That the US invests less in passenger rail than Europe or Asia is obvious. Less well known is that with its smaller budget, Amtrak also buys more expensive stuff:

Unfortunately, Transportation Secretary Ray LaHood’s recent announcement of a $562.9 million loan to Amtrak to buy new locomotives for the Northeast Corridor suggests that they will not be doing more with less. The money will go to buy 70 electric locomotives, which, as Alon Levy at Pedestrian Observations explains, are far more expensive than comparable European and Japanese models, and will lock us into outdated technology for decades to come.

Europe and Asia have realized the benefits of lighter and more nimble trains – cost, speed, and energy consumption among them – but Amtrak’s planned purchase is further proof that the U.S. is not quite there yet. One easy cost-saving move would be to wait two years for Positive Train Control, an anti-crash safety technology, to be fully installed along the Northeast Corridor. By 2015, Amtrak will no longer have to comply with the Federal Railroad Administration’s requirement that trains be able to withstand crashes with enormous freight trains. Free to buy lighter off-the-shelf foreign designs, Amtrak could then save 35-50 percent off the cost of the locomotives, as Alon notes.

An even more radical modernizing and cost-cutting measure (at least in the long run) would be to transition the Northeast Corridor Regional fleet from locomotive-hauled trains to electrical multiple units, or EMUs, in line with best practices in Europe and Asia. EMUs are, like subways in the US, individually-powered carriages, and standard models can be as cheap as the inflated price that Amtrak pays for its unpowered passenger railcars. The locomotive purchase locks Amtrak into buying more of these unpowered carriages in the future, making Amtrak’s decision to go with locomotives all the more important.

I don’t particularly want Amtrak to do more with less. I’d like it to do much more with more. But either way, it would be better to act cost-effectively. A stingy, yet high-cost, rail system is bad news.

Bethany McLean discusses the corporate governance aspects of the Dodd-Frank law:

One part of the problem is that in these days of publicly-traded banks and brokerages, the interest of the bankers and the interests of the banks’ stockholders aren’t always the same. If an executive can pocket tens of millions in cash compensation in the short term, he will fret a bit less about the future of his firm, or even the money he might still have tied up in it. Dodd-Frank contains some provisions that attempt to better align compensation with a bank’s long- term performance, such as the ability to “clawback” executive compensation that’s based on improper financial statements. These reforms may not work, but they’re well worth trying.

The more I think about this, the more I think it may be doomed. After all, who’s going to be good at gaming a compensation scheme if not a bank executive? Bankers are particularly tricky in this regard not only because they have specialized skills in the field of financial gamesmanship, but because I think they have less in the way of intrinsic motivation that most high-achieving professionals. An architect wants to make money, but he also wants to make buildings he likes. A basketball player wants money, but he also wants rings and acclaim. A pundit wants to earn a living, but he also wants influence. But banking isn’t something you do that you also get paid for, it’s just getting paid to make money.

Contrast this kind of complicate scheme with the alternative idea of a crude rule mandating that large banks be partnerships or otherwise owned by a small number of people rather than publicly traded firms owned by retail investors. After all, “these days of publicly-traded banks and brokerages” is a pretty recent phenomenon. Was there some specific social or economic problem with the old paradigm that the rise of publicly traded banks solved? Many aspects of bank deregulation did, in fact, solve actual problems. Having banks be able to operate branches in multiple states creates actual convenience for customers in a clear way. But what was the problem with a lack of publicly traded investment banks?

Paul Krugman notes that the prolonged housing slump seems to suggest that a relatively modest fiscal boost could push us to a higher employment equilibrium:

Suppose that Obama announces that we face a clear and present danger from Ruritania, and that to meet that threat we need immediate investment in roads and rail (to move troops, of course). The economy surges on the emergency spending — and newly employed men and women at last get to move out of their relatives’ basements. Home construction surges. Then Obama apologizes, says that his advisers have learned that there is no such country as Ruritania, and cancels the program. But we still have the new roads and rail links; plus, the surge in housing demand is now self-sustaining, and the economy remains strong.

And of course we could do this even without the pretend invasion. But there is (as ever) a monetary angle. As Karl Smith puts it before increased demand leads to increased supply of homes, it needs to lead to higher rents. Among other things, you can’t build a home instantaneously. That has implications for the proposed anti-Ruritanian fiscal boost. In particular, if the Federal Reserve is happy with the current inflation rate that means it’s going to need to tighten money during the “higher rents” phase and short-circuit the fiscal boost. Which is just to say that any time fiscal policy works, it’s going to work in part by increasing the price level which means it will only work if it’s tolerated by the central bank.

How exactly this goes together depends in part on your model of what’s happening at the Federal Reserve. One way of looking at it is that if the Fed were willing to accept a higher inflation rate, they’d be doing QE3 right now. So the fact that they’re not doing QE3 shows that they would tighten money to offset any boost from fiscal policy. Hence, even though fiscal policy could work, it wouldn’t. Another view, however, is that the Fed isn’t doing QE3 primarily because of political worries around QE3 itself. If the US Congress and President Obama were to initiate a fiscal stimulus that they claim responsibility for, the Fed would be happy to stand pat and let the price level rise, issuing a statement about the continued existence of excess capacity and well-anchored expectations. This is a scenario considered by Scott Sumner:

This suggests the Fed’s previous actions have given her a “loose” reputation. She’s willing to be easy, but not that easy. Of course you and I know that monetary policy has been very tight. But what matters in questions of virtue are perceptions. And there are few areas of life more permeated by Victorian morality that monetary policy.

If this is the problem, then fiscal stimulus might just work. The Fed cares about the perceived stance of policy. It wants more NGDP, but isn’t willing to put out.

All things considered, this highlights the extent to which non-transparency and lack of accountability at the Fed has itself become a problem. A medium-sized fiscal boost might solve all our problems by sparking a self-sustained recovery, or it might be a total waste of money and which it is depends on one’s view of the murky internal politics of the central bank.

Jennifer Rubin proposes that the attacks yesterday in Norway are “a sobering reminder for those who think it’s too expensive to wage a war against jihadists.”

This of course would make no sense even if it were the case that the attacks were undertaken by jihadists as opposed to, say, anti-Muslim extremist Anders Breivik.

The Mayor of Oslo has, I think, the most sensible take of all arguing that “I don’t think security can solve problems. We need to teach greater respect.” I wouldn’t go quite as far as he does. Security certainly can solve certain specific problems. Any country would do well to ensure that a relatively small number of high-value targets are hardened such that even a well-armed madman determined to commit mass murder can’t get at them. But ultimately no security measure will provide absolute assurances against racist terrorist attacks, or jihadist terrorist attacks, or apolitical spree killings. The important thing is to keep the risks in perspective and to try to tackle social problems as best you can.