Why transportation costs too much, 4 more explanations

A Transportationista who wishes to remain anonymous sends this in response to Why Transportation Costs Too Much, 39 Hypotheses and Counting:

"It occurs to me that transportation in the United States is usually underpriced at the user level. For instance, when I get in my car and drive to the store the variable costs I incur are minimal. If I take the bus the cost to me is low because the service is heavily subsidized. But while the direct cost to transportation system users is generally modest it is certainly true that as a society we spend a lot on transportation, much of which is in the form of fuel taxes and license fees of various kinds. I won't venture an opinion on whether we are spending the "right" amount, but in any case we spend quite a bit. Perhaps the question should be "why don't we get more for what we spend?"

In addition to the reasons you have already listed consider the
following possible explanations:

1. Transportation agencies attempt to provide high levels of peak
capacity to accommodate the demand that results from un-priced roads and
highways. This is very costly capacity to provide. If tolls were charged
that reflected true costs people would drive less, especially during
peak hours. It would therefore cost much less to provide the
economically optimal amount of peak system capacity.

2. Federal funding programs create perverse incentives that lead to
very costly capital projects. Almost any project looks good if somebody
else is paying for most of it. For example every year billions of
dollars are spent on passenger rail projects that would never be funded
were it not for generous Federal grants. Just look at the high speed
rail program or the FTA New Starts program. There are examples on the
highway side too, such as bridges to nowhere and freeways in rural areas
with little traffic. These Federal programs, no matter how well
intentioned, tip the local decision making process in favor of expensive
capital projects and discourage consideration of lower cost options and
policy reforms.

3. Most of the transportation system is owned, planned, and managed by
public agencies. These entities have many objectives but efficiency and
cost-effectiveness are rarely a high priority. The public sector does
some things well but it doesn't usually do them very efficiently (I say
that as an experienced bureaucrat). As a result transportation revenues
are not always efficiently converted to transportation user benefits.

4. Because transportation involves a large number of public agencies
with overlapping or intertwined responsibilities planning is complex and
inefficient. Projects end up with all the bells and whistles needed to
satisfy the agencies and constituencies that could block a proposal.
Local elected officials often load up regional plans with pet projects
that do little to improve transportation system performance. There is a
whole science to how public agencies bargain with each other and
interact, unfortunately the results are rarely optimal from a
cost-effectiveness perspective. The principal/agent problem is part of
the reason for this, but only a part. In nearly every metropolitan area
in the United States institutional structure results in transportation
plans and policies that fall far short of the cost-effectiveness that
could be achieved.

These four factors help explain why we have difficulty efficiently
converting our large transportation expenditures into user benefits.
However, it does not explain why we spend as much as we do. That is a
somewhat different question the answer to which has more to do with
other relationships. In particular, a number of studies have shown that
people tend to spend a relatively constant percentage of their income on
transportation. So it follows that a wealthy society like ours will
spend a lot on transportation because we have a lot to spend. I would
add that mobility has a very high value and as our cities spread out and
decentralize that value may be increasing. Being able to travel around a
region confers huge benefits in terms of employment, education,
shopping, etc. Given those large benefits perhaps we should not be
surprised at our willingness to pay. Now the challenge is to enact the
institutional reforms needed to more efficiently use transportation
revenues so those expenditures yield greater benefits."

David Levinson

Network Reliability in Practice

Evolving Transportation Networks

Place and Plexus

The Transportation Experience

Access to Destinations

Assessing the Benefits and Costs of Intelligent Transportation Systems

Financing Transportation Networks

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This page contains a single entry by David Levinson published on February 27, 2012 3:36 PM.

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