Transport Economics

P.C. Stubbs, W.J. Tyson, M.Q. Dalvi

• Publisher: Routledge
• Year: 2017
• Topic: Business
• eBook ISBN:
  9781351791489
• Subtopic: Business General
• Index: Business

Practically everybody in the community uses the transport system, and an eighth of personal consumption expenditure in Britain is spent on transport. This book, first published in 1980 and revised in 1984, presents a synthesis of theoretical and empirical material to explain the elements of transport economics. These include demand, supply, pricing and investment, and the importance of institutional arrangements is emphasised in chapters on transport planning, and on international transport, in which shipping and airline economics are analysed.

Chapter 1
The Characteristics and Scope of Transport Economics

Transport is a keystone of civilisation. The spread of production, trade and ideas and the economic ascendancy of mankind all depend upon movement. Personal mobility is one of democracy's most valued freedoms, and a surprisingly high proportion of our income is devoted to our movement and to the movement of the goods that we buy. However, the systematic economic analysis of transport is relatively recent.

Transport economics is basically a branch of applied microeconomics. While it uses many standard techniques of economic analysis, it faces a number of special problems and characteristics that justify its consideration as a specific branch of the discipline. The demand for transport is a derived one, and each journey is unique in time and space; it cannot be stored or transferred - and from these seemingly simple statements follows a host of implications. The complexities of economic problems involving transport are illustrated by the controversies over supersonic aircraft, the Third London Airport and motorway construction and by the difficulties posed by road congestion, declining public transport, air traffic control and the vagaries of ocean freight rates. Technology, with all its expense and uncertainty, has played a critical role, and it will continue to do so as the depletion of oil necessitates a replacement for conventional motor cars.

The simple canons of market economics cannot be applied to transport for a variety of reasons. Since journeys are unique in space and time monopoly is likely to arise in varying degrees, especially when technological change offers an advantage to a particular mode or where economies of scale affect one mode more than another. The state has therefore intervened in transport; railways in Britain have been regulated since 1844 to prevent any repetition of the monopoly abuse evident among canal companies. Since then regulations and often state ownership have pervaded all sectors of transport (Gwilliam and Mackie, 1975, Chapter 3). The danger that a monopoly will restrict output and force up price is well known, although sometimes the only means to realise economies of scale is to accept monopoly but constrain its behaviour by statute. In the short run the degree of monopoly may be intense as the user has no alternative; but as the time span lengthens so does choice, and the user may seek alternative modes, routes and sources of supply of the goods that he seeks or even other destinations that will satisfy the purpose of his trip.

The external effects of transport also warrant intervention. Pollution and congestion are both real costs imposed on the community by the users of transport, but they are not reflected in the private costs met by the individual user. Social decisions should, however, make allowance for these costs, and they should also recognise the need to preserve certain public goods (e.g. visual amenity) that are not priced in the market but are accepted as legitimate concerns for community planning and decision. Intervention may also be important where the individual fails to perceive the full economic implication of his own defective decisions. One example of this is compulsory safety tests for cars; another is the legal obligation to wear car safety belts that applies in Australia.

Another important source of difficulty in transport economics is indivisibility. This problem impinges on both pricing and investment. Many investments in transport are large and infrequently made, and there are problems over how their costs should be allocated. For example, if passenger and freight trains use the same track, how should track costs be allocated between them? At the time of writing British Rail charges its track costs to passenger trains, but this clearly represents a cross-subsidisation of freight services. Peak traffic also poses problems over the allocation of costs; and so does journey length, for often the cost of a journey is not simply proportional to distance but includes an element of cost for loading or boarding the vehicle, implying that cost per mile diminishes with the length of journey. Indivisibilities render marginal cost pricing difficult, however. Consider the cost of a train journey: should the first entrant of the carriage pay his full marginal cost? Clearly not; some form of averaging is necessary here although the ideal might be, as Dupuit (1844) put it over a century and a quarter ago, that 'the best tariff would be o...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Original Title
• Original Copyright
• Preface
• Contents
• 1 The Characteristics and Scope of Transport Economics
• 2 The Analysis of Demand
• 3 Models of Passenger Traffic
• 4 The Analysis of Supply
• 5 Pricing Policies in Transport
• 6 Investment
• 7 Spatial Equilibrium
• 8 Government Transport Policy
• 9 Sea Transport
• 10 The Economics of Airlines
• Bibliography
• Index