Wednesday, October 31, 2007

Build the Road, and the Cars Shall Come

Today's The Standard reported:

"The HK$7.8 billion Hong Kong-Shenzhen Western Corridor is being underused by as much as 89 percent, a government official admitted yesterday... the government had earlier estimated a daily usage of around 29,800 trips on the corridor - the fourth vehicular corridor to enter Shenzhen via Shenzhen Bay Port.

However, actual usage only rose from 1,400 trips in July to 3,256 in September, or about 11 percent of the estimate."

More here.

If a private company wrongly anticipates demand, the company will face financial problem. If the financial problem is severe enough, the company will go out of business. At the minimum, such failure will force the firm to learn from their mistakes and try to avoid the same error the next time around. That's the way the free market ensures that limited resources will be in the hands of those entrepreneurs who better anticipate what their customers want.

Unfortunately, this is not the way the government works. Instead, more infrastruture projects are in the pipeline according to this government document. The government never learns because it does not need to. It can tax and it can inflate.


Kempton said...

In the big picture for Hong Kong politicians, HK people and tax payers' welfare are less important than the political chips they can gain from the mainland government.

So the HK government learns a lot. Just not the things that will benefit the lives of HK people.

Politicians are smart and know who give them power and they do act accordingly.

Just my 2 cents.


I think the problem of infrastructures are even worse than SOEs.

For SOEs, people aware of their ongoing financial burden on the government. For infrastructures, they call them "investment" which generate "postive externality". You can never say they are in deficit.