Former Treasury Secretary and Harvard President Larry Summers discusses infrastructure investment through bets on building airports.
You’re a rapidly growing Asian country, and you decide to build an airport somewhere where there aren’t very many people.
You do that because it’s going to be cheap to build it now, when there aren’t a lot of people around, and it’s important to establish the land. Then 15 years later, if you’ve grown fast, you’re a brilliant hero of masterful long-term planning, and if you’ve grown slow, you’re an idiot who’s building an airport where nobody wanted to go.
It’s hard to know which is the case. The Japanese probably look stupider than they really were because they built in anticipation of more growth than they, in fact, were able to generate.
I don’t know quite what’s going to happen with respect to China. It’s not unlike Dulles Airport. Today we think of Dulles Airport as an important strategic stroke that cemented and made possible a hugely vibrant technological economy in Northern Virginia.
I’m old enough to remember in the late ’70s or early ’80s when it was a generation after Dulles Airport was built. It was a ridiculous idea, built a million miles from anywhere, and like, “Why did we build that?”
So it’s very difficult to judge some of these infrastructure investments except in the very, very long run. Even when you judge them in the very, very long run, you can make a judgment ex post as to whether they were a good idea, but even then, it’s going to be even more difficult to make a judgment about whether they were ex ante sensible or ex ante not sensible.
I think he’s wrong about Dulles airport, by the way, because it’s been so badly managed through nepotism, poor environmental policies like forcing taxicabs dropping off passengers from downtown to return empty, and stupidity like building an expensive train that takes United passengers nowhere near their gates.
It was born by condemning African American homes. It’s super expensive precisely because of mismanagement.