Zhang, Lei and David Levinson (2009) The Economics of Road Network Ownership: An Agent-Based Approach. International Journal of Sustainable Transport Sept. 2009 3(5) pp. 339-359. [doi]
This paper explores the economic impact of alternative ownership structures on transportation system performance, social welfare, and regulatory needs. Road pricing, investment, and ownership decisions are jointly considered in an agent-based evolutionary model applicable to large networks. Results suggest that a centralized public regime with average-cost pricing is far from socially optimal with even moderate demand growth. When properly regulated, a completely privatized transportation network could achieve net social benefits close to the theoretical optimum and distribute a high percentage of welfare gains to travelers. But an unregulated private road economy would suffer from higher-than-optimal tolls and overinvestment.
Keywords: network economics; privatization; road pricing; simulation of network evolution; transportation financing
In the news … Problematic plank road to be repaired . This road is next to the very nice Minneapolis Mill City Museum (for those interested in the history of breakfast cereal). The interesting thing is that the 6 year old road needs repairs, which is exactly why plank roads were abandoned the first time they were laid during the plank road boom of the mid 1800s. (Repairs were required too quickly, so total cost > total benefit).
Ref: J Majewski, C Baer, DB Klein (1993) Responding to Relative Decline: The Plank Road Boom of Antebellum New York Journal of Economic History
James Fallows on Security lines at airports, which I complained about years ago.
From FiveThirtyEight: Do Americans Really Hate Flying? Or Really Love Driving?, an amateur analysis of inter-city travel statistics that includes a discussion of gravity models. The comments are worth reading as well.
From Green Car Congress via EP: Univ. of Delaware Researchers Conclude Cash for Clunkers Cost Exceeded Benefit
2 September 2009
Burton Abrams and George Parsons of the University of Delaware evaluated the efficiency of the recently concluded Cash for Clunkers (CARS) program and concluded that the cost exceeds the benefit by approximately $2,000 per vehicle, or close to $1.4 billion in total. Their paper appears in the online journal The Economists’ Voice.
Abrams and Parsons calculated the average national cost per vehicle turned in to be scrapped under CARS at $2,600. There is a $4,200 loss to the taxpayer (the average subsidy), but the CARS participant gains $1,600 per vehicle ($2,600 in the value of the price subsidy less the $1,000 loss of the clunker).
Assuming 12,000 as the average miles driven per year and using the average mpg of the retired vehicles (15.8 mpg) and the newly purchased vehicles (25.0), they calculated that the program cut gasoline consumption by some 280 gallons per year per vehicle. Assuming the average clunker would have lasted 3 more years (at which time a new, higher mpg vehicle would have been purchased), the gasoline savings works out to 804 gallons per vehicle on average.
Using an estimated cost of $0.71 per gallon for CO2 and criteria pollutant costs (Jason Hill et al., PNAS), Abrams and Parsons calculated the environmental benefits of the clunker program (ignoring discounting) at about $596 per vehicle.
With per vehicle environmental benefits at $596 and the costs at $2,600 per vehicle, the clunker program is a net drain on society of roughly $2,000 per vehicle. Given the approximately 700,000 vehicles in the program, we estimate the total welfare loss to be about $1.4 billion.
The welfare loss would be even greater if we fine tuned our estimate of the social cost per gallon to account for the spatial mix of clunkers…Even if the environmental gains were double our estimate, the net drain would still be close to $1 billion. While a more rigorous analysis would no doubt adjust these figures, we doubt that the basic conclusion would change.
–Burton and Paarsons (2009)
Congratulations to University of Minnesota Civil Engineering and Nexus Group Alumnus Ning Li (now Senior Highway Safety Engineer, Virginia Department of Transportation, Richmond, Virginia) for receiving the ITE
Past Presidents’ Award for Merit in Transportation Engineering in recognition of the paper titled “Improving Data Accuracy of Roadway Departure Crashes: Virginia Practice and its National Implications.”
I was interviewed by Ina Jaffe for the NPR story: California Edges Ahead In High-Speed-Train ‘Race’ Of course a half-hour interview by Ina Jaffe was distilled into 2 soundbytes.
The story is fascinating … not enough demand for air travel therefore we need HSR.
It is followed by an interview with Eric Morris. I am pleased to be no longer the only official California HSR skeptic.