Category Archives: Economics

The Transportation Empowerment Act as a Model for Conservative Policymakers | The Agenda

Reihan Salam at The Agenda writes  The Transportation Empowerment Act as a Model for Conservative Policymakers. He quotes Enterprising Roads. He writes:

Meanwhile, other conservatives states might eventually establish public road enterprises, as the University of Minnesota transportation economist David Levinson has proposed:

The United States should follow Australia and New Zealand’s lead, and transform its state Departments of Transportation (or the highways divisions thereof) into separate, publicly regulated, self-financing corporate entities. Full-cost accounting—as already performed by Arizona’s Department of Transportation—constitutes a necessary first step in this direction. In making the transition, policymakers should strive to impose regulation only where absolutely necessary, to minimize the anti-competitive effects of any such regulation, and to leave social objectives to the government, thereby freeing road enterprises to focus on economic ones. Accordingly, road enterprises should be permitted to pursue cost-effective contracting and public private-partnerships as they see fit.

The new road enterprises should also be given latitude to make greater use of user fees—as opposed to general revenue—for funding their activities. Such charges are not just more efficient and equitable than traditional funding sources; if properly designed and implemented, they are also better suited to reducing congestion through effective pricing. Vehicle-miles-traveled charges, weight-distance charges and electronic tolling are all options that road enterprises should be free to pursue.

Over time, states will develop transportation strategies tailored to their particular circumstances. Densely-populated states like New York and New Jersey might choose to devote resources to creating Helsinki-style mobility networks while a state like Utah might instead choose to invest in a more expansive road network to support exurban development. States would no longer be hampered by the imperatives of national politics, and the most cost-effective, consumer-friendly state transportation bodies will find eager imitators across the country.

 

Bus Toll Lanes

Complementing recent discussions about transit systems, RF passes this along about Bus Toll Lanes. The idea is basically a HOT lane  (e.g. MnPass) where the transit agency helps finance the lane and gets an equity stake in the BTL, so revenue (profit) is dedicated for the bus service. Obviously, whether this pencils out depends on local conditions, demand patterns, costs, etc. This might work where a bus lane by itself would not have sufficient buses per hour to fully utilize the capacity, but coupled with a limited number of toll users it would, and it has enough toll users to justify installing ETC equipment.

Transit advocates may perceive that this is a highway use raiding what are seen as scarce transit funds. This is particularly an issue with grants; at least loans would get paid back. Sadly we are very silo-ed in the  transportation sector, so achieving multi-modal solutions like this is challenging. Ideally with a Transportation Bank, the mode would not matter, just whether it could pay back the loans.

Some reports from Tampa are here. They write:

Imagine a transit solution that reduces traffic congestion and pays for itself

By combining the individual strengths of transit and tolling, Bus Toll Lanes gives travelers a real choice by providing sustainable, competitive options.  This public partnership will fund the construction and operations of this transit solution.

“BTLs offer premium transit service on dedicated lanes added to local highways.

These dedicated transit lanes allow private vehicles to pay a toll to travel in the lanes.

With tolls collected electronically, (no toll booths, no toll booth congestion) all vehicles in the lane will maintain free-flow operating speeds.

Construction and operation of the Bus Toll Lane would be funded with a combination of public transportation sources (such as federal grants) and tolls collected from users.

Toll revenue collected from private vehicles are re0invested into the transit agency to at least cover the operational and maintenance expenses.

Combining short-term public transit capital project funding with long-term toll revenue and  real-world business practices, BTL is an innovation that creates a financially feasible, self-sustaining public transportation solution.”

How to Make Mass Transit Financially Sustainable Once and for All | CityLab

I have a post up at CityLab (was Atlantic Cities): How to Make Mass Transit Financially Sustainable Once and for All: The seven-part case for operating public transportation as a public utility.

The words “transit” and “crisis” have been associated in the American lexicon for nearly 60 years. It is time to recognize this as a chronic condition rather than a temporary event. Current strategies have not placed transit on a financially sustainable path.

Continue reading

More on “Transport as Utility”

Fred Salvucci, former Massachusetts Secretary of Transportation, and now at MIT writes in a comment on Transport as Utility:

This topic is very interesting. Our electric utility systems fail temporarily and rarely, and we are so shocked that there are political investigations when it happens. (Why did it take so long to restore service? Why did the disruption occur to begin with?) A few decades ago there was serious discussion of lifeline concepts to provide some base access to water or electricity, at low rates for everyone, but much higher marginal rates for usage above the base amount, so. One could introduce progressivity, and feedback against excessive use fairly efficiently.

Our transportation systems fail persistently to provide even basic service to the entire jurisdiction, and are dominated by history, ( let us do tomorrow what we did yesterday for a cost not too much higher than the rate of inflation, and we will be considered a success). Political control of gas taxes and transit fares heve led rates to rise much slower than inflation, with substantial lags between catastrophic failures, and severely constrained quality and quantity of service as a result, generally reducing accessibility in very uneven ways. It seems extremely worthwhile to explore in a serious and detailed way the possibility of treating transportation as a utility.

Rivalry and Anti-rivalry, Excludability and Anti-excludability

Walking home the other day, I invented the terms “anti-rival” and “anti-excludable”. These terms are not widely used, yet sadly I do not earn coinage credit.

Many things are important and essential that are largely done by the private sector. Many things are neither important nor essential that are done by the public sector. What differentiates in which sector a good or service is provided is not essentialness, nor its importance. Rather it is its excludability and its rivalry. A good is excludable if I can charge you for it and keep you from using it if you don’t pay. A good is rivalrous if my consumption prevents yours.

Goods that are both excludable and rivalrous are classified by economists as private goods, and are often provided by the private sector. Food is both important and essential, yet most Americans get food from private vendors in the US, ranging from the local farmer’s market to the largest Big Box store.

In contrast, goods that are neither excludable nor rivalrous are categorized as public goods. The classic example is national defense, which serves me whether I want it or not, and I pay with taxes. No private firm provides a nuclear defense in case my property is invaded by a foreign army. Over-the-air broadcasting is also a public good, though it is privately provided. Anyone with a receiver can get any over-the-air channel. In that case, broadcasting is funded not by taxes but by advertising. The model is switched and the viewer is the good being sold to the advertiser, since the market for advertising on over-the-air television  is both excludable and rivalrous (since time is rivalrous and the broadcaster can sell it to whomever they like for the market rate).

Goods that are excludable but not rivalrous are called club goods.

Goods that are rivalrous but not excludable are congesting or common pool resources.

The opposites of Rival and Excludable are generally taken to be Non-rival and Non-excludable. Yet, that is incomplete. Is the opposite of one zero or negative one? Hence the need for the ideas of Anti-rival and Anti-excludable.

The term Anti-rival is important enough to have its own wikipedia page. They credit Prof. Steven Weber from Berkeley with the idea from his book The Success of Open Source.

The concept of Anti-excludability was, as far as I can tell, first defined in a blog post by Pierre de Vries

He writes:

These definitions, however, don’t take into effect the network effects that have become so prevalent on the web. Social networks like amazon reviews and del.icio.us tags are not just non-rivalrous, as one would expect from knowledge; the more one uses them, the more value is created.

These goods are “anti-rivalrous”. Their use increases the amount available for consumption by others.

One can play the same game with exclusiveness. An “anti-exclusive good” might be one where the my giving it to you actively encourages you to pass it along to others. Viruses are one example; another is peer-to-peer software which someone cannot use without becoming a server node for others.

Anti-rival

We usually think of transportation as a tangible good, but it is also often an Anti-rival or Network good, and far more valuable the more people there are, until congestion sets in.

Your consumption of bike lanes is much more a complement for mine than a substitute. Your presence increases the demand for bike lanes (and thus network coverage – through a politically intermediated process) and spreads the fixed costs of construction across more users (if it were in fact user financed, in practice it is a complement because of lobbying the government, but that’s another story).

Your consumption of transit is a complement to mine, increasing the likelihood there will be a bus on the route I want to travel, and lowering my wait time. This is dubbed the Mohring effect in transportation.

Even your consumption of driving complements mine where network density is low, ensuring there will be a road network, which I could not afford myself. In short, not only is transportation usually non-rivalrous in the long run, it is anti-rivalrous. Even in the short run, significant congestion is the exception not the rule.

Anti-excludable

But how can such a good be anti-excludable?

We hypothesize the more people who walk, the more likely the next person will be to walk, not because the network changes, but because walking invites more people to walk, the act of walking acts as an advertisement for the act of walking. Similarly for biking, riding transit, or driving a car. The more you see it, the more plausible it becomes. I feel more comfortable walking the more pedestrians there are. I feel safer walking. Every pedestrian is a reminder to drivers that there are pedestrians. Every pedestrians acts as Eyes on the Street extending the words of Jane Jacobs which she applied to local proprietors.

 Filling in the Table

The northwest corner of the table below (suggested by de Vries is standard. Does it make sense to think about  the remaining five cells as de Vries suggests?

Table: Types of Goods

Excludable Non-excludable Anti-excludable [Includable]
Rival[Congesting] Private Congesting or Common Pool Resource Rally Good
Non-rival Club Public Viral Good
Anti-rival [Network] Social Network Broadcast Media Memetic Good

 

There are five cells in the table requiring names. I hereby coin the following:

  • Anti-Rival and Excludable: Social Network Good (For example, Facebook, it is excludable, but my membership makes yours more valuable)
  • Anti-Rival and Non-Excludable: Media Good (For example any broadcast activity (de Vries suggests Social Tagging) but really any type of social media like Twitter)
  • Anti-Rival and Anti-Excludable: Memetic Good (Perhaps Walking or Biking)
  • Non-Rival and Anti-Excludable: Viral Good (For instance as per de Vries, Peer-to-Peer software)
  • Rival and Anti-Excludable: Rally Good (Envision a rally on a public square (for instance to overthrow a government) which attracts protestors, but does get crowded)

 

Summary

In short there are some additional types of goods beyond rival/non-rival and excludable/non-excludable.

Anti-rival goods – I benefit if others use

Anti-excludable goods – I spread the use of the good to others every time I use.

Anti-rival, anti-excludable items include many ideas or memes. My possessing an idea does not prevent you from possessing it, so it is certainly non-rival. Unlike tangible property, ideas cannot be easily protected. (There are of course patents and copyrights, but those affect physical (or electronic) production, not what’s in your head). However many ideas are better if more people possess them, so we could class them as network goods, or anti-rival. Similarly many ideas are so good people want to share them. Like a juicy secret, telling someone induces it to spread more widely, making it anti-excludable.

The US needs better roads and bridges–and less congestion–but not a higher federal gasoline tax |AEIdeas

James Pethokoukis discusses (and endorses) Fix-it-First, Expand-it-Second, Reward-it-Third

Now the case for upgrading American transportation infrastructure isn’t about short-term Keynesian stimulus. It’s about long-term growth. “Places that have the greatest  accessibility, that enable more people to interact in less time, produce the greatest wealth,” write transportation experts Matthew Kahn and David Levinson in a 2011 report. More accessibility also means more economic mobility. A 2013 analysis from the Equality of Opportunity Project found climbing the ladder much harder in cities with longer commute times. Indeed, the monetized cost of US congestion is around $120 billion a year.

Study says Blue Line’s development impact is minimal | Star Tribune

Adam Belz in the Star Tribune writes: Study says Blue Line’s development impact is minimal, discussing a recent study by Sarah West and Needham Hurst of Macalester. I get quoted:

“My first sense is the Green Line is a better line,” said David Levinson, a civil engineering professor at the University of Minnesota. “It’s going to a denser area.”

Levinson said that the Green Line — and any subsequent additions to the light rail system — will also improve the value of land along the Blue Line, thus making it more ripe for development as the rail system grows and more people use it.

“That positive feedback system sort of kicks in, and it reinforces the growth,” Levinson said.