Brownian motion

Remember high school chemistry? There was a concept called Brownian motion in that course; it is the random movements of atoms and molecules in a fluid. One can never tell where a particular atom will go over the next five minutes and certainly not over the next five months. Well now, Calfornia governor Jerry Brown has brought back something similar. He pushes for actions by the state that can only be called random and inexplicable.

The latest in Brown's repetoire of random acts is his approval of construction of the high speed rail line which is to run in the Central Valley. Ultimately, the line is to connect San Francisco and Los Angeles, but the first section will be built at a cost of more than ten billion dollars in a sparsely populated region between the two metropolitan areas. Once this large segment of the line is built, it will go into operation to take a few people here or there but at high speeds. Operating costs will far outstrip revenue (assuming they do not charge $1000 per ticket.) As a result, not only will California pay a big chunk of the construction costs, it will also pay huge sums every year in operating subsidies. Since California is broke, no one is quite sure where the state will get the funds for the line.

For those who say that the line will be a success once LA and SF are connected to it, I have a question: when will that be and how much will that cost? As of now, the answer seems to be that no date for construction of the remainder of the line has yet been determined. Without a time frame, the cost of construction cannot be determined. Let's assume, however, that the rest of the line could be built for a mere twenty billion bucks. If California's total share of the construction cost is $15 billion and if the bonds issued for the construction funds pay only 4% interest, then California will need $600 million each year from now on just to pay the interest. Operating losses will be huge as well.

So there you have it: Brownian motion. On one day, Jerry Brown is trying to cut spending and raise taxes to close the enormous California budget gap. On the next day, he is spending billions of dollars that the state does not have to construct a project that cannot pay for itself and which is unlikely to achieve a meaningful ridership level.