Category Archives: economics

The Theater of Public Policy – in Tweets

The Road Ahead: County Transportation Funding and Financing

There is a nice interactive by the National Association of Counties (by my former co-author Emilia Istrate and others): The Road Ahead which maps the variety of financing issues facing local governments in the US.

The Road Ahead
The Road Ahead

There is a huge variety of organization across the United States. The page notes:

The interactive provides individualized PDF profiles for 43 states where counties have authority over roads and/or bridges. Counties in four states (Delaware, North Carolina, Vermont and West Virginia) do not have authority over both roads and bridges. New Hampshire counties do not own roads and only one county (Belknap County) owns a bridge. Connecticut and Rhode Island do not have county governments and are not included in the study. They are marked in gray on the map.

So why do we need 3 or even 2 levels of government managing roads when some states can do with one? [See Jurisdictional Overload]. Should this be government owned (or executive branch controlled) at all when other utilities are cooperatively or privately managed and publicly regulated? In this era of declining demand for travel, it is seriously time to rethink how we manage roads. Some rationalization is in order.

See also Enterprising Roads.

Bastion of Socialism

ILikeIke

I have long said roads are the last bastion of socialism in the US. While I had to temper those remarks after the US nationalized the auto industry and some banks during the Crisis of 2008; now that those holdings have been sold off, we are back to highways as the flagship of US Socialist Enterprise.

The Interstate Highway System was fathered in part by that life-long state bureaucrat (and in the end, Republican) Dwight David Eisenhower (he had a short stint in the “private” sector as President of Columbia University, but even then, he soon returned through the revolving door back into Washington, serving as Chair of the Joint Chief of Staffs, and then as head of NATO before becoming President).

Socialism “is an economic system characterized by social ownership of the means of production and co-operative management of the economy.”

Almost all the roads in the United States are state-owned (either by states, counties, or cities or towns). They are allocated first-come, first-serve, without regard to wealth (aside from the entry cost of owning a vehicle), paid for by taxes (some on users, some on land owners, some otherwise). One might almost say “from each according to his abilities, to each according his needs.”

A critique of such socialist, (or dare we say it, communist), allocation schemes is that they are inefficient, they allocate resources poorly. Queues are quite common due to undersupply and lack of a real-time price signal (which gas taxes cannot replicate). Clearly we still see congestion, which is nothing if not queueing.

However, not all roads have always been socialist, many were initially private turnpikes. (They were also largely unprofitable). There are even a handful of private highways in the US today (and far more in other countries). Other places have non-profit but non-government private road associations (even nominally socially democratic Sweden has two-thirds of its road network managed this way).

But efforts at building new private roads are highly constrained. For one, these private roads are competing against subsidized (“free”) public roads, limiting their pricing powers. Second, the public has an exclusive monopoly on the power of eminent domain, enabling it to build roads without the hold-up problem that a private entrepreneur trying to fashion a means of production through the fields of others might face. Yet even opportunities that might suggest a perfect opportunity, for instance a bridge between two states with little nearby competition, is built by the government because there clearly is insufficient benefit to attract a private firm. Third private roads are subject to taxes, while public roads are tax-free.

(Now wipe away those tears, put away that tiny violin playing that small sad song, we come not to weep for poor capitalists).

Should roads be socialist? If they are socialist, what government should govern?

Though in politics, words like communist, socialist, and capitalist are thrown around as pejoratives, when we actually decide whether a sector is public or private, it is usually based on history, a set of contingent events that could have played out differently. In the US, transit was private, now it is public. Railroads are private. In the UK, bus transit was private, than was public, and again is privately provided (under public franchise agreement), but railway track (to a first-order approximation, the legalities are complex) is public.

There is no universal principal, unless you are a Marxist or an anarcho-capitalist. As Hans Rosling says “People who don’t like government, go into this corner and discuss Somalia, People who don’t like markets, go into that corner and discuss North Korea.”

Pragmatics decide. Many things are clearly better in the private sector, we are collectively (if not unanimously) confident the government could not provide the same quality good for the price. Other things are clearly better in the public sector, since the private sector cannot provide the good as universally as we desire for technical reasons (free rider problems for instance.) We have multiple goals, efficiency is among them, though equity may also be important.

I like this table (and used it earlier in a post: Markets Attack!):

Excludability
Yes No
Rivalry Yes Private “Congesting”
No Club Public

Public goods are non-excludable and non-rivalrous, (uncongested arterials)

Private goods are both excludable and rivalrous. (congesting, limited access highways)

Club goods (for instance a country club membership) are excludable, but non-rivalrous (in the absence of crowding). (local neighborhood streets, which only neighbors and their visitors would use, or rural roads serving local markets)

Congesting goods are rivalrous but not excludable, for instance a crowded street. While an individual cannot be excluded from a city street that person’s presence may cost you extra time and his occupation of space does prevent you from occupying the same space at a given time.

Roads fall under any of the four categories, depending on their characteristics. Even if they are “public”, which public becomes a question, as there are multiple layers of government, and as the Swedes show, one can easily create new special layers of government for the purpose of managing roads, which have spatially distinct sets of users.

Against this differing nature of roads falls the idea that there must be some economies of scale in managing roads (even if there isn’t much at the margins). Clearly everyone maintaining the road in front of their own home would be costlier than some centralization (a homeowners association, a town), since not everyone has specialized tools to do proper maintenance, and has little incentive to monitor. So even if in the absence of these economies, there would be an argument for different owners, with the economies, we may sacrifice some type of efficiency for another.

A feature (or bug) of socialized roads is the lack of pricing. This of course is not required, but far more likely, as socialized roads are subject to more political interference than a different governance structure.

The auto-highway system is mature, it is on the cusp of decline. Many declining sectors demand (and get) public subsidies they may not have needed during growth. In the US roads have been getting subsidies (though user fees could easily be adjusted to avoid this, the evidence is the range of prices globally). But this is also an opportunity to experiment, to find different models for managing the system (since there is little controversy about maintaining the existing network, while there is great controversy about building new roads, which we seem not to be doing much of any more).

There is not one model, transportation is a big sector, and what is public and what is private is fluid.

Are there too many roads?

With today’s news that President Obama is coupling tax reform with a renewed call for a major infrastructure investment (following up on his fix-it-first proposal in the State of the Union Address), we should ask the Goldilocks question: is our road infrastructure too little, just right, or not enough? Of course this depends on how, there is not simply a “lump of roads”, but rather roads of particular designs, connecting particular origins and destinations, with a length, width, and depth.

This discussion is US-centric, but applies to many developed countries. Developing countries are not there yet.

Too Little:

  1. On the side of “too little” are some economists, following on the heels of David Aschauer’s work in the 1990s about the infrastructure investment shortfall. The claim is that infrastructure investments drive economic growth.
  2. There are arguments about economies of agglomeration, which infrastructure may enhance, by operating through accessibility. To the extent accessibility increases, agglomeration increases too. This is likely to be non-linear, but may be increasing or decreasing in a particular range.
  3. There is also the stimulus argument, from macro-economists looking for useful jobs projects, to employ the unemployed.
  4. Having some redundancy in the network is also valuable, as it makes the network more robust to failures (such as terrorist acts, bridge collapses, or superstorms).
  5. Stronger roads and bridges would enable buses and trucks to be more efficient by carrying more weight.

Too Much:

  1. On the side of “too much” are arguments like those in the “Strong Towns” movement who argue that we can’t afford to maintain the infrastructure we have.
  2. Also worth noting is the lack of economic development impacts of most new investments.
  3. History suggests that if demand has peaked, supply is probably also at the peak of what we can support. This was true of rail in the 1920s, at which point the mileage of rail networks (both intercity and urban) declined. This may now be true of roads, with peak travel occurring, as we see rural areas continuing to depopulate, some places considering gravelization, some urban freeways being taken down and not replaced.
  4. It is clear we under-price what we have, so naturally that leads to more consumption than if we properly priced things. It is also clear the roads sector (and some other transport sectors) are in the mature phase of development, and roads have at best diminishing returns on investment, if not zero or negative returns.
  5. It is also clear that most roads are mostly empty most of the time, and that we build many roads far wider than are needed, so wide they can be used to store cars 24 hours a day.

I would conclude, that in general, we do have too much road infrastructure.

We mostly have too much width, perhaps a bit too much length (e.g. we could reduce the rural grid from a 1 mile to a 2 mile spacing in many places), and generally not enough depth (pavement thickness).

Some of the excess width and length should be gracefully abandoned. It may not be worth demolishing, but entropy can have its course. When it is to be rebuilt, it can also be appropriately rescaled. The term road diet is sometimes used, and applies in some cases.

That does not mean that we have all the infrastructure we need. There are surely some investments that have benefits that exceed their costs.

It also doesn’t mean that all infrastructure should be abandoned. Most infrastructure is quite useful, and we have developed land conditioned on the existence of that infrastructure. So abandonment is not necessarily practical.

So in contrast with the Betteridge’s Law of Headlines that any question in an article title is answered with a “no”. Here I think the answer is generally yes.

Cost per Daily Passenger Mile

Yesterday I posted cost per rider. This of course is biased against long trips, since one of the things a transit service does is move people distances. Moving longer distances may be more valuable (on the other hand, we don’t want to subsidize longer trips). Another simple calculation is presented, this time, dividing cost by daily passenger miles. Since I don’t know the trip lengths on the various modes (even if I had the forecast models, I doubt it), I use the APTA Fact Book, which gives what I think are reasonable estimates. I made up the Red Line number, since they didn’t have Commuter Bus, but otherwise these seem plausible. [If someone has actual data on this, please chime up, I will gladly update the spreadsheet]. Notably, (and not surprisingly) the rankings change slightly (SWLRT comes out worse than Northstar and the Red Line by this metric). The general conclusion does not (arterial BRT is still more cost effective). Sources of data are given in yesterday’s post, or are wikipedia.

Another criticism is that the cost are more than just required for transit, and include things like park and ride and roadway reconstruction. I agree. Blame the funders, I am using their data to describe the project.

A third criticism is that ridership will go up over time. This may or may not occur, but if you believe it will, you can adjust accordingly.

More importantly these critiques apply to all of these projects to a greater or lesser extent, and might bend the numbers, but don’t change the fundamentals.

Route

Cost

Ridership

Line Length

Trip Length

Cost per Rider

Cost per Daily Passenger Mile

Red Line

112000000

800

16

12

140000

11667

Northstar

317000000

2400

40

24

132083

5503

SW LRT

1820000000

30000

12

4.7

60667

12908

Green Line

920000000

42170

11

4.7

21816

4642

Blue Line

715000000

34000

12.3

4.7

21029

4474

Snelling aBRT

25000000

3500

10.3

3.9

7143

1832

Trip Length estimates from:
APTA Fact Book Table 7

International Transport Economics Conference: Submission Deadline Nov. 21

International Transport Economics Conference
Incorporating the International Conference on Funding Transport Infrastructure
The International Transport Economics Conference (ITrEC) brings together researchers, practitioners, and policymakers interested in questions of transport economics. Topics include economic questions relating to revenue and finance; congestion, pricing, and investment; production function and cost estimation; transport demand; energy and environment; safety; institutions and industrial organization; and transport and land use. The conference is designed to appeal to participants from varied backgrounds, including economists and transport professionals in particular.
The conference has previously been held in Banff, Canada(2006); Leuven, Belgium (2007); and Paris, France (2008).
Submission of Abstracts
Abstracts will be categorized and ranked by peer reviewers. Theoretical, empirical, case-study, and policy-oriented contributions are welcome. Abstracts of up to 1,000 words must be submitted electronically at http://www.transporteconomics.org by November 21, 2008 for consideration.
Key Dates
Abstracts Due: November 21, 2008
Abstracts Selected and Submitters Notified: January 2009
Final Papers Due (subject to acceptance): April 3, 2009
Early Registration Deadline: May 15, 2009
Conference: June 15-16, 2009
More Information
David Levinson
RP Braun/CTS Chair in Transportation
University of Minnesota
dlevinson {at} umn.edu
Sara Van Essendelft
Conference Coordinator
University of Minnesota
612-624-3708
cceconf5@umn.edu
The conference is hosted by the Center for Transportation Studies at the University of Minnesota.

Journal of Transport and Land Use.

We are pleased to announce the Journal of Transport and Land Use.
What, you ask? Another journal amidst an already overcrowded field?
Yes, we respond enthusiastically! Several journals touch on the interaction of transport and land use; however, they do so peripherally. This new venue puts both transport and land use front and center. We seek to be the leading outlet for research at the interdisciplinary intersection of these two domains, including work from the domains of engineering, planning, modeling, behavior, economics, geography, regional science, sociology, architecture and design, network science, and complex systems.
The Journal of Transport and Land Use (JTLU) will be peer-reviewed, web-based, open-content, subscription-free, and free to contribute. All of this is enabled by support from the Center for Transportation Studies at the University of Minnesota, where the journal will be housed. The advantages of this new journal and new process are several:
1. With a rigorous peer-review process, only quality papers that meet scientific standards will be published within the journal.
2. By being web-based (and web-only), we reduce costs significantly compared with paper journals. Web-based publication allows a much faster turnaround time than paper publication. Our goal is six weeks between submission and first reviews returned to the author. Being web-based also allows the inclusion of full color graphics and multi-media content, and the inclusion of datasets with the publication.
3. By being open-content, papers published in JTLU can be freely distributed (with attribution), increasing the value of papers published in the journal, and increasing their likelihood of being used in course readers and being read by the public.
4. By being subscription-free, we overcome a fundamental problem of today’s expensive journals published by for-profit publishers, which many libraries can no longer subscribe to.
5. By being free-to-contribute, we overcome the burden of the open-content journals that charge the authors to publish their paper.
We are now soliciting papers covering topics at the intersection of transport and land use. Details about the journal, its editorial process, and paper submission can be found at the journal’s website http://www.jtlu.org .
If you are interested in organizing a special issue, please contact one of the editors.
There will be a meeting at the World Conference on Transport Research in Berkeley to discuss the journal, contact the editors for details.
We look forward to any comments, questions, or suggestions you may have.
Sincerely,
David Levinson and Kevin Krizek
David Levinson
Richard P. Braun/CTS Chair in Transportation Engineering
Director Networks, Economics, and Urban Systems (Nexus) Research Group
University of Minnesota (612) 625-6354
dlevinson@umn.edu

http://nexus.umn.edu

Kevin J. Krizek
Associate Professor, Urban Planning & Civil Engineering
University of Minnesota (612) 625 – 7318

http://www.kevinjkrizek.org