1

by Peter Philips, Ph.D.,

Professor of Economics, University of Utah November, 2015

The Unreasonable Reason-Foundation's

Assessment of New Jersey's Road

Cost-Effectiveness

Why Urban Roads Cost

More and Deliver More

2

Executive Summary

The Reason Foundation believes that on overall performance, Wyoming ranks highest among all state road

construction operations in the country. The Reason Foundation ranks New Jersey third from the bottom.i In

terms of cost effectiveness, the Reason Foundation ranks New Jersey last.ii Along with New Jersey, other cost-

ineffective bottom dwellers include highly urbanized states such as Massachusetts , Florida, Rhode Island,

California and Maryland.iii All the top performers are rural states such as South Carolina and Wyoming.iv When

something sounds wrong, often it is wrong. In this case, the Reason Foundation is wrong simply because they

treat a mile of one-lane country road in Wyoming as the same as a mile of four-lane turnpike in New Jersey.

When we correct for this error, New Jersey road costs line up with costs across the county.

To illustrate the Reason Foundation's mistake, we compare 211 miles on Wyoming's US-189 to the 166 miles of

US-9 in New Jersey. Wyoming's road passes through 7 towns with a collective population of 28,000. New

Jersey's road passes through 42 towns and cities with a collective population of 1.7 million. Wyoming's one-lane

road has 19 intersections, one of which has a stop light. The rest are governed by two-way stop signs. New

Jersey's road has 129 major intersections and is criss-crossed with multiple major highways, expressways and

interstates. We do not know how many overpasses New Jersey's US-9 goes under, but Wyoming's U-189 goes

under one overpass. That overpass has a dirt roadbed and is there to help antelope in their annual migration

from their summer to their winter quarters.

In this report, we show that the size, density, complexity and usage of a state's road system are the major drivers

of construction and maintenance costs per mile. New Jersey leads the nation both in population density and in

the size of its major roads and interstate highways. Yet, the Reason Foundation ignores these obvious facts. As a

consequence, systematically, the Reason Foundation unreasonably ranks urban states like New Jersey with wide

roads, complex road systems, dense populations and heavy usage as cost-ineffective while ranking rural states

with narrow roads, simple road systems, sparse populations and little traffic as cost-effective.

The 2012 Census of Construction shows that, in fact, New Jersey's construction industry is well organized and

highly productive. New Jersey has the highest value added per hour of work of any highway construction

industry in the country. This is, in part, due to the high quality of the road materials used, but it is also due to the

speed and organization New Jersey contractors and workers employ putting these materials in place.

Thus, it is not surprising that when we control for the differences in the nature and quality of roads in states like

Wyoming compared to states like New Jersey, New Jersey's cost structure is right in line with where we would

expect it to be. In fact, our modeling of New Jersey's cost structure finds that New Jersey's actual per mile road

costs are about 4% below where we would expect given the size, complexity , density and usage of the state's

road system.

New Jersey leads the nation in developing and exploiting the advantages of density. But New Jersey risks killing

the goose that is laying this golden egg by letting its transportation system slip into disrepair and

dysfunctionality. It is timely now to deploy New Jersey's productive highway construction industry to maintain

and improve the state's transportation system, the foundation of its comparative advantages.

3

Basic Points: The Reason Foundation's assertion that Wyoming leads the nation in road construction cost-

effectiveness and New Jersey is in last place is just not true.

The claim that New Jersey pays 12 times more per mile on state-administered roads is also false and

deceptive because a mile one-lane county road will, of course cost less than one mile of turnpike.

o This misleading methodology leads to the following unreliable conclusion:

"The top rankings continue to be dominated by relatively small rural states. Wyoming led

the cost effectiveness ratings, followed by Nebraska, South Dakota, South Carolina and

Kansas." v

Indeed, the population density of their top ten so-called "cost-effective" states was 45

persons per square mile.

New Jersey has a population density of 1210 persons per square mile.

Population density means more traffic.

More traffic means highways have to be built to a higher standard.

More traffic means that construction has to accommodate and work around

traffic patterns.

o Not surprisingly, more densely populated New Jersey has more lanes per mile of road than any

state in the country.

Yet the Reason Foundation's $2 million per mile for New Jersey and $77,000 per mile for

Wyoming does not consider

how wide roads are, how many bridges or tunnels there are, or

how much usage the road gets, or

whether the road is an urban express way or a country road, or

how many and how complex the intersections are, or

any other aspect that distinguish a major highway from a minor road.

When the data are adjusted for total system mileage, population density, the number of lanes and the

mix of disbursements among capital-and-bridges, maintenance, finance and administration, New Jersey

road costs come in 4% below expected and are right in line with the costs in other states.

New Jersey's construction industry is one of the best-equipped and most productive in the country.

o In street, road and highway construction, New Jersey ranks

16th in capital expenditures including tools and equipment per worker hour;

6th in road materials installed per worker hour, and

1st in value added per worker hour.

Nonetheless, due to past neglect, New Jersey's roads need attention.

o New Jersey ranks

5th highest in percentage of urban and rural roads in need of repair

15th highest in percentage of deficient bridges in need of repair, and

6th highest in the most congested roads of any state in the country.

New Jersey's comparative advantage in both the national and global economy is rooted in the economies

of density and agglomeration. Continued vigilance and care in the maintenance and improvement of

New Jersey's transportation system is foundational to the state's competitive standing.

4

About the Author

Peter Philips (Ph.D. Stanford University) is a professor of

economics at the University of Utah and recognized expert on the

U.S. construction industry. He has published widely in academic

journals on various aspects of construction including construction

safety, teenage deaths in construction, absenteeism on

construction worksites, labor turnover on construction sites, the

role of health insurance in retaining experienced workers in

construction, bidding in construction, the role of local hire on

public works and prevailing-wage regulations.

Philips is the coauthor of four books on the construction industry including: Construction Research at NIOSH,

The National Academies Press, Washington, DC, 2008, The Economics of Prevailing Wage Laws, Ashgate

Publishers, 2005, Building Chaos, 2003 and Portable Pensions for Casual Labor Markets, 1995. Philips served

on the National Academies review panel evaluating the National Institute of Occupational Safety and Health's

research on safety in the construction industry. Philips has served as an expert on the construction labor market

for the U.S. Labor Department, the U.S. Justice Department, and the U.S. Court of Federal Claims .

Table of Contents Basic Points: .................................................................................................................................................................3

About the Author .........................................................................................................................................................4

Table of Contents .........................................................................................................................................................4

List of Figures ...........................................................................................................................................................5

List of Tables ............................................................................................................................................................5

Introduction .................................................................................................................................................................6

The Reason Foundation Bias Against Urban and Densely Populated States ...............................................................6

The Reason Foundation Bias Against States with Fewer Roads per Inhabitant ....................................................... 12

The Reason Foundation Ignores Its Own Data ......................................................................................................... 14

New Jersey Costs Are Right in Line with Costs around the Country ........................................................................ 14

New Jersey Highway Construction among the Most Productive in the Country .................................................... 16

Good Highways Are the Foundation for a Globally Competitive Local Economy..................................................... 17

Conclusion: Good Highways Cost More and Deliver More ...................................................................................... 19

Endnotes ................................................................................................................................................................... 20

5

List of Figures Figure 1: as population per square mile in states rise, the Reason Foundation's ranking of cost-effectiveness

worsens ........................................................................................................................................................................6

Figure 2: New Jersey's widest major roads and highways in the country means a bad Reason Foundation cost-

effectiveness ranking ...................................................................................................................................................8

Figure 3: New Jersey's dense population means heavy usage across a complex road system requiring more and

better materials per mile of road--something the Reason foundation ignores ..........................................................9

Figure 4: the only overpass on Wyoming's US 189 between I-80 and Jackson Hole is for antelope not cars ......... 10

Figure 5: a visual comparison of New Jersey's US-9 in Freehold and Wyoming's US-189 north of La Barge shows

the real difference between a mile of road in the two states .................................................................................. 11

Figure 6: more miles of road per person in a state means less usage, simpler rural roads and cheaper materials,

yet the Reason Foundation mistakes this for cost-effectiveness ............................................................................. 12

Figure 7: burning trucks and buffaloes: a visual comparison of traffic jams in New Jersey and Wyoming ............. 13

Figure 8: wider roads necessarily cost more, yet for the Reason Foundation more lanes simply mean lousy cost-

effectiveness ............................................................................................................................................................. 14

Figure 9: New Jersey's highway construction industry is efficient: it has the highest value added per worker hour

and materials added per hour of any state. ............................................................................................................. 17

Figure 10: in every measure of road system functionality, New Jersey's road system needs attention to preserve

the advantage New Jersey gains from economies of density and agglomeration ................................................... 18

List of Tables Table 1: :in 211 miles, Wyoming's US-189 goes through just 7 small towns--big towns for Wyoming but tiny

compared to New Jersey .......................................................................................................................................... 12

Table 2 : multiple linear regression explaining differences in total disbursements per mile on state roads .......... 15

6

Introduction The Reason Foundation's analysis of New Jersey's highway cost-effectiveness is biased against densely populated

urban states in favor of sparsely populated rural states like Wyoming. The Reason Foundation treats a mile of

single lane on a country road as if it were the same as a mile on the New Jersey Turnpike. In doing so, the Reason

Foundation ignores its own data showing that New Jersey has the widest roads of any state in the country. We

will show that adjusting for differences in the quality and complexity of road systems, New Jersey's road system

is right in line with the cost-effectiveness of other states. In fact, New Jersey's highway construction industry is

one of the most productive in the country. New Jersey's road system is foundational to the comparative

advantages the state enjoys from being the most densely packed economy in the country. To keep those

comparative advantages, the Reason Foundation's own analysis shows that New Jersey needs to repair and

update the state's road system.

The Reason Foundation Bias Against Urban and Densely Populated States

Figure 1: as population per square mile in states rise, the Reason Foundation's ranking of cost-effectiveness worsensvi

According to the Reason Foundation, New Jersey ranks the worst in road construction and maintenance as

measured by total disbursements per state-controlled mile of road.1 But New Jersey has company. Rhode Island,

Massachusetts, Connecticut, Maryland, Delaware, New York and Florida also fare poorly in the Reason

1 This is not miles of new road built but rather primarily miles of existing roads under state control whether they are being

built, rebuilt, maintained or even if nothing at all is being done to any or many of those roadsl.

7

Foundation's cost-effectiveness measures. But what these states have in common is not poor cost controls on

their road building. What they have in common is dense, urban populations corresponding to complex,

interconnected economies. This means that road networks are dense and complex with many intersections and

specifications designed to move heavy traffic safely.

Regarding safety, the Reason Foundation ranked New Jersey with the 5th best safety record at .79 fatalities per

100 million vehicle miles. The Reason Foundation compared this number 5 ranking to Wyoming at 35 with 1.33

fatalities per 100 million vehicle miles.vii This ranking in the Reason Foundation Report is the only time the

Report analyzes data by adjusting for differences in road usage. And it is appropriate for the Reason Foundation

to take road usage into account. As the Insurance Institute for Highway Safety points out:

The number and types of motor vehicle crash deaths differ widely among the 50 states and the District of

Columbia. A state's population has an obvious effect on the number of motor vehicle deaths. Fatality

rates per capita and per vehicle miles traveled provide a way of examining motor vehicle deaths relative

to the population and amount of driving.viii

If we ignored these important factors, in 2012, we would find that New Jersey had 589 traffic fatalities and

Wyoming had 123. Had the Reason Foundation followed its general methodology in the other parts of its Report

and failed to take into consideration road usage, it would have said that New Jersey's roads were 5 times more

dangerous than Wyoming's roads. Wyoming would have ranked 5th safest and New Jersey 29th.

In this one instance, the Reason Foundation reasonably avoids these kind of nonsense conclusions. But when it

comes to cost-effectiveness, nonsense conclusions abound. The Reason Foundation quite unreasonably forgets

to adjust their analysis of cost-effectiveness for road usage or any other factor related to road usage. Wyoming

and similarly rural and sparsely settled states become the paragons of road-cost effectiveness and New Jersey

and similarly situated urban states become the wastrels of highway construction management.2

Roads are wide to carry more traffic. Roads are built to higher specifications to carry that traffic. Overpasses and

underpasses are required to smooth the flow of traffic across roads. On-ramps and off-ramps are needed to

move cars onto and off-of limited access highways. Sound-walls are needed to reduce traffic noise in urban

areas. None of these factors are taken into consideration in the Reason Foundation's measures of cost-

effectiveness per mile of road. That is why once state population density rises above about 400 people per

square mile, these more urban states' Reason Foundation cost-effectiveness rankings tank. (See Figure 1 above)

Using the reason Foundation's own data, Figure 1 shows that New Jersey, Rhode Island, Massachusetts,

Connecticut, Maryland, Delaware, New York and Florida are the most densely populated, urbanized states in the

country--in that order. As a consequence, compared to all other states, these states have the widest interstates

and major highways. Figure 2 shows that, on average, New Jersey's interstates and major state highways are

almost four lanes wide while the other seven urbanized states, taken together, average almost three lanes per

2 The Reason Foundation had the data to do adjust for road quality and congestion if it wanted to. On Table 14, the Reason

Foundation reports that Wyoming has the least congested interstate and freeway lane-miles in the country (sort of an interstate version of a country road). While New Jersey had the 41st most congested freeway and interstate system. But the Reason Foundation makes no effort to either factor in either its data on road width or its data on road congestion in analyzing state differences in road construction cost-effectiveness. See Reason Foundation Report, Tables 6 and 14.

8

major highway and interstate mile. In contrast, all the other 42 states, averaged together, have just less than

two-and-one-half lanes on their interstates and major highways. Wyoming averages two-and-one-third lanes per

interstate mile.ix Obviously, when a state's highway system is wider, it is going to have higher costs per mile to

maintain, repair and rebuild.

Figure 2: New Jersey's widest major roads and highways in the country mean a bad Reason Foundation cost-effectiveness ranking

Population density determines how complex a highway system is, how much traffic it must carry, and to what

level of quality it must be built--to handle that road complexity and usage. Wider, more complex and higher

quality roads will require more expensive materials for each mile of those roads.

While Figure 2 shows that New Jersey has the widest interstates and major roads in the country, Figure 3 shows

that New Jersey is, by far, the most densely populated state in the country.3 Taken together, dense population

and wide roads mean that New Jersey correspondingly has the most complex and heavily used interstate and

major road system in the country. As a consequence, New Jersey puts into its system a higher value of materials

per mile of road compared to any other state in the country. This is not cost ineffectiveness as the Reason

Foundation Report would have it. Rather this is the effective cost of providing the road infrastructure needed to

service the most densely populated state in the country.

3 New Jersey has 1210 people per square mile followed by Rhode Island at 1017 and Massachusetts at 856. Wyoming is the

second least populated state (behind Alaska) at 6 people per square mile. Other top performers according to the Reason Foundation include Nebraska (24 people per square mile), South Dakota (11 people per square mile), South Carolina (159 people per square mile) and Kansas (35 people per square mile). Wikipedia, "List of U.S. states by population density," https://en.wikipedia.org/wiki/List_of_U.S._states_by_population_density

2.42.8

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igh

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road

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other states urban states NJSource: Reason Foundation Report, Table 6

urban states=FL, NY, DE, MD, CN, MA, RI with NJ separated out

Comparing Urban and New Jersey to All Other States

The Average Number of Lanes on Interstate Highwaysand Major State Roads, by State, 2012

9

Figure 3: New Jersey's dense population means heavy usage across a complex road system requiring more and better materials per mile of road--something the Reason Foundation ignores

To understand this, let us again consider Wyoming, one of the top states in the Reason Foundation's

disbursement ranking, and its top state overall.x Here we will compare a 211-mile segment of Wyoming's US-189

from Evanston, Wyoming to Jackson Hole, Wyoming to a comparable 166-mile segment of New Jersey's US-9

from Cape May to the George Washington Bridge. These road segments can be followed virtually on mapquest,

google maps and wikipedia.xi

The trip from Evanston, Wyoming (population 12,190, Wyoming's 8th largest city), to Jackson Hole (population

10,449, Wyoming's 10th largest city), is 211 miles and takes 3 hours and 34 minutes.xii Getting on I-80 (which US

189 briefly shares), you travel 13 miles on a two-lanes-each-way interstate to the off-ramp, exit 18. After you

leave I-80, you will be on 195 miles of one-lane-each-way roads on US-189. In the last 3 miles of US-189, just as

you enter Jackson, the road widens out to a four-lane highway. Over the entire 195 mile length of this asphalt

road, US-189 has no median divider, no wide shoulders, no emergency lanes, no sound walls, no on-ramps or off-

ramps. There are a handful of street lights in the seven small towns that sit astride US-189 along this Wyoming

route.

Over its 195 mile length between I-80 and Jackson, US-189 does have two stop signs, one traffic light, three

bridges and one overpass. You actually go under the overpass because the overpass itself, (see below), has no

road on it. It is a dirt path. This overpass is for pronghorn antelope to use as they migrate from their summer

quarters in the Jackson Hole area to their winter feeding grounds near Green River.xiii On your way, you will pass

in sequence through the incorporated towns of Diamondville (pop. 740: 49th largest in Wyoming), Kemmerer

45.5 100.4 94.1

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Sources: US Economic Census, Construction, Geographic Series, Detailed Statistics, 2012;Wikipedia, State Population Density; Public Road Length Miles by OwnershipUS DOT Office of Highway Policy Information Table 4.4.4.1, 2012

urban states=FL, NY, DE, MD, CN, MA, RI with NJ separated out

Comparing NJ and Other Urban States to All Other States

Value of Construction Materials per Mile of State Roadand Population per Square Mile, 2012

Materials Pop. Density

10

(pop. 2,732: 25th largest) , LaBarge (pop. 553: 53rd largest), Big Piney (pop. 538: 55th largest), and Mableton

(1,114: 41st largest).xiv In these towns, city streets intersect US-189 usually with side-street stop signs but in

Diamondville there is a stop sign and at the town square in Kemmerer, there is a stop light. There is also a stop

sign where US-189 intersects with the road to Pinedale and a small traffic circle at Hoback Junction where US-189

intersects with US-89 near Jackson Hole.

Figure 4: the only overpass on Wyoming's US 189 between I-80 and Jackson Hole is for antelope not cars

An illustrative and reasonable comparison to this 211 mile stretch of US-189 in Wyoming between Evanston and

Jackson is the 166 miles of US-9 in New Jersey between the Cape May-Lewes Ferry and the George Washington

Bridge. In New Jersey, US-9 has 129 major intersections.xv In Wyoming, US-189 has 19 major intersections.4 xvi

The New Jersey intersections include multiple parkways, expressways and interstates. With the exception of the

short section where US-189 in Wyoming shares 18 miles of roadbed and three intersections with I-80, US-189 is

intersecting only with one-lane roads with 16 of the 19 intersecting roads having two-way, side-road stop signs.

US-9 in New Jersey passes through 42 municipalities with a total population of 1,736,131, while Wyoming US-189

over its 211 miles between Evanston and Jackson passes through only 7 municipalities with a total population of

28,316. (See Table 1 below.) The Reason Foundation does not consider the 129 intersections over 166 miles of

New Jersey's US-9 compared to the 19 intersections over 211 miles of Wyoming's US-189. For the Reason

Foundation, a mile is a mile regardless of its characteristics. And cost-effectiveness per mile is cost-effectiveness

per mile regardless of road characteristics. The Reason Foundation does not consider a road-using population of

28,316 over 211 miles compared to a road-using population of 1,736,131 over 166 miles. For the Reason

4 Because these are really two very different road systems, a major intersection governed by a side-road stop sign in

Wyoming is often not counted as a major intersection on New Jersey's US 189.

11

Foundation, traffic is traffic whether on a country road or in an urban corridor. No wonder, the Reason

Foundation finds low disbursements per mile in Wyoming compared to New Jersey.

Figure 5: a visual comparison of New Jersey's US-9 in Freehold and Wyoming's US-189 north of La Barge shows the real difference between a mile of road in the two states

xvii

Figure 5 (which is also used on the cover of this report) provides a representative visual comparison between US-

9 in Freehold Township, NJ (population 36,184) and US-189 just north of La Barge WY (population 551).xviii New

Jersey's US-9 shows two-lanes northbound US-9 with guard rails, off-ramp exit lanes, wide shoulders, a smooth

roadbed with major and minor intersections, intersection lighting, considerable traffic and urban congestion.

Wyoming's US-189 shows one-lane northbound with no median, no guardrails, no ramps or intersections, no

lighting, no shoulder, no traffic and a roadbed that has been repaired with tar. But for the Reason Foundation, a

mile of each road is the same. And the less money spent on the Wyoming mile comes across in the Reason

Foundation's numbers as cost-effective while the extra lanes, better roadbed, more complex traffic management,

signage and safety accessories on US-9 in New Jersey in the Reason Foundation's view are just a waste of money.

Another way to give a sense of how a trip on Wyoming[s US-189 is different from a road trip in New Jersey, Table

1 lists each Wyoming incorporated municipality between Evanston and Jackson on US 189 with its ranking among

Wyoming cities and its population. The comparably ranked New Jersey cities are listed alongside with their

populations. The populations for these seven cities for each state are then totaled. The Wyoming seven total to

28,316 people. Taken together, this amounts to 11,242 fewer people than the smallest of all the comparably

ranked New Jersey cities--Atlantic City. The comparable New Jersey seven cities total to 399,366 people--14

times more people.

12

Table 1: :in 211 miles, Wyoming's US-189 goes through just 7 small towns--big towns for Wyoming but tiny compared to New Jersey

Rank Wyoming Population New Jersey Population2

8 Evanston 12,190 Toms River 91,239

10 Jackson 10,449 Trenton 84,913

25 Kemmerer 2,732 Union 56,642

41 Marbleton 1,114 Evesham 45,538

49 Diamondville 740 Berkeley 41,255

53 La Barge 553 Marlboro 40,191

55 Big Piney 538 Atlantic City 39,558

Total 28,316 399,336

Total disbursements per mile of road in the Reason Foundation Report includes the cost of both maintaining and

improving roads. With 28,316 Wyoming people spread out across 211 miles of road, these roads are not getting

a lot of traffic. US 189 does not have to be built for a lot of traffic. And it does not have to be maintained due to

a lot of traffic.

The Reason Foundation's metrics for cost efficiency in road building and maintenance is fundamentally flawed at

its core. It does not distinguish between road miles. Below we will use the Reason Foundation's own data to

correct for their central mistake. When we do this, we will find that Wyoming is not more cost effective than

New Jersey. Wyoming just has simpler, less traveled roads.

The Reason Foundation Bias Against States with Fewer Roads per Inhabitant

Figure 6: more miles of road per person in a state means less usage, simpler rural roads and cheaper materials, yet the Reason Foundation mistakes this for cost-effectiveness

13

A correlate to population density per square mile is population density per mile of road. When states like

Wyoming have many miles of road per state resident, they do well on the Reason Foundation's metric of cost

effectiveness. When states have few miles of road per state resident, their Reason Foundation ranking is terrible.

(See Figure 6)

But the Reason Foundation simply ignores both differences in population density and differences in traffic and

road usage. A quick way to see this is to look at how traffic backs up when something blocks the road.

Figure 7 shows the results of a truck fire that stopped traffic dead on the New Jersey Turnpike. Drivers got out

of their cars. Some relaxed. Some took movies of others throwing a football around. Figure 7 also shows traffic

backed up on a Wyoming highway because bison blocked the road. (Bison are notorious in Wyoming for holding

their ground when cars approach. ) Again, traffic came to a dead stop. Drivers got out of their cars. Some took

pictures. Of course, it's as dangerous to approach a bison as it is to approach a burning truck. Maybe this is why

the Reason Foundation treats all roads the same whether they are in New Jersey or in Wyoming.

But if the Reason Foundation took a moment to reason this thing through, they would see that the costs of

maintaining, managing, resurfacing and rebuilding the New Jersey Turnpike, and the cost of maintaining,

managing, resurfacing and rebuilding a Wyoming country road, are not an apples-to-apples per mile of road

comparison. Below, we will make the adjustments needed to appropriately compare Wyoming to New Jersey.

Figure 7: burning trucks and bison--a visual comparison of traffic jams in New Jersey and Wyomingxix

14

The Reason Foundation Ignores Its Own Data

Figure 8: wider roads necessarily cost more, yet for the Reason Foundation more lanes simply mean lousy cost-effectivenessxx

Figure 8 clearly shows that as the average number of lanes on a state's major highways and interstates rises,

their ranking with the Reason Foundation for cost-effectiveness gets worse. Again Wyoming and similar rural

states contrast sharply with New Jersey and other urban states. So the unreasonable, Reason-Foundation

pattern, of ignoring differences between the characteristics of roads in assessing the cost-effectiveness of state

highway construction managers persists. But here the pattern is egregious. The data to do this was right before

their eyes. Figure 8 simply cross references the data in the Reason Foundation's Report from Tables 6 and 10.

Surely they knew, or at least a reasonable person should have known what the Reason Foundation was

unreasonably doing--putting their finger on the scale by ignoring in their rankings that urban states had wider

roads. Comparing the cost to build, rebuild or maintain one mile of a one-lane road to the cost of building,

rebuilding or maintaining one mile of turnpike without adjusting for those additional lanes is just simply

unreasonable.

New Jersey Costs Are Right in Line with Costs around the Country Multiple linear regression analysis is a widely used statistical technique for handling what the Reason Foundation

chose to ignore--namely the cost-effectiveness of state road construction controlling for differences among the

states in the amount and complexity of their road systems, the population density differences among states, and

differences among the states in the share of disbursements going to capital and bridge improvements,

15

administration, maintenance and other expenditures including law enforcement, interest payments and bond

retirement.

In the linear regression model shown below, differences in total disbursements per mile of roads in a state is

explained by 1) the differences in population per square mile among the states, 2) the differences in the average

number of lanes among the states on their interstate and major highways, 3) the differences in the total miles of

state controlled roads, 4) the differences among the states in the share of total expenditures going to capital

expenditures and bridges, and 5) the differences among the states in the share of expenditures going to

administration. The share differences are all relative to differences among the states in the share of

disbursements going to maintenance plus law enforcement and financial expenditures. Thus, Table 2 allows us

to do what the Reason Foundation should have done--take into consideration that the quality of roads differ in

different states, the usage of roads differ in different states and the mix of road expenditures differ in different

states.

Table 2 : multiple linear regression explaining differences in total disbursements per mile on state roads

Linear Regression Model Explaining Total Disbursements per Mile of Road (1)

population per square mile (1) 0.12 statistically significant at the 1% level

ratio of lane miles to state highway agency miles (1) 1.25 statistically significant at the 1% level

total miles of state controlled roads (1) -0.33 statistically significant at the 1% level

share of capital and bridge disbursements to total disbursements -1.71 statistically significant at the 1% level

share of administrative disbursements to total disbursements -2.11 statistically significant at the 5% level

constant 12.49 statistically significant at the 1% level

Total variation between states explained by the model=85% (R-square statistics)

Number of states=50

Year=2012

(1) measured in natural logs

The model in Table 2 fits the data for 2012 well with 85% of the differences in total disbursements per mile

between states is explained by the five variables included in the model. Each independent variable, in itself, is

statistically significant adding to our confidence that this is a well specified model.

The model basically says that controlling for other factors, 1) the more dense the state's population, the more it

costs to finance, build and maintain roads in that state; 2) the more lanes per mile of road, the more expensive it

is to finance, build and maintain those roads; 3) in contrast, the more spread-out a state's road system is, the

more miles there are in the state's system for a given population density and road width, the less expensive it is

to build and maintain those roads (this is a measure of lighter usage); 4) relative to the share of disbursements

going to maintenance, police and finance, the higher the share of disbursements going to either capital/bridge

improvements and/or administration, the less expensive it is to build and maintain roads. This is similar to the

general pattern in construction that new construction is typically less expensive per square foot compared to

renovation. Working with a clean slate on capital and bridge work has both the advantages of economies of

16

scale compared to typically smaller maintenance projects as well as the advantages associated with fewer

surprises compared to the unexpected problems that often emerge from maintenance work.5

In the case of New Jersey, based on New Jersey's 2012 mix of disbursements, the state's population density, its

road width and total system mileage, the model in Table 2 predicts that the state would spend 4% more than it

actually did spend in 2012. We never expect that the model will hit the actual number spent right on the head

for each state. The model will miss low sometimes and high other times. What we can say is that in New Jersey's

case in 2012, New Jersey's predicted expenditures per mile were 4% higher than they, in fact, actually were. We

can conclude from this that New Jersey's cost-effectiveness was right in line with construction industry

expectations and the spending of other states. Once differences in roads and their usage are taken into account,

New Jersey's cost-effectiveness is typical and perhaps slightly better compared to highway construction and

maintenance across the United States.

New Jersey Highway Construction among the Most Productive in the Country Dense, complex and heavily used highway systems are more difficult to repair and rebuild not only because they

are more complex and specified to a higher standard, but also because all construction work must be geared to

deal with very heavy traffic while the construction is taking place . Blue collar highway construction workers in

these circumstances have to be highly skilled and experienced not only to get the job done right and hopefully

on-time, but also to avoid injuries and deaths for themselves and the public they must work around.

New Jersey has one of the most highly skilled, experienced and productive highway construction industries in the

country. Figure 9 shows that New Jersey has the highest value of construction materials put in place per worker

hour on highways, roads and streets in the country. This reflects the quality of the materials put on New Jersey

roads and highways. But it also reflects the speed with which New Jersey construction crews can put that

material in-place.

New Jersey also has the highest value added per worker hour on highway work of any state. Building and

repairing highways and dense urbanized areas is difficult and dangerous. These facts have driven New Jersey and

other highly urbanized states to better organize, better manage, better train and better equip their work crews

with a correspondingly higher value added per worker-hour and higher value of materials laid down per hour.

These are measures of cost-effectiveness that were ignored in the Reason Foundation Report.

5 The cost of maintenance work will vary across states based on the underlying road system that has to be maintained. So,

for instance, the states spending the least on maintenance per mile of state-controlled roads in 2012 were all rural states with less complex systems and lighter usage (New Mexico, North Dakota, South Dakota, South Carolina, Mississippi). The states with the highest spending on maintenance per mile of state controlled roads were all urban states with complex transportation systems and heavy usage (New Jersey, California, Maryland, New York, Massachusetts). Reason Foundation Report, Table 8.

17

Figure 9: New Jersey's highway construction industry is efficient: it has the highest value added per worker hour and materials added per hour of any state.

Good Highways Are the Foundation for a Globally Competitive Local Economy Jack be nimble, Jack be quick is not only advisable for jumping over candle sticks but also for staying globally

competitive in a local economy. Communication and transportation lie at the heart of the global economy. The

efficient movement of goods and people are what allow one local economy a comparative advantage over others

whose local economies are gummed up by wasted time between places of activity and delivery. Good road

systems create more jobs.xxi Good road systems draw industry and economic activity into an area and away from

areas that do not have as effective a transportation system.xxii Productivity and wages are higher in densely

populated areas such as New Jersey.xxiii In general, a doubling of employment or population density leads to a 4%

to 8% increase in productivity in the local area.xxiv An efficient and effective transportation system is the

foundation for harvesting the advantages of density and agglomeration. xxv But these advantages deteriorate

when density is transformed into traffic jams of immobility. In academic jargon:

New investments in transport can render a larger scale of activity more accessible by reducing travel

times or the costs of travel, giving rise to positive agglomeration benefits. Conversely, where transports

systems work inefficiently, or where there are constraints on accessibility, these may inhibit the

generation and distribution of agglomeration externalities. xxvi

9075

95

73

133

110

050

10

015

0

mate

rials

put-

in-p

lace &

valu

e a

dd

ed

per

wo

rke

r h

ou

r

other states urban states NJ

Source: US Economic Census, Construction, Geographic Series, Detailed Statistics, 2012

urban states=FL, NY, DE, MD, CT, MA, RI with NJ separated out

Comparing New Jersey and Urban to All Other States

Blue-Collar Value Added and Materials Put-in-Placeper Worker Hour on Highways, Roads & Streets, 2012

Total Value Added per Hour Materials per Hour

18

Put more simply: New Jersey leads the nation in developing and exploiting the advantages of density. But New

Jersey risks killing the goose that is laying this golden egg by letting its transportation system slip into

dysfunctionality. The Reason Foundation, itself, provides the evidence for this looming threat.

Figure 10: in every measure of road system functionality, New Jersey's road system needs attention to preserve the advantage New Jersey gains from economies of density and agglomeration

Based on federal data, the Reason Foundation provides the precise reason for New Jersey to turn its attention to

its road system. Compared to the national average, New Jersey's roads are one-third more congested. Again

compared to national averages, about twice as many New Jersey's urban interstates miles are in poor condition.

Rural, non-interstate principal roads are in the worse shape compared to national averages while rural

interstates and bridge conditions are just 18% and 15% worse than national averages. The big picture is clear.

New Jersey's road transportation system is in need of an overhaul.

Everyone has to find a way to compete in the emergent, highly competitive, global economy. New Jersey has a

way. No state is better positioned to harvest the well-known economic advantages of density and

agglomeration. But the necessary condition for this advantage to be continually actualized is for New Jersey to

be continually vigilant, guarding against neglect of its transportation and communication systems. The Reason

Foundation is wrong in believing that New Jersey's highway construction sector is cost-ineffective. In fact, not

only are New Jersey's highway construction and maintenance costs right in line with what you would expect for

the most dense, complex and heavily used road transport system in the country, but also the managerial

19

experience, human and physical capital investment and know-how of the New Jersey highway construction

sector leads the nation. Given New Jersey's comparative advantage among all the states in the advantages of

density and agglomeration, it is always timely, and it is time now, to use New Jersey's skills and abilities in

highway construction to keep New Jersey's road transport system in top running condition. Allowing the state's

transport system to slip as the Reason Foundation's data suggests is happening, it reason enough to act now.

Conclusion: Good Highways Cost More and Deliver More If New Jersey tried to tie together its economy with Wyoming's roads, New Jersey's economy would come to a

standstill. If New Jersey dropped its population density to accommodate Wyoming-type roads, not only would

New Jersey lose its comparative economic advantages, New Jersey would also have to go from its current 1210

persons per square mile to Wyoming's 6 per square mile. Ninety-nine percent of the people in New Jersey would

have to leave the state.

What New Jersey has going for it are all the advantages that come from what economists call the economies of

agglomeration. New Jersey's population density allows many companies to locate close to each other. These

companies can share a local, skilled-labor pool which in turn provides both training and jobs for well-paid labor

and profit and growth for companies. Population density and the economies of agglomeration in New Jersey also

encourage the development of both new and traditional industries due to the advantages of scale and cross-

fertilization stemming from companies being close together. Also, and here solid, well maintained and well

functioning transportation and communication systems are crucial, packing an economy close together allows for

the exchange of supplies, laborers and innovative ideas fostered by proximity.

New Jersey's place in the world is not Wyoming's. New Jersey's roads cannot be Wyoming's. Comparing New

Jersey's road costs to Wyoming's without taking into consideration all the different ways these two states

operate in the global economy--industry versus summer tourism, high-tech versus resource-extraction, a

complex, mixed economy versus a simple tourism-ranching-resource economy--is just silly. And misleading. And

unreliable.

New Jersey's highway contractors comprise one of the most skilled, experienced and productive construction

industries in the country. They are in New Jersey to service the state's dense, complex and sophisticated

transportation needs. New Jersey's economies of agglomeration are the goose that keeps laying golden eggs.

New Jersey's transportation system is the environment that allows that goose to thrive. Starving that goose by

skimping on transportation infrastructure is more than short-sighted--it is deadly for the state's comparative

advantages in the globalized economy. Succumbing to a false alarm regarding highway building and maintenance

costs will starve the goose that is responsible for what makes New Jersey work.

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Endnotes i David T. Hartgen, M. Gregory Fields and Baruch Feigenbaum, "21st Annual Report on the Performance of State Highway Systems (1984–2012)," Reason Foundation, Table 1, p. 2 http://reason.org/files/21st_annual_highway_report.pdf (Hereinafter Reason Foundation Report) ii Reason Foundation Report, Table 10, p. 20 iii Reason Foundation Report, Table 10, p. 20

iv The top 20 cost-effective performers according to the Reason Foundation are all rural states: South Carolina, West Virginia, North Carolina, South Dakota, Nebraska, Missouri, Virginia, Kentucky, Arkansas, Montana, New

Mexico, Wyoming, Maine, North Dakota, Mississippi, Alaska, Idaho, Tennessee, Minnesota and Iowa. Reason Foundation Report, Table 10, p. 20 v Executive Summary, Reason Foundation Report (no pagination) http://reason.org/files/21st_annual_highway_report.pdf (Hereinafter Reason Foundation Report) vi Ranking of total disbursements per mile is from Table 10 of the Reason Foundation Report; population per square mile is from Wikipedia, "US States by Population Density," https://en.wikipedia.org/wiki/List_of_U.S._states_by_population_density vii Reason Foundation Report, Table 16. viii Insurance Institute for Highway Safety, Highway Loss Data Institute, General Statistics, 2012 http://www.iihs.org/iihs/topics/t/general-statistics/fatalityfacts/state-by-state-overview/2012 ix Reason foundation Report, Table 6. x Table 1: Overall Highway Performance Rankings 2012, Reason Foundation Report xi Detailed descriptions of these roads can be found at https://en.wikipedia.org/wiki/U.S._Route_9_in_New_Jersey and https://en.wikipedia.org/wiki/U.S._Route_189 xii mapquest calculation going on US 189 and a small section of I80 http://www.mapquest.com/directions/from/us-wy-evanston~to~us-wy-jackson/A5;41.264806,-110.960137/A5;43.47962,-110.7623518 xiii National Geographic, "Pictures: Overpass Helps Pronghorn Migration," http://news.nationalgeographic.com/news/2012/12/pictures/121204-pronghorn-migration-new-highway-overpass/ xiv Wikipedia, "List of municipalities in Wyoming," https://en.wikipedia.org/wiki/List_of_municipalities_in_Wyoming xv Wikipedia, "U.S. Route 9 in New Jersey, Major Intersections," https://en.wikipedia.org/wiki/U.S._Route_9_in_New_Jersey#Major_intersections xvi Wikipedia, "U.S. Route 189, Section 3, Major Intersections," https://en.wikipedia.org/wiki/U.S._Route_189 xvii Picture credit, US-9, Jason Layne, "US route 9," Wikipedia https://en.wikipedia.org/wiki/U.S._Route_9#/media/File:US9_Freehold_NJ.jpg US Route 189, Wyoming Department of Transportation, "Road Work Delayed," http://www.pinedaleonline.com/news/2015/03/Roadworkdelayed.htm xviii

https://en.wikipedia.org/wiki/La_Barge,_Wyoming https://en.wikipedia.org/wiki/Freehold_Township,_New_Jersey xix Mark D. Stein, N.J. Turnpike traffic 'a scene out of The Walking Dead'," silive.com August 4, 2015 http://www.silive.com/news/index.ssf/2015/08/nj_turnpike_traffic_is_a_hot_m.html "Wyoming traffic jam," flickr, https://www.flickr.com/photos/lord-walt/15064065961 xx Tables 10 and 6 in the Reason Foundation Report xxi GILLES DURANTON and MATTHEW A. TURNER, Urban Growth and Transportation," Review of Economic Studies (2012) 79, 1407–1440 xxii Amitabh Chandra and Eric Thompson, " Does public infrastructure affect economic activity?

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Evidence from the rural interstate highway system," Regional Science and Urban Economics 30 (2000) 457–490 xxiii Rosenthal, Stuart S. and William C. Strange. 2004. "Evidence on the nature and sources of agglomeration economies." In Vernon Henderson and Jacques-François Thisse (eds.) Handbook of Regional and Urban Economics, volume 4. Amsterdam: North-Holland, 2119–2171. xxiv Pierre-Philippe Combes, Gilles Duranton, Laurent Gobillon, Sebastien Roux. "ESTIMATING AGGLOMERATION ECONOMIES WITH HISTORY, GEOLOGY, AND WORKER EFFECTS." 2008. https://halshs.archives-ouvertes.fr/halshs-00347451/document xxv Tomoya Mori and Koji Nishikimi, " Economies of transport density and industrial agglomeration," Regional Science and Urban Economics 32 (2002) 167–200 xxvi Daniel J. GRAHAM, Agglomeration Economies and Transport Investment," Discussion Paper No. 2007-11, JOINT TRANSPORT RESEARCH CENTRE, International Transport Forum, OECD, December, 2007, p. 6.