Urban Transportation Economics

K. Small

• Publisher: Taylor & Francis
• Year: 2013
• Print ISBN:
  9780415269766
• eBook ISBN:
  9781136461651
• Topic: Business
• Subtopic: Business General
• Index: Business

This title provides a comprehensive review of the economics of urban transportation.

Urban Transportation Economics

KENNETH A. SMALL

University of California, Irvine

1. INTRODUCTION

The study of transportation involves researchers trained in many disciplines, including engineering, economics, geography, planning, business, and regional science. Transportation research has become increasingly sophisticated in its use of economics. This trend has brought a more solid practical footing to policy analysis, by showing how the ideas and goals generated within various analytical frameworks can be reconciled with the actual behavior of users and with the resource constraints of a real economy.

This volume reviews the contributions that economics can make to the analysis of urban transportation. It concentrates mainly on industrialized nations, where the key change in recent decades is the rise of automobile travel, closely related to the suburbanization of population and employment. For this reason, I place heavy emphasis on highway transportation, choosing that area to present a comprehensive set of formal models.

1.1. The scope of urban transportation economics

The boundaries of transportation economics are neither well defined nor static. Nevertheless, the reader is entitled to know what principles are used to limit the scope of this review. Aside from the inevitable one that I try to write about what I know best, the following observations are guidelines.

Transportation economics is, of course, a branch of economics. Hence it focuses on resource allocation and how the interactions among independent agents bring about a self-consistent outcome. It draws from and interacts closely with transportation engineering, urban planning, and other disciplines, but has a somewhat different emphasis. Engineering emphasizes facility design and implementation, while economics emphasizes behavioral principles and resource allocation. The disciplines of management, public administration, and urban planning are concerned with the formulation of workable transportation policies, for example by studying decision processes and organizational structures. An important role of economics is to inform these disciplines about the complex ways in which transportation policies exert their influence. Economics is well suited to predict the ultimate results of behavioral shifts among interacting economic actors in response to policy implementations. It also can identify tradeoffs between efficiency and other goals.

These orientations of the subject give it certain characteristics that are evident in this review. Transportation economics tends to focus on models that illustrate concepts, as opposed to those whose output is the actual design of facilities or regulations. Hence its models are usually at a coarse rather than a fine geographical scale, lending themselves to ‘sketch planning’ of the broad features of a transportation system.

Analysis often proceeds by defining a demand structure and a supply structure for a set of goods or services, then searching for an equilibrium consistent with both structures. This is a normal microeconomic approach, although the nature of transportation creates ambiguities in the boundary between demand and supply: for example, is the time required for a trip an attribute affecting demand, or is it part of the cost? Either viewpoint is valid so long as demand and cost are consistently defined; doing so is the task of Chapters 2 and 3, respectively. Their interconnection is made explicit in the discussion of value of time in Section 2.5.

Demand and supply structures are sufficiently complex–involving many types of people, modes, locations, and times–that finding an equilibrium requires considerable analytical sophistication. The pioneering study is by Beckmann, McGuire, and Winsten (1955). In the presence of increasing returns to scale and lack of efficient pricing (conditions which, as we shall see, characterize urban transportation), this equilibrium may differ in drastic and surprising ways from a configuration satisfying optimality conditions. The common thread throughout this review is that transportation economics should provide the tools to understand and quantify such differences, and to design policies that address them.

Three important types of policies to consider are pricing, investment, and industrial organization. Pricing and investment have long been the hallmark of urban transportation economics, and are accorded full treatment here. Industrial organization has been less significant; but questions of oligopolistic markets, regulation, and government versus private provision of services, long prominent for intercity transportation (Winston, 1985), have recently become more pressing in urban contexts as well (Beesley and Kemp, 1987). Chapter 4 considers the nature of equilibria under alternative policies in this area.

Transportation potentially affects the nature of the urban area itself. If transportation were costless, participants in an economy would have no economic reason to locate close to one another. The study of this influence is clearly germane to transportation policy. However, to analyze it satisfactorily requires the full power of disciplines such as urban geography, urban economics, and regional science which seek to explain the shape of urban development. There is not room to develop these tools here. For this reason, the interaction of transportation and land use is not covered in this volume. It is discussed in other reviews in this series, especially those by Fujita (1986), Anas (1987), and Kanemoto (1987).

1.2. The scope of this review

This review, while attempting to summarize a great deal of literature, aims not so much for a definitive bibliography as for a self-contained introduction to the major subject areas of research. Indeed, the list of references contains many relatively unknown works and omits many important ones. The reason for this is that I have chosen to explore certain topics in great detail in order to illustrate how the analysis can be put to practical use.

Above all, I attempt to show how to construct a set of workable models that can be adapted, refined, and combined in subsequent research. It is my hope that such models will provide a common language for researchers in urban transportation, facilitating comparisons among theoretical innovations and among empirical applications.

The model-building process is illustrated in considerable detail in the important area of highway congestion. The models presented incorporate critical features not typically included: queueing, trip scheduling, and peak shifting. There is evidence that these phenomena exert a strong and heretofore neglected influence on the impacts of policies designed to relieve congestion. Furthermore, recent advances make it possible to incorporate them in a manner that requires no more technical sophistication than, for instance, was originally required to understand the analysis of congestion developed by economists in the 1950s and 1960s.

The decision to emphasize highway travel has beguiled me into a rather extensive accounting of the social costs of highway travel.^* In this instance I have attempted to summarize the disparate evidence and provide my own judgment. The reason for emphasizing this topic is the importance of urban highway travel and, based on the evidence in Chapter 3, the very large subsidies, even aside from mispricing of congestion, that are common in highway transportation. One topic I do not address, however, is urban goods transportation, mainly because of a dearth of economic literature.

Models presented here are intended to be suitable as building blocks for comprehensive equilibrium models of an entire urban transportation system. Such comprehensive models would permit investigation of questions such as: What would the overall transportation system look like under drastically different policies designed to improve economic efficiency? Would the small and dwindling share of trips by public transit become much larger? Would rapid-transit systems that seem uneconomical under present conditions become desirable? The literature contains limited attempts to address such questions, but I believe it is urgent to provide more sophisticated answers. If transportation professionals aspire to bring about more efficient policies, we had better know what kind of system must be planned for should we succeed. This quest is further discussed in the concluding section.

^* Throughout the volume, empirical cost parameters are converted to U.S. dollars at 1989 prices and, where distance-related, to miles (0.6214 mile = 1 km.).

2. TRAVEL DEMAND

In order to plan transportation facilities, it is necessary to forecast how much they will be used. In order to price them rationally and determine the best operating policies, it is necessary to know how users respond to prices and service characteristics. In order to evaluate whether a project is worthwhile at all, it is necessary to have a measure of the benefits it produces. All these requirements are in the province of travel demand analysis.

The demand for travel takes place in a multi-dimensional setting. The traditional sequential framework used by many metropolitan transportation planning agencies¹ considers four choice dimensions: trip generation (the total number of trips originating from or destined for an area); trip distribution (the locations of these trips); modal choice (the means of travel, such as car, bus, train, bicycle, or walking); and trip assignment (the exact route used). Traditionally, certain key parameters, such as motor-vehicle ownership rates and the locations of jobs, housing, and commercial attractions, have been taken as exogenous, perhaps to be forecast through land-use models that may or may not include feedback from the travel models.

More recently, researchers have paid greater attention to other dimensions of choice, such as residential and job location, household automobile ownership, and the time of day at which trips are taken.

Travel is a derived demand: it is normally undertaken not for its own consumption value, but rather to facilitate a complex and spatially varied set of activities such as work, recreation, shopping, and home life. This observation links the study of travel demand to studies of labor supply, firms’ choices of technologies, and urban development. It furthermore calls attention to a form of travel increasingly believed to be important: the linking together of several trip purposes into one integrated travel itinerary or tour, a process known as trip chaining.

Clearly the demand for travel is a complex subject. For this reason, researchers have had to adopt vastly simplified models to make any progress. This chapter attempts to show what can be learned from models currently in use. It is inevitably selective; the reader may consult Horowitz (1985) for some additional topics, and the volume edited by Hensher and Stopher (1979) for an extensive (though now dated) account of progress in the field.

The chapter begins (Section 2.1) by describing what happens when the conventional aggregate approach to economic demand modeling is applied to transportation. It then moves on to disaggregate models (Section 2.2), also known as ‘behavioral’ because they depict the individual decision-making process; it explains their advantages and their technical foundations, including those of the widely used logit model. The chapter also includes the ‘generalized extreme value’ extension of the logit model, focusing on the example of nested logit and its illuminating portrayal of how a decision-maker evaluates an entire group of alternatives (such as all the destinations within a particular geographical area) relative to a different group. Section 2.3 presents examples of logit models for two key travel decisions: mode choice and trip-scheduling choice on the journey to work. This is followed (Section 2.4) by an assessment of the overall success of disaggregate models.

The chapter concludes (Section 2.5) with theoretical and empirical analyses of one of the most important behavioral parameters to be derived from any travel-demand study: the value of time, or to be more prec...

Table of contents

• Front Cover
• Harwood Fundamentals of Pure and Applied Economics
• Fundamentals of Pure And Applied Economics
• Title Page
• Copyright
• Title Page
• Copyright
• Contents
• Introduction to the Series
• Acknowledgment
• Selected Symbols and Abbreviations
• 1.Introduction
• 2.Travel Demand
• 3.Costs
• 4.Pricing, Investment, and Industrial Organization
• 5.Conclusion: Toward Unified Models of Urban Transportation
• Appendix:Long-Run Cost Functions with Queueing and Endogenous Scheduling
• References
• Index