CORNELL UNIVERSITY

COLLEGE OF HUMAN ECOLOGY

DEPARTMENT OF POLICY ANALYSIS & MANAGEMENT
PAM 5340: REGULATION AND INFRASTRUCTURE POLICY
FALL 2014 SYLLABUS
When high roads, bridges, canals, etc., are in this manner made and supported by the
commerce which is carried on by means of them, they can be made only where that
commerce requires them, and consequently where it is proper to make them. Their
expenses too, their grandeur and magnificence, must be suited to what that commerce can
afford to pay. They must be made consequently as it is proper to make them. A
magnificent high road cannot be made through a desert country where there is little or no
commerce, or merely because it happens to lead to the country villa of the intendant of
the province, or to that of some great lord to whom the intendant finds it convenient to
make his court. A great bridge cannot be thrown over a river at a place where nobody
passes, or merely to embellish the view from the windows of a neighbouring palace:
things which sometimes happen in countries where works of this kind are carried on by
any other revenue than that which they themselves are capable of affording.
Adam Smith, The Wealth of Nations (1776)
Instructor: Dr. Rick Geddes
Office: 251 Martha Van Rensselaer Hall
Office Phone: 255-8391
E-mail: rrg24@cornell.edu
Office hours: Wednesdays, 10AM to 12:45PM, directly after class, and by appointment
Administrative Assistant: Ms. Angela Downing, Room 2250A, MVR Hall
Phone: 255-1199
E-mail: ald26@cornell.edu
Class Time: Tuesdays and Thursdays: 1:25PM - 2:40PM
Classroom: Statler Hall, Room 445
Academic Accommodations: Students with disabilities are entitled to equal access in all
university programs and activities. Students with disabilities should work with Student Disability
Services (SDS) (sds_cu@cornell.edu) to determine their best strategies for insuring access. The
SDS website is (http://sds.cornell.edu/). SDS will provide you with an accommodation letter that
will enable me to work with you on the logistics of appropriate academic accommodations. Once
you have the letter, please make an appointment with me to discuss your requirements as soon as
possible.
Course Description: This course examines public policies affecting the design, construction,
operation maintenance, funding, and financing of physical infrastructure, including water and

wastewater treatment, electricity, and transportation (e.g. roads, bridges, tunnels, ports and
airports), among other facilities. One focus will be on innovative approaches to funding,
financing, constructing, operating, and maintaining physical infrastructure. This includes
analysis of various forms of public-private partnerships, or PPPs. Another focus will be on the
regulation of private infrastructure provision, such as controlling market power in the pricing of
services, ensuring proper asset maintenance and high service quality. The course will include
theoretical approaches to infrastructure policy and detailed case studies, and will have a global
perspective.
Course structure: There are three main elements to this course: (i) in-class lectures; (ii) guest
speakers; and (iii) student group presentations. There are two main aspects of the lecture material:
(i) discussion of the basic economic concepts underlying infrastructure policy; (ii) application of
those theories to the infrastructure underlying specific network industries.
Learning Objectives: The objective of this course is to understand the main policy challenges
facing the delivery of physical infrastructure. Those include natural monopoly, asset specificity,
irreversible investment, and hold-up problems. Students will learn how public policies can be
used to help address those problems. Students will learn about alternative approaches to funding
physical infrastructure, and how innovative financing can help address infrastructure delivery
problems once it is funded. Students will also learn about new approaches to operating and
maintaining infrastructure, and how technology can be used to improve infrastructure delivery.
The course encourages critical thinking within a systems context and attempt to integrate
principles from engineering, planning, municipal finance and economics, the social, policy, and
decision sciences, and risk management.
Learning Outcomes: Students can expect to obtain the following specific learning outcomes from
taking this course:
Outcome 1: Students will acquire an enhanced understanding of the unique set of policy problems
that face the delivery of physical infrastructure.
Outcome 2: Students will better appreciate how policy can be used creatively to address many of
those problems.
Outcome 3: Students will have a better understanding of the infrastructure policy problems facing
countries around the world, as well as the similarities and differences in the problems faced.
Textbooks: The main textbook for this course will be Jose Gomez-Ibanez, 2003. Regulating
Infrastructure: Monopoly, Contracts, and Discretion (Cambridge: Harvard University
Press). This book will be used in conjunction addition to a variety of readings. This book is
available in the bookstore and on Amazon. Copies will be placed on reserve in Mann
Library.
We will regularly examine current issues related to infrastructure policy as discussed in popular
publications. Particularly relevant sources include the Wall Street Journal, the Financial Times,
business section of the New York Times, and The Economist, among others. I am grateful to students
who point out articles that are of particular interest, or are otherwise relevant for the subjects we are
studying.
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Blackboard: Please be sure to sign up for and check Blackboard frequently for announcements,
lecture slides, problems sets, and other information. I will utilize the Announcements function
regularly, and will only email students with particularly important information. All PowerPoint
slides will be posted on Blackboard.
Class Meetings and Format: The class format includes lectures assisted by both PowerPoint and
Blackboard, in-class discussions, occasional use of the document camera to display recent
newspaper reports and essays, and student in-class discussion. Because we are a relatively small
group, attendance at all class meetings is critical.
Academic Integrity: Fairness to your fellow students requires that late homework and unexcused
absences from exams result in a loss of points. Each student in this course is expected to abide by
the Cornell University Code of Academic Integrity. Although discussion of problem set questions is
permitted, any work submitted by a student in the course for academic credit will be the students
own work. If there are any questions about the code, see: http://www.cornell.edu/University
Faculty/docs/main.html.
Prerequisites: This course will rely on fundamental economic concepts to analyze government
intervention in economic activity. It will also examine papers that analyze infrastructure policy
empirically. Students should thus have taken principles of economics and basic statistics; the more
they have been exposed to those subjects the better.
Grading: Fairness in grading is a high priority. I will ensure that examination and homework
questions accurately test the material from the class discussions and the readings. Class grades will
be based on:
(1) Four problem sets, collectively constituting 10 percent of the final grade
(2) Class attendance and participation (including written guest speaker questions) constituting 10
percent of the final grade
(3) Two in-class prelim examinations, each constituting 20 percent of the final grade
(4) A comprehensive final exam, constituting 25 percent of the final grade
(5) A group project resulting in a 20 to 25 page term paper analyzing a particular infrastructure
policy problem (with in-class presentation), constituting 15 percent of the final grade
Fairness dictates that any appeal of grades result in re-grading of the entire exam or problem set in
question, rather than only a specific question. Requests for re-grading must be submitted in writing
within one week of the works return. You will receive a response in writing.
Group projects will be discussed in more detail in separate handouts. The group projects should
apply some of the key concepts discussed in the course to an infrastructure policy issue of the
students choosing. They should incorporate several of the following concepts (which we will
discuss) into its analysis:

Careful attention to how infrastructure policy affects economic efficiency (i.e. the size of
the pie). Does the project or policy in question increase overall social welfare? Does the
discounted social value of the benefits exceed the costs?
Careful attention to how the policy affects equity, or universal access to critical
infrastructure services, such as transportation and clean water
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Consideration of the project or policys historical background. How did it come to be

adopted? What was the role of politics versus economic efficiency in its adoption?
Knowledge of the institutional details surrounding the policy that you are studying (that is,
really knowing what you are talking about)
Examination of all available data (of various types, such as both qualitative and quantitative)
that will help to understand the policy and its effects; i.e., an attempt to measure wherever
possible
A concern for the unintended consequences of a particular policy intervention
Paying attention to the current policy debate on the issue

CLASS MEETING SCHEDULE AND CURRICULUM

Date
August

Sept.

Curriculum

Reading Due

Work Due

Tu. 26

Introductions; Course Overview, Course goals

Syllabus

Th. 28

Lecture 1. Policy Issues in Infrastructure: Overview

JGI Ch. 1,2

Scan the sites of major

infra players (below)
Hand in two examples of
new learning based web
browsing of this sector

Tu. 2
Th. 4

Lecture 2. Policy Issues in Infrastructure: Overview

Lecture 3: Policy Issues in Transport: Natural
Monopoly and Regulatory Capture
Lecture 4: Funding Issues in Transport: Road Pricing
and Fuel Taxes
Lecture 5: Policy Issues in Transport: PPPs and Infra
Investment
Lecture 6: Policy Issues in Transport: The
Fundamental Law of Road Congestion
Lecture 7: Policy Issues in Transport: Parking

JGI Ch. 1,2

Tu. 9
Th. 11
Tu. 16
Th. 18
Tu. 23

Th. 2

Lecture 8: Policy Issues in Transport: Megaprojects

and Risk
PRELIM EXAM ONE
Lecture 9: Policy Issues in Transport: Megaprojects
and Risk
Lecture 10: Policy Issues in Electricity

Tu. 7

Lecture 11: Policy Issues in Electricity

Th. 9
Tu. 14
Th. 16

Lecture 12: Policy Issues in Water

Fall Break: No class meeting
Guest Speaker: Peter Vanderzee, CEO LifeSpan
Technologies;
Lecture 13: Policy Issues in Airlines and Railroads

Th. 25
Tu. 30
Oct.

Tu. 21
Th. 23
Tu. 28
Th. 30

Lecture 14: Policy Issues in Urban Transport: Buses

and Rail
Lecture 15: Policy Issues in Urban Transport: Buses
and Rail
Guest Speaker: Tom Madison, Executive Director,
NY State Thruway Authority
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P; G&N, ODOT
E, RRG, W

Problem Set 1 due

DT
Manville
Readings, S
BF

Memo #1 Due

Lectures 1 to 8
BF

All Associated readings

JGI Ch. 6& Ch.

12, 13
JGI Ch. 6& Ch.
12, 13
JGI Ch. 9

Selection of groups and

group topics; outline for
policy briefs dues
Problem Set 2 due

JGI Ch. 9
JGI Ch. 8, Ch.
11

TBA

Develop (and hand in) two

written questions for

Nov.

Tu. 4

PRELIM EXAM #2

Th. 6

Guest Speaker: Dr. Martha Gross, Senior

Infrastructure Advisor, Arup (bio below; to be
followed by CPIP reception)
Guest Speaker: Steven Greenberg, Managing
General Partner, Fox Meadow Capital Partners
(bio below; to be followed by CPIP reception)
Lecture 16: Current Policy Issues Facing Infra:
Overview
Lecture 17: Current Policy Issues Facing Infra:
Overview
Presentation of student group topics
Presentation of student group topics
Presentation of student group topics
Presentation of student group topics
FINAL EXAM: Date to be announced

Tu. 11

Th. 13
Tu. 18

Dec.

Th. 20
Tu. 25
Tu 2
Th. 4
TBA

Lectures 9 to 16,
guest speaker
material
TBA

TBA

TBA

speaker
All Associated Readings

Develop (and hand in) two

written questions for
speaker
Develop (and hand in) two
written questions for
speaker
Prob. Set 3 Due

TBA
TBA
TBA
TBA
All lectures,
presentations,
and guest
speaker material

Prob. Set 4 Due

Final version of term
papers due

Abbreviations for readings:

TBA = to be announced.
EFG1 = Engel, Eduardo & Fischer, Ronald & Galetovic, Alexander, 1997. "Highway Franchising:
Pitfalls and Opportunities," American Economic Review, American Economic Association,
vol. 87(2), pages 68-72, May.
EFG2 = Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2006. "Privatizing Highways in
the United States," Review of Industrial Organization, Springer, vol. 29(1), pages 27-53,
September.
EFG3 = Eduardo M. R. A. Engel & Ronald D. Fischer & Alexander Galetovic, 2001. "LeastPresent-Value-of-Revenue Auctions and Highway Franchising," Journal of Political
Economy, University of Chicago Press, vol. 109(5), pages 993-1020, October.
ODOT = Oregon Department of Transportation, 2014. Road Usage Pilot Program 2013 & PerMile Charge Policy in Oregon, (published May 2014, available at:
http://www.oregon.gov/ODOT/HWY/RUFPP/docs/RUCPP%20Final%20Report%20%20May%202014.pdf).
PS = Parry, Ian W.H. and Kenneth A. Small, Does Britain or the United States Have the Right
Gasoline Tax? American Economic Review Vol. 95, No. 4 (Sep., 2005), pp. 1276-1289
(Article Stable URL: http://www.jstor.org/stable/4132715).
DT = Duranton, Gilles, and Matthew A. Turner, 2011. The fundamental law of road congestion:
Evidence from the US, (October) American Economic Review, 101(6):2616-52 (available
at:http://homes.chass.utoronto.ca/~mturner/papers/published/Duranton_Turner_AER_2011.
pdf).
G =Gramlich,E.M. 1994. Infrastructure Investment: A Review Essay, i 52(3): 1176-1196.
BF = Bent Flyvbjerg, Nils Bruzelius, and Werner Rothengatter, 2006. Megaprojects and Risk: An
Anatomy of Ambition (Cambridge University Press).
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RRG= R. Richard Geddes, 2011. The Road to Renewal: Private Investment in U.S. Transportation
Infrastructure (Washington, DC: AEI Press).
JGI= Jose Gomez-Ibanez, 2003. Regulating Infrastructure: Monopoly, Contracts, and Discretion
(Cambridge: Harvard University Press).
P = Poole, Robert, Ten Reasons Why Per-Mile Tolling is a Better User Fee than Fuel Taxes,
(available at: http://reason.org/files/why_tolling_is_better_than_fuel_taxes.pdf).
VVH = W. Kip Viscusi, John M. Vernon and Joseph E. Harrington, 2005. Economics of Regulation
and Antitrust, 4th edition (Cambridge: MIT Press).
G&N= Geddes, R. R., Nentchev, D. N., 2013. Road Pricing and Asset Publication: A New
Approach to Revitalizing U.S. Infrastructure, AEI Policy Brief, Washington, DC: American
Enterprise Institute (December 2013, available at: http://www.aei.org/files/2013/12/10/road-pricing-and-asset-publicization_12592596596.pdf, accessed August 4, 2014).
E= The Economist, Investing in Infrastructure: The Trillion-Dollar Gap, May 22, 201 (available
at: http://www.economist.com/news/leaders/21599358-how-get-more-worlds-savings-paynew-roads-airports-and-electricity).
W = Winston, Clifford, 2014. How the Private Sector Can Improve Public Transportation
Infrastructure, Reserve Bank of Australia, Conference Volume, pp. 163-87.
S = Shoup, Donald C., 2011. The High Cost of Free Parking (Chicago: American Planning
Association).
Examples of topics for Term Papers:
Students may choose any topic for their term papers that fits within the broad rubric of this class.
Topics can be taken from the Gomez-Ibanez book, the Geddes book, or from current policy
issues. Some examples of infrastructure policy issues that could be addressed in term papers
include:

Electricity unbundling in Mexico: where is this reform now, where is it going?

Charging for water use in Ireland: Where is the policy and what is the outlook
Overview of the role of new technologies in changing optimal infrastructure policy. Are
micro-turbines (for both hydro and natural gas) reducing the need for large electric
generating capacity and universal distribution systems? How do recent technological
developments affect the natural monopoly policy argument for infrastructure
regulation?
What is the broad outlook for nuclear power? Environmentalists are now supporting
nuclear power due to zero carbon emissions. Is this power source viable for transport (via
electric cars)?
Least-cost subsidy bidding? Is this model viable for transport more broadly? How about
LPVR auctions?
How to set up a PPP unit: what are its duties? What are its measures of success? How
large should it be? Size/source of tis budget? Should it have the task of monitoring and
overseeing PPP contracts? Should it have the task of educating people about PPPs? Are
Partnerships Australia and Partnerships BC good models?
How to set up a PPP unit to meet a specific countrys needs
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Value-for-money analysis: what are its benefits and shortcomings? Is there a better
replacement?
Water PPPs around the world: how successful; good versus bad models?
Paris and private participation in water? What is the nature of the fight?
Londons Heathrow airport noise problem tradable noise permit? Application of the
Coase Theorem?
Reporting on the issue of infrastructure resilience. What does this man and what are its
policy implications?
History of private roads in the U.S. (including wooden plank roads; see work by Klein &
Majewski)
Seattle boring machine disaster (i.e. Bertha; its stuck!); who should bear this risk?
Road pricing/tolling: overview of the Oregon Road Pricing Program
Policy issues in parking: pricing spaces and PPPs (e.g. Chicago Parking Meters PPP)
What are the best ways to gain public support for system-wide road pricing?
High-speed rail in the USA/abroad: how feasible; how to address the policy challenges
(new Florida line)?
How can we better incorporate technology into physical infrastructure?
What policy challenges do emerging technologies (such as driverless cars) present?
How to PPPs operate in the provision of stand-alone (i.e. non-network) social
infrastructure, including schools, prisons, and hospitals?
What policy challenges do emerging business models that use technology present (such
as Uber versus Lyft) present?
US adjustment to the new Panama Canal expansion? Are East Coast Ports ready?
Reform of the Port Authority of NY & NJ, or indeed overview of the authority model
(see new report at: http://wagner.nyu.edu/rudincenter/wpcontent/uploads/2014/04/PortAuthorityFINAL_Web.pdf)
Reform of U.S. parking policy

Resources for Group Projects and for Infrastructure Careers:

Newsletters:
Surface Transportation Innovations (edited by Bob Poole)
Innovation News Briefs (Edited by Ken Orski korski@verizon.net)
Public Works Financing Newsletter: http://pwfinance.net/
Infrastructure Investor: DailyDigest@Infrastructureinvestor.net
Trade Groups:
AASHTO (in general). Our contact is Joung Lee:
http://www.transportation.org/Pages/AASHTOStaff.aspx
AASHTO (Center for Excellence in Project Finance, specifically):
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http://www.transportation-finance.org/
International Project Finance Association: IPFA Events <Events@ipfa.org>
Government:
Federal Highway Administration, Office of Innovative Program Delivery:
http://www.fhwa.dot.gov/ipd/
Advocacy Groups:
Associate for the Improvement of American Infrastructure
http://aiai-infra.info/
Major Infrastructure Players (not exhaustive!):
Fluor
Cintra US
Clark Construction Group
ACS
Kiewit
Parsons Brinkerhoff
Skanska
Star America
AECOM
HNTB
Parsons Corporation
Iridium
Ferrovial
United Water
Abertis
Globalvia
Veolia Water
Sacyr Concessions
Ernst & Young
HDR Consult
Arup
CDM Smith
CH2M Hill
Meridiam Infrastructure
OHL Concessions
LifeSpan Technologies (http://lifespantechnologies.com/)
Major Law Firms:
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 Nossaman, LLP
Mayer Brown
Osler
Guest Speaker Short Bios:
Dr. Martha Gross
Senior Infrastructure Advisor, Arup
Martha is a senior infrastructure advisor at Arup for transportation megaprojects. Her work in
the firm's Transaction Advisory practice has advanced large public-private partnership initiatives
in both the planning and construction stages as lenders' technical advisor, translating between
technical and financial stakeholders for privately-financed tunnel and highway projects. In her
current role, she serves in senior commercial management for the New York State Thruway
Authority to deliver New York's $3 billion Tappan Zee Bridge replacement. Having started her
career as a hands-on field construction worker, she spent seven years in the heavy-civil
contracting industry developing large transportation projects along the east coast. She
subsequently earned an MBA and PhD in infrastructure finance and delivery, building on
previous degrees in civil engineering, and is a licensed civil engineer. With past experience as
adjunct teaching faculty, she continues to maintain close connections to academia and frequently
speaks and writes on infrastructure topics. Martha has a MBA, PhD-Civil Engineering from
Virginia Tech and a BS and MEng in Civil Engineering from Pennsylvania State University.
Martha also serves on the Advisory Council of the Cornell Program in Infrastructure Policy. See
more at: http://www.human.cornell.edu/pam/cpip/advisory_council.cfm#sthash.cEVkWl4Z.dpuf
Steve Greenberg
Managing General Partner, Fox Meadow Capital Partners
Steve is a senior finance professional with 20 years of experience in private equity,
infrastructure, mergers and acquisitions, and financing. He founded Fox Meadow Capital
Partners, a private equity investment and advisory firm, in 2007 and currently works on
infrastructure investments with some of the world's largest infrastructure funds. He also has
operating experience in electric power, cellular, landline communications, and various media
businesses. Mr. Greenberg has taught an advanced private equity course for Cornell's graduate
engineering and business schools since 2008. He received a BS from Cornell's College of
Engineering in 1989, an MBA from the Johnson Graduate School of Management in 1990 and a
JD from Stanford Law School in 1998. Steve also serves on the Advisory Council of the Cornell
Program in Infrastructure Policy. See more at:
http://www.human.cornell.edu/pam/cpip/advisory_council.cfm#sthash.cEVkWl4Z.dpuf
Thomas J. Madison, Jr.
Executive Director, New York State Thruway Authority
Tom Madison is the Executive Director of the 570-mile Thruway and the 524-mile Canal
System. As Executive Director, Mr. Madison oversees the day-to-day operations of the Authority
while directly reporting to a Board of Directors consisting of seven members appointed by the
Governor of New York State. Prior to joining the Authority/Corporation, Mr. Madison had held
a variety of executive positions in private industry including Vice President for STV Inc, of New
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York City and President of Spectra Subsurface Imaging Group, LLC. Mr. Madison also held
high level positions with Federal and State government including Federal Highway
Administrator at the U.S. Department of Transportation, as well as Commissioner of the New
York State Department of Transportation where he oversaw the states vast transportation
network. Prior to his time at NYSDOT, Madison served as Deputy Secretary and principal
transportation advisor to Governor George E. Pataki of New York, where he provided executive
management to state transportation agencies and authorities. Madison was also the Director of
the New York State Bridge Authority, and had previously served as Chairman of the
Metropolitan Transportation Authoritys Capital Program Review Board. Mr. Madison is a 1988
graduate of the State University of New York at Geneseo, and has a Bachelor of Arts degree in
Political Science with a minor in International Relations.

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