The wrong question about Amtrak’s profitability

From The Economist January 16th

EARLIER this month, the New York Times’s “Freakonomics” blog asked a panel of experts whether Amtrak, America’s government-run passenger rail company, could “ever be profitable”. The answers ranged from the supportive (Amtrak’s problems are many, but they’re not all the company’s own fault) to the critical (it’s time to start breaking up the beast). One astute respondent, journalist Nate Berg, noted that the company had already answered Freakonomics’s question: “Amtrak will never be profitable,” David Gunn, Amtrak’s president, told a Senate committee in 2002.

Liberal commentators, however, seemed put off by Freakonomics’s framing of the issue. “‘Can Amtrak Ever Be Profitable?’ is a dumb question & predictably leads to a dumb debate,” Grist’s Dave Roberts wrote on Twitter. The problem, of course, is that Amtrak’s competition—interstate highways and domestic airlines—isn’t “profitable”, either. Intercity travel of any kind has enormous fixed costs—purchasing or seizing land for airports or rights-of-way; building highways and railroad tracks; buying, fuelling and operating planes and trains. That’s why governments have traditionally played a large role in air, rail and road travel.

Here are some better questions: what’s the right balance of public- and private-sector involvement in these sorts of enterprises? How much, if anything, should governments continue to invest in air, rail and road infrastructure? If the government is going to invest in infrastructure (rather than simply let the market decide), what is the right balance of spending between those different modes of travel? And how much should the environmental consequences of various modes of travel be taken into account when making these decisions?

Freakonomics’s panellists, to their credit, explored some of these questions in their answers. But framing the discussion around a weird notion of “profitability” isn’t particularly helpful. Here’s a good rule of thumb: if a government entity’s profitability is the main thing you’re worried about, it probably shouldn’t be a government entity. Nobody worries about the military or the courts being “profitable”. It’s probably not the right question about Amtrak, either.


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