The Full Costs and Benefits of Transportation

Frontmatter

The Full Costs and Benefits of Transportation: Conceptual and Theoretical Issues

Abstract

A growing number of studies in Europe and the U.S. have addressed the full, public and private, monetary and nonmonetary, intended and unintended costs of transportation systems. This chapter reviews key conceptual and theoretical issues in the identification and measurement of transportation’s costs and benefits. Three different perspectives are identified: 1) promoting economic efficiency, 2) comparing alternative states of the world and, 3) evaluating questions of equity. Each implies a different paradigm and requires different methods of analysis. As a preface to the Conference on Measuring the Full Social Costs and Benefits of Transportation this chapter briefly describes each perspective and attempts to identify unresolved questions and clarify critical areas in need of further research. The book’s final chapter by Lakshmanan, Nijkamp, and Verhoef sums up and identifies directions for future research.

David L. Greene, Donald W. Jones

The Annualized Social Cost of Motor-Vehicle Use in the U. S. Based on 1990-1991 Data: Summary of Theory, Data, Methods, and Results

Abstract

Every year, American drivers spend hundreds of billions of dollars on highway transportation. They pay for vehicles, maintenance, repair, fuel, lubricants, tires, parts, insurance, parking, tolls, registration, fees, and other items. These expenditures buy Americans considerable personal mobility and economic productivity.

Mark A. Delucchi

Full Social Cost of Transportation in Europe

Abstract

The acknowledgment that transportation cost is a complicated matter and that natural market price does not cover the full social cost is very ancient in Europe, but has gained new interest since the beginning of the 1990’s. Many studies have been devoted to this topic, encompassing both methodological and numerical results; these results are always subject to arguments between scientists, lobbyists and decision-makers, since their consequences for transport policy are paramount. So they deserve special attention, and the purpose of this communication is to present and discuss this experience with full transportation cost estimation, and the related scientific and political issues: (1) is there any agreement on methodology of calculation, on results; (2) what is the impact of these full transportation cost calculations on policies; and (3) what should be the directions for further research?

Emile Quinet

Uses and Meanings of Full Social Cost Estimates

Abstract

Social costs include all costs to society, direct or indirect, monetized or in-kind, incurred by private individuals and firms or by collective entities up to and including the planet. Costs occurring outside private markets, such as environmental externalities, are of special concern. Government decisions need to be informed by cost information that is comprehensive and consistent, whatever its source. Many of these costs have only gradually become recognized, some have not been valued, and many of those that have been valued are not comparable across transportation modes. Whether for purposes of active management of transportation systems, for monitoring their status and performance, or for evaluating policies or projects, full social cost information is at least valuable and often essential.

Douglass B. Lee

Estimating Whether Transport Users Pay Their Way: The State of the Art

Abstract

Studies of whether transport users pay enough special taxes and fees to offset the costs they impose on society at large have proliferated in North America and Europe since 1990, largely because environmental groups have argued that pollution and other social costs should be considered more systematically in transport planning. Before 1990, most studies of whether transport users paid their way focused exclusively on whether they pay the costs of constructing and maintaining highways and other infrastructure and services provided by government. The studies ignored other costs economists call “externalities,” which are defined as costs that the producer or user of a good or service imposes on others through mechanisms other than the market. In the case of transport, typical externalities are the health damage caused by motor vehicle air pollution or the delays a road user causes other motorists because his use of the highway increases traffic congestion.²

José A. Gómez-Ibáñez

Externalities, Prices and Taxes: Second Best Issues in Transportation

Abstract

In my undergraduate course in environmental economics, after the usual treatment of externalities, Pigouvian taxes, and their application to air and water pollution control, I ask the students to spend a class hour identifying all of the incorrect price signals (externalities, subsidies, etc.) surrounding the use of the automobile for transportation in the United States. The students usually manage to fill a blackboard with examples of market failure. But the end of the hour comes too quickly. So I am never able to spend more than a minute or two talking about means of correcting these market failures with things like congestion tolls and pollution taxes on air emissions. Thus, when I was asked to write a paper for this conference, I did not feel well prepared for the task. But, I welcomed the opportunity to read in a literature that I was not particularly familiar with and to think about the use of market based instruments for controlling externalities in a new (to me) context.

A. Myrick Freeman III

Efficient Use and Provision of Transportation Infrastructure with Imperfect Pricing: Second Best Rules

Abstract

Over the last five years, there has been a re-thinking of the way in which transportation infrastructure services are priced, financed, managed and delivered. The position taken by politicians and policy makers that roads and highways, ports, and airports and airway systems were part of social overhead capital to be provided by government at less than full cost has been challenged. There are many who contend that users should pay all costs including a charge for environmental damage.² Within this group, however, there is not agreement as to how this might be achieved. The other stimulus to re-thinking pricing of transportation infrastructure is a shift to fiscal conservatism with an emphasis on efficiency.

David Gillen

Benefits and External Benefits of Transport: A Spatial View

Abstract

This paper inquires into the benefits of transport. We start by showing how transport is derived from the demand for other goods. Consequently, benefits can be directly related to the latter in terms of economic and social activities. These benefits relate to different dimensions: goods space (public-private), economic space (i.e., market structure) and geographic space. We will analyze to what extent a benefit in the (primary) goods market is also revealed in the (secondary) transport market.

Once we have inquired into the benefits, we analyze the question of external benefits which may relate to the demand or to the supply side of the transport market proper; we look further into potential links between externalities in the goods’ market and in the transport market. We define a “social transportation function” in contrast to the usual transportation function.

We find that market economies have an in-built tendency to capture emerging external benefits unless institutional settings oppose this. We argue that benefits of transport which are not captured by the market either imply some arbitrary definition of groups which make externalities identifiable (these delimitations of groups in a certain way even define the externality) or relate to evolutionary economic processes with open trajectories.

Ulrich Blum

Behavioral Value of Travel Time Savings in Personal and Commercial Automobile Travel

Abstract

This paper reviews the broad literature on the behavioral value of travel time savings. Specific consideration is given to the economic theoretic foundations and their translation into suitable empirical models; and the sources of variability in empirical values. We detail the merits of the stated preference approach when the interest is on the empirical specification of a valuation function in contrast to a single mean estimate of the value of travel time savings. A case study related to the choice between a tolled and a free urban route is presented as a framework within which to illustrate how economic theory and experimental design can be combined to improve the evidence on behavioral values of travel time savings in a number of travel market segments.

David A. Hensher

Societal Costs of Transportation Crashes

Abstract

Safety is a major concern in any transport system. Deaths, injuries, and property damage, together contribute significantly to the societal costs of transportation.

Ted R. Miller

Congestion Costs and Congestion Pricing

Abstract

Pricing congested roads generally produces efficiency gains. Unless toll revenue is carefully distributed, however, road pricing would also make most drivers worse off, particularly those with low incomes. We analyze these potential income-distributional effects for the Twin Cities area by calculating network equilibria. Our analysis allows the demand for travel to be price-sensitive and drivers to differ in the valuations they place on time. Pricing all congested roads optimally would increase total travel costs by 18–42% depending on the elasticity of demand for travel. With unit-elastic demand, pricing would increase travel costs by 31% and 5% for, respectively, the lowest and highest income groups examined.

David Anderson, Herbert Mohring

Transportation and Air Pollution: The Environmental Damages

Abstract

This paper examines estimates of the damages caused by air pollution emissions from transportation sources. The paper first provides a summary of dollar per gallon air pollution damage estimates from twenty studies. Next, new nationwide estimates of damages associated with air emissions are presented. Finally, three key issues in the estimation of damages are discussed.

Alan J. Krupnick, Robert D. Rowe, Carolyn M. Lang

Employer-Paid Parking: A Nationwide Survey of Employers’ Parking Subsidy Policies

Abstract

Ninety-five percent of automobile commuters in the United States park free at work. To deal with the traffic congestion and air pollution caused by parking subsidies, California law now requires many employers to offer employees the option to cash out their parking subsidies. Similar Federal legislation has been proposed. This nationwide survey found that employers in the United States offer employees 84.8 million free parking spaces. Employers own 65.3 million of these free parking spaces, and rent the other 19.5 million. Employers of fewer than twenty employees provide more than half of all employer-paid parking spaces.

Donald C. Shoup, Mary Jane Breinholt

Full Benefits and Costs of Transportation: Review and Prospects

Abstract

Since transportation is a part of every good and service produced in the economy, the transportation system in an affluent and highly industrialized economy is a very large enterprise. In the U.S., the transportation system accounts for over 4 trillion passenger miles of travel and almost 4 trillion miles of freight, generated by over 260 million people, 6 million business establishments, and 80,000 units of government. Every tenth American worker is engaged in moving people or goods, fabricating, selling, or servicing transport vehicles and infrastructure, or providing other crucial services supporting the transportation system. Indeed, transportation accounts for about 11% of the U.S. gross domestic product—a contribution roughly comparable to major functional sectors such as food (12%), health (14%), and education (7%).

T. R. Lakshmanan, Peter Nijkamp, Erik Verhoef

Backmatter