why anyone would buy into it, and whether it made any sense at all. Essentially, the argument for DVC is that if you are going to pay godawful amounts of money to stay on property every (other) year, you may be able to save some interesting fraction of that amount by buying "points" and paying dues every year. The argument against DVC is that the math does not work out if you don't go at least every (other) year (and honestly, the other is kinda dodgy), and it's insanely cheaper to stay off property. You really don't save any meaningful amount of money if you finance the points; it's a huge hassle to rent unused points; and you are committing to spending a chunk of your precious vacation time in one place for decades to come. About the best news out of the whole thing is that there is a resale market.

Once upon a time, if you wanted to go somewhere, you got there via muscle power: your own, someone else's, an animal's. Needless to say, getting anywhere was slow and, in a world in which everything is done with muscle power and food was not cheap, expensive. In that world, walking was expensive, which is why cities were so compact.

Then there was a world in which you could go somewhere on a train. Still pretty expensive, but much, much cheaper than any other option to date. So much cheaper, that it more or less wiped out all other long distance travel in a matter of a few decades. (You might be thinking, well, no one was walking across the country before that. And then you probably went, dur, never mind.)

The bicycle and, in short order, its evil spawn, the automobile, presented this country (since we had the most oil at the time) with a conundrum: continue to pay for each ride, which was basically pretty cheap, or spend a lot of money (possibly financed) to buy something that you could then travel around on or in for free, subject to fuel costs, maintenance costs, replacement costs, etc. While there have not necessarily been a lot of people spreadsheeting the costs as experienced at the time, the main perspective I've seen is a little odd. People from our car-world looking back at train fare try to figure out how ordinary, middling sorts of folk could afford to take vacations by train (which we know they did) -- the fare was an interesting chunk of money. But that's not really the right question. The question is why anyone would have financed a car, back in the day.

And I think all one really has to do is take a look at DVC to answer that question. Most people buying DVC don't really factor the ongoing dues into the cost calculation. Which is, in part, why there is a thriving resale market. But the draw, I think, then and now, is the Dream.

mmmm, email

Awhile ago, I ran across a prediction for the housing market that I thought was...interesting. I tracked it down partway, and then hit a wall, in that I was unable to decide what I thought of the source. In my efforts to research them via their website, I signed up to get email and today, I got email advertising a new product they are selling:

http://www.ufanet.com/FSLocation.htm

This doesn't include anywhere near the level of detail in the e-mail I got, which included things like this:

"What Goes Into the ForeScores?
Local economic variables like income, employment, unemployment, and inflation
Zip code level demographics like population growth and distribution
Forecasts of future collateral values with quarterly updates
Local legal environment like recourse, judicial foreclosure, and predatory lending laws
Local political variables like property taxes and growth controls
Local topography factors -- e.g. coastal -- that affect loan performance"

and

"UFA has brought together the best minds in the industry and in academia to create
simple metrics for the economic risks of default and prepayment at the zip code
level."

Perhaps someone can explain to me how this is not redlining?

You don't need to explain to me why lenders would want to do this. I'm not an idiot. I understand that part.

ETA: UFA is offering a free test drive (historical) of the data. About a year ago, WaPo worried about this practice:

http://www.washingtonpost.com/wp-dyn/content/article/2008/02/01/AR2008020101680.html

I think it's fair to say that it is no longer some major lenders doing it; it is now industry practice.