Economics and Urb~ait Transportation Policy in the United States Kenneth A. Small ... - eScholarship

28 Pages·2004·1.91 MB·English

UC Berkeley
Earlier Faculty Research
Title
Economics and Urban Transportation Policy in the United States
Permalink
https://escholarship.org/uc/item/7mz1326k
Author
Small, Kenneth A.
Publication Date
1997
eScholarship.org Powered by the California Digital Library
University of California
Economicsa nd Urb~ait Transportation Policy
in the United States
Kenneth A. Small
UCTC
No 219
The Cm’:~.cr d~ribut~ r~po~
on l~ r~cnrc~ m working
papas, monographs, andi n
mpnnt~o f published arctic.
It also pubI~slmAs ccessa,
magazinep r=s~nthxgs um-
mm’i~o~ s~I~c~csmdc h~s,F or
a list of pubkicati~min prin~
wri~ to the ~dmssb ~low.
Thceo ntenotf~~ hirse porreLf let~h ev iewosf t heS L~0~wSh,o
responsf|borle th ef ~ andth ea ccuraocfyt h ei nfonn~porens ented
hereinT.h isd ocumise dnits sereinu~tned~e rsthp¢o nsoresfh thipe
Departmoef nT~ra nspor~fUieenP,~ emTimt~n spn~~fniotenr Psr ogram,
Jnt hei nteresotf i nfo~afiee~nc haTnhpe.U .S,G overnamsesnutm neos
iiabi~fi~o r~ e¢ or~eoartus s teh ereof.
Reprinted from
REGIONAL SCIENCE AND URBAN ECONOMICS
Regional Sclence and Urban Econormcs 27 (1997) 6"71-691
Economics and urban transportation policy in the United
States
KennethA Small*
Department of Economics, Umvers~ty of Cahforma, lrvme~ CA 92697, USA
Received 25 July 1995, accepted 30 May 1996
REGIONAL SCIENCE AND URBANE CONOMICS
Aims and Scope
RegionaSl ciencea ndU rbanE conom;cesx ists to facilitate ande ncouragteu gh qual~ys cholarshipo n Importantt heoretical
and empmcails sues in urban and regional research Given a rapidly changing field, the joumars emphasisis on
nucrm~"onomatcn alyses of spatial phenomenTah e joumgl sohcIt~ ongmalr esearchc ontdbutmnsm spat=el economics,
econom¢g eography,a nd rslsted disciphnes Wee ncouraget he submiss~ono f theoretical and empmcaclo ntnbut=ons
related to marketo rgen;zat=o=nn space,h ousinga ndl abor markets,t ransportation, andt otal pubhoe conomies
Editors:
JOHNM QUIGLEYG, raduateS choolo f PubhcP ohcy, Umversn’yo f Cahfom=a2, 607H earst Avenue,B erkeley, CA9 4720,
USA
KONRAOD S TAHL,D epa~menot f Economics,U n;versity of MannhelmD, ~68131M annhelmG, ermany
BookR eviewE dltor
RICHARADR NO’I-F,D epartmenot f EcenomEc5sc, atch College, Chestnutt Hltl, MA0 2167, USA
AssociateE ditors:
S P ANDERSOUNnn, ters=tyo f V~rgtnla, Chadotteswlte,V A, L ANSELINW, estV ~rg~n=aU ntversrb/, MorgantownW, V,M
BERLIANTW, ashingtonU niversity, St Louis, MO,A . B()RSCH-SUPAUNni,v ersity of Mannheirn,R BRAIDW, ayneS tate
Un;verstty, Detroit, MI, R DAVIDSOQNu, een’sU mvers=tyK, ingston, Ont andU ntverslt~ d’A=x-Marse=lle,P ENGLUND,
University of Uppsala, JWF RIEDMANU,n wers=tyo f North Carohna,C hapelH dl, NC, M FLIJITA, Kyoto Institute of
EconomicR esearch, Kyoto, E GLAESERH,a rvard Umvers~y,C ambndgeM, A, J H HAMILTONC, ollege of Business
Administration, Ga~nesvltle,F L, E HELPMATNe,l AvwU niversW, R HELSLEUYn, iversity of Bnt=shC olumbia,V ancouver;,
P HENDERSHOOTTh,i o State Unwers~j, Columbus, OH, JV HENDERSOBNro, wn University, Providence, RI, D
HOL’I’Z-EAKINS, yracuseU mvers=tyS, yracuse,N Y, K IHLANFELDGTe, orgiaS tate Umversrty,A tlanta, GA, R P INMAN,
Unwerstty of Pennsylvama,P hdadstph=a,P A, Y IOANNIDEST,u fts Umverslty, Medford, MA, Y KANEMOTTOo,k yo
University, G NORMATNu, fts Umverstty, Medterd, MA, J POTERBAM,I T, Cambridge,M A, WR ICHTERU, mverstty of
Dortmund, H ROSENP, nncetonU nJversdy, Pnnceton, NJ, S SCOTCHMUEmRv ers~o f Cahfom;a, Berkeley, CA, K A
SMALLU, mversrtyo f California, Irwne, CA, J-F THISSEU, n=verstt~d e Parts, D E WILDASINV,a nderb=ltU niversity,
Nashville, TN, J M YINGERS,y racuseU niversity, NY
Pub|Icatlon |nform~tlon
ReglonatS c¢encea nd UrbanE conomic(sIS SN0 166-0462F) or 1998v olume2 8 =s scheduledf or pubhcat~onS ubscnpt=on
pncesa re available upor~r equest from the PubhsheSr ubscnphoanrse acceptedo n a prepaid basis only anda re entered
on a calendary ear bas~si ssues are sent by surface mail except to the following oountnesw herea ir dehveryv ia SAL
(SurfaceA ir Lift) mad~ s ensuredA rgentina,A ustralia, Brazil, CanadaH, ongK ong,I ndia, Israel, Japan,M alaysiaM, exico,
NewZ eatand,P ak=etan,P RC hina, SmgaporsS, outh Afnca, South Korea, Ta{wan,T hadand,U SAF or all other countnes
alrmafl rates are available uponr equest CIalmsf or missingi ssues shouldb e madev athms ~x monthso f our pubhcatlon
(malhng)d ate
Orders, claims, and product enc|u=rtesP leasec ontact the CustomeSr upportD epartmenatt the Reglona~S alesO ff=co
nearest you
York Amsten~em Tokyo S~ngapore
ElsevierS conce E)sev=eSrc ience ElsevmSr cience EtseweSr cience
PCB ox 945 PCB ox 211 9-15H ;gesh~-Az1a-bcuh orea No ’[ Te~ekA venue
NewY ork, NY1 0159-0945 1000A EA msterdam Mmate-kuT,o kyo1 0~ #’~7-01M dl~nleT ower
USA "TheN e~her~nds Japan Singapor0e3 ~192
Tel (+t)212-833-3730 Tel [phone] TeE(+ 81)3-5561-5033 Tel [phone]
[Toll fr~en umbfeorr North Fax( [phone] Fax( [phone] Fax( [phone]
Amenc~cnu stomers e-men~h rdo-f@elsenwler e-mallm fo@elsecwoe ~rp e-maral s~atnfo@etsceowrnes rg
1-888-4ES-IN(4F3O7 -4636)]
Fax( ~ 1)212-6333680
¯ rr~l~u s’nfo-f@elsecworenr
Advett~tamg|n form,~t~on
Advert=stago rders and enqumems ayb e serrt to IntemaboneE| lsevier Science, Advertising DepartmentT, he Boulevard,
Langford Lane, K~dhngton,O xford OX51 GB,U K, Te~( .,-44} (0) 1885 943585, Fax (+44) (0) 1865 843976
Canada:W estonM ediaA ssociates, Daniel Lipner, PCB ox 1110, GreensF arms, CT06436-’H10U, SA," re[ (+1) (203)
261 2500,F ax (+1) [phone]J apanE lsevier ScienceJ apan,M arkebnSge rvices, 1-g-15 H~gash,-AzabuM, mato-ku,
Tokyo1 06, Japan, Tel [phone],F ax ([phone]
USm ailing noteee.--RegtonaSt ciencea ndU rbanE conomicsIS, SN0 166-0462=, s publishedb ernonthtyb y Elsevier Science
BV( Molenwerf1 , Postbus2 11, 1000 AEA msterdamT,h e Netherlands) Annuals ubscription price m the USA~ s US$572
(US$p ncev ahd} n North, Central andS outhA mencoan ly), including air speedd ehveryS econdc lass postageis pa~d
Jamaica, NY1 1431
USAP OSTMASTSEeRnSd address changest o Regzona/Sciencea nd Urban Econormcs,P ubhcebonsE xpediting, Inc,
200 MsechaAmv enue,E tmont, NY1 1003A irfre0ght and ma~hngm the USAb y Pubhcat=onE ×ped~tmg
0166-0462/97/$17 00 Pnntedin the Netherlands
ELSE-a,’IER R, egmnalS cience and UrbanE conomtcs2 7 (1997) 671-691
Econormcs and urban transportation policy in the United
States
Kenneth A. Small*
Departmenot f EconormcsU, mverstryo f Caltforma, Irvme, CA9 2697, USA
Received2 5 July 1995, accepted 30 May1 996
Abstract
This arucle exarmnes the role that econormcs can play m analysmg problems with urban
tra.usportataon m the UmtedS tates The specific problems addressed are fathng infra-
structure, financially weak pubhc transit, enwronmentali mpacts of motor vel~cles, motor-
vehicle acclde,ats, and traffic congestmn Sunple quantatauve analyses, even though
approximate, c,m help to focus attentaon on the most prormsmgc lasses of pohcles Those
classes involve some technological measures and some nmxowlyt argeted behavioraI
changes, but r, ot the widespread cartmlment of motor vehicle use © 1997 Elsevaer
Science BV
Keywords Transportauon pohcy, Environmental mapacts, Cortgestton, Automobile costs,
External costs
JEL cIasstficanon R40, H23
1. 1. Introd~tetion
Economaca rguments often play an maportant role m the formulatmn of
transportataon pohcyF or example,e conormstsh ave greatly influenced regulatory
pohcy m the Umted States, as documented by Winston (1993). th~s has
encouraged widespread deregulatmn of mterclty transportation serwces, as well as
a number of other industries, over the past twenty years While urban transporta-
tmn has been less influenced by this movementt han has mterclty transportatmn, it
*Correspondinga uthor Fax + 1-714-824-2182,e -maul ksmall@ue~ed u
0166-0462/97/$1070 © 1997 Elsevier Science BVA II rights reserved.
PII S0166-0462(96)02166-7
672 K A Small / RegwnaSl cwncea nd UrbanE conomw2s7 (1997) 671-691
has by no means been exempt, as exemphfied by experiments with bus deregula-
tion, pnvauzaUono f transit services, and road pricing
In exarm~mgth e deregulaUon of mterclty transportation, Winston emphastzes
the role of quantitative calculations m persuading policy makers to adopt reform
He also examines the role of sophisticaUon m model bmldmg, finding that the
predictive accuracy of the economlca nalyses that were done depended not on the
complexaty of the analytical models use& but on whether or not major structural
adjuslrnents (such as the development of hub and spoke mr networks) were
anticipated and included m the models. Thus it is often the incisiveness of the
econormci nsight, not the completeness of Its elaboration, that is most crucml
Furthermore, the persuasiveness of economac analysis to policy makers may
depend more on the credibility of such simple arguments than on the more
complexm odeling efforts that quite rightly influence professionals
In this paper, I exarmneh owe conormc analysis call elucidate some well-known
problemso f urban transportation m the UmtedS tates (1) failing infrastructure, (2)
financially weakp ubhc transit; (3) environmental impacts of transportation, (4)
motor-vehmtea ccidents, and (5) traffic congesBonIn each case I argue that basic
econolmc argumems can help steer pohcy away from unproducttve chrections
Furthermore, relatively simple quantitative calculations can play an important role
in tmderstandmgs omeo f these problemsa nd m defining the categories of potential
policy responses to them that are most prolmsmg
2. Failing i~tfrastructure
Winston and Bosworth (1992) provide an insightful survey of the state of U.S
pubhc Infrastructure Over the past two decades, the nation has seen a sharp
decline in the percentage of its gross national product (GNP)d evoted to gross
investment in mfrastructltre, from nearly four percent m the late 1960s to 2¼
percent m 1990 The total value of the capital stock has declined smnlarly as a
percentage of national product, from 49 percent of GNPm 1970 to 41 percent m
1990 These declines have occurred "at all levels of government and .. across a
broad range of different types of capital’ (Winston and Bosworth, 1992, p 268)
One of the largest categories affected by these trends ~s transportauon infra-
structure, especially roads, and one of the most visible manifestations of these
trends is the physical deterioration of highways, bridges, and subways
Some of these dechnes are natural reductions from a peak m mfrastructure
expenditures that occurred during the 1960s due to rapidly increasing school
enrolments, suburbamzation, and the beginning of an ambmousIn terstate highway
system Nevertheless, there is considerable evidence that unprovmgt he pubhc
infrastructure would now have a high rate of return This ewdence includes
macroeconom~cs tudies of the relalaonslmp between public infrastructure and
productivity (Munnell, 1992) and mlcroeconomacs tudms of the costs and benefits
K A Small/ RegzonaSl ciencea nd UrbanE conomic2s7 (t997) 671-691 673
of specific lt~vestments (U S. Congresmonal Budget Office, !988). C-ramhch
(1994) provldzs a cauUous and insightful review of evidence and pohcy Jmphca-
tions
A conclusion drawn by manyi s that the UmtedS tates needs to spend more on
pubhc infrastructure In fact, the nation is already movml;m that darecUons ince
its low point m the early 1980s, investment m pubhc infrastructure has risen, as a
fraction of GNP,f rom 2 0 percent to about 2.25 percent, core mfrastructure
spending m particular has increased substantially m real terms, from about $21
bilhon to $32 billion (1992 dollars) m the case of roads1 For highways and
bridges, it see~mst hat current spendingl evels, ff maintaineda s a fraction of GNP,
would be sufficient to mamtmcno nchtions as they were m 1989. This still leaves
somes igmficnnt deficmncles, but at least is a better prognos~s than a few years
ago The mov: recent federal highwayl eglslataon, the Inlermodal Surface Trans-
port,anon Efficiency Act (ISTEA)o f 1991, should continue and perhaps accelerate
the trend tow~trd larger capital expendltttres on highways
Howevert,k tere is little guarantee that these newe xpendlmresv ~ll be targeted to
those measure~t hat are most useful A large portion of new spending m ISTEA~ s
for speclaI highwayp rojects, a category heavily dependent on pohtical consldera-
tlons mid wl~ a poor track record (Winston and Bosworth, 1992, p 287) I-hgh
federal share,,, and biases m favor of capital intensive projects have been
demonstratedl o cause mefficlencmsm a variety of types of infrastructure projects,
especially mass transit. Often projects are chstnbuted widely in order to achieve a
pohtically viable d~strlbutaon of expenditures, rather than targeted to those areas
wherer ates o] return are highest.
Furthermore, pricing policies often cause Infrastructure to be built to accommo-
date mefficmnt numbers and mixes of users (Winston, 1991) In the case
highways, capacity must accommodatep eak traffic volumes that are unrestrained
by any slgmfic,ant pncmg,t hese volumes are further mflate~d by employer-provided
parking subslcaes, which are m turn strongly encouraged by the federal tax code
and by many- ~aumclpal planmng ordanances (Wfllson and Shoup, 1990) Further-
more, a lack cf lmcmgm cenuves on heavy trucks causes them to mipose "damage
to pavementst hat could be greatly reduced wlth relalavely inexpensive reconfigu-
rations of their axles Small et al, 1989) In the case of an’ports, lanchng fees that
bear httle relationship to use of scarce peak runwayc apacity result in too many
fhghts at peak hours and too manys mall private mrplanes clogging the busiest
commercial airports (Momsona nd Winston, 1989)
Research suggests that opttmazmgin vestment strategaes and better managingt he
mfrastruct~are through pricing can create measurable and very iarge reductions m
the cost of provlchnga ny gnven level of infrastructure servtces For example,S mall
~Wmstaonnd Boswort(h1 992),F igs 8-1, 8-2, wdtatedt o 1992p nezsu singc onsumeprr ice index
for all items,f rora US Bureauo f the Cen,~n(s1 993),t able 756
674 K A Small I RegwnaSl cience and UrbanE cononuc2s7 (1997) 671-691
et al. (1989, p. 53) Identify. annual cost reductmns for the U S road system,
excluding bridges, that amount to $11.3 bflhon at 1992 pnces Therefore the
effecuve amount of useful mfmslructure can be substanuaUy increased without
necessarily increasing the long-run costs of investment
3, Fhmncially pressed mass transit
Mass translt servace m the UmtedS tates, poor as it is compared to Europe.
absorbs enormouss ubslches u about $13 5 b~llion m 1993, roughly a twelve-fold
increase an real terms since 1970.2 Abouth aft of this increase occurred during the
1970s and was a source of local and state fiscal crises (Plckrell, 1983).
Transit subslches have attracted conslderable attenuon from profess~onaA
economasts, and as a dxrect result the mgredaents for understanding tbas phenom-
enon are at hand F~rst and foremost, as Mohnng(1 972) has shown, public transit
(like any serrate performed m batches) is subject to sharply increasing returns
scale wheno ne takes into account the value to users of tugher route densxty and
service frequency. If demando n a pamcular corridor nses, the transit provxder
serving that comdorc an respond an one of several ways If vehacles are not fully
occupied, or ff larger velucles can be operated at httie adchtmnalc ost. the provider
nnght choose to handle the extra passengers samply by mamtatmngt he same
routes wath the same servace frequency, allowing average cost to dechne.
AltemaUvely, the provlder can increase route denslty and/or servace frequency,
wbach produces cost savings to passengers m the form of less walking or wmtmg
tune In eather case, total average cost (to provider and users) declines. A different
way of putting the same point as that given a particular level of service, as
measuredb y the density of routes and the frequency of vel~cles on a given route,
handhnga n add~taonal passenger costs httle extra because it 6oes not necessitate
extra vebacles or dr~ers From the point of wewo f econormct heory, thin is the
primary justfficataon for transat subs~ches Nash (1988) offers a clear formal
exposmono f tbas argument and an enhghtenmga pphcataon of it to pohey toward
pnvauzauon of transit
Thxs property of increasing returns to scale, however, greatly hmats the vaab~hty
of mass transit m the UmtedS tates because populataon denslty there is so low For
example, the U S populauon is about the same as the combined populaUons of
Germany,I taly, the U.IC, and France, but it occupies moret han six tunes the area
(U S Bureau of the Census, 1995, table 1361) It is no surprise that tbas relative
2Thefi gure quoted~ s total expensersm nuso peratingr evenues,f romU $ Bureauo f the Census
(1995t,a ble 1046)a nd( 1981t,a ble 1101T) het welve-folidn crease~ s calculatedaf ter deflatingb y
consumeprr ice indexf or all acres, fromU S Bureauo f the Census(1 995),t able 761
K.AS mall I RegionalS ciencea nd UrbanE conomtc2s7 (1997)6 71-691 675
abundanceo f land is reflected m lower urban densmes3. although of course bastory
also plays a role m that comparison In addmont he U.S, hke other nauons, has
seen the automobile capture a rapidly increasing share of traps This exacerbates
the difficulty m finding comdorsw sth passenger densst~es statable for successful
mass transit servsce.
Fmhngt c recogmzet hese facts, polmy makers m the UmtedS tates have tried to
increase tmaslt patronage by expandmgt ransit service far into suburban areas
preclsely where it has the least market potential Meanwhile,t hey have failed to
take full advantage of two of translt’s most natural markets (Meyer and Gomez-
Ibanez, 1981, ch 3)" low-income tuner-city residents, whoh ave been relatwely
neglected ~, a market, and high-income commuterst o central business &stncts,
who have been served by bmldmgn ew rail translt lines, an extraordinarily
expensive method m most locatmns where xt has been adopted m recent years The
results have been &sappomtmngd erstup and debihtalaag subslches Furthermore,
the subsldms appear to have encouraged dramatic increases m management
personnel and m umon wage rates, snnultaneous with a substantml fall m labor
productlwty as measured~f or example, by vehmle-hours per driver-hour (Pmkrell,
1983. Lave, 1991)
One posssble response to l~gh subssdy costs is to radmall~ change the
msatutlonal structure of mass transit through pnvat~zaraon Econormstsh ave taken
an actsve and constwact~ve role m analyzing private markets for mass transit
services and m pre&ctmgt he impacts of various proposals (see Small, 1992, pp
143-151, for a rewew) A wide variety of experiments m Bntmn, the Umted
States, and elsewhere are provsdmga wealth of data to test these sdeas (Dodgson,
1991; Talvmee t al, 1991, Bamster et al, 1992, Gomez-Ibaneza nd Meyer, 1993,
Wt~te, I995) Wl,ale economsstsa re far from reaching consensus on all the detzals,
tbas work has narrowed the range of controversy considerably, mainly to how
extens!vely and m just what contractual form private firms should be brought into
the pmture. For example, debate continues on hows uccessful deregu|ataon of
Bntash bus transit has been, but st is w~delya greed that it has lowered costs and
that competmvet endenng for servmes, as praclaced m London, reaps manyf f not
all of the cost savings of morec omplete deregulataon It ~s also w~delya greed that
bus trark~at is not a perfectly contestable industry, leawaga t least somes cope for
monopolyp ricing under full deregulatmn
aDefimt~vceo mparisonosf urband ensmeas re Impossibled ue to the &fficulty of defining
comparabuIer bana reas Onea ttempti s madeb y US Bureauo f the Censu(s1 993,t abIe 1377),w l~ch
definesa n urbana reaa s a conunuobuusi lt-upa rea includinlgo catmnws lthp opulataodne nsity,a t least
5000p er squm~m aleA monthge world’s5 0 mostp opulouus rbana reas by this criterion, thosei n
Europea ndt he UmteSdt ates had1 992p opulatmdne nsme(sm t housandps er square~ anle)a veraging
27.2m ad9 4, respectavelTyh ed ens~taeosf the m&vlducarel es,m d ecreasinogr dero f total populaaon,
wereN ewY ork(1 1 5), Mosco(w27 8), LosA ngele(s9 1), Londo(n1 0 5), Pans( 19 9), Essen
Chicag(o8 5), Milan( 13 7), St Petersburg(3 3 4), Madri3d) , Bareclona (485 ), SanF rancisco
(9 4), Manchest(e1r1 2), andP tuladelph(m8