lecture 7 tuesday, september 25 transportation film about the destruction of the l.a. trolley...
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Lecture 7Lecture 7Tuesday, September 25Tuesday, September 25
TransportationTransportation
Film about the destruction of the L.A. trolley system:
Taken for a Ride
http://www.youtube.com/watch?v=ehoVnykvMKY
% of Urban Trips by type of transportation (1995)
Trends in Annual public transit ridership, 1900-2000
0
200
400
600
800
1000
1200
1400
1600
1800
UnitedStates
Canada UnitedKingdom
Germany Europe France CentralAmerica
Middle East& N. Africa
SouthAmerica
Asia
Annual liters per person
Annual Per Capital Gas Consumption, 2003
Annual hours of delay per traveler due to traffic congestion
The LA Transportation Story The LA Transportation Story as told in as told in
Who Framed Roger RabbitWho Framed Roger Rabbit??
http://www.youtube.com/watch?v=8DO5HzEWSkM&feature=related (first 2 minutes)
http://www.youtube.com/watch?v=OUnWPcipi1w&feature=relmfu
(first 4 minutes)
YOUR CHOICE
BUS PRIVATE CAR
EVERYONE ELSE’SCHOICE
BUS A25 minutes
B10 minutes
PRIVATE CAR
C1.5 hours
D45 minutes
The Public Transportation Free Riding Problem:
Busses vs. Cars
Free-riding preferences: B > A > D > C
Free riding gain: 15 Minutes (A minus B)
“Sucker penalty”: 45 minutes (C minus D)
YOUR CHOICE
RAIL PRIVATE CAR
EVERYONE ELSE’SCHOICE
RAIL A15 minutes
B10 minutes
PRIVATE CAR
C25 minutes
D45 minutes
The Public Transportation Free Riding Problem:
Light Rail vs. Cars
Free riding gain: 5 Minutes (A minus B)
“Sucker penalty”: There is no sucker penalty!
What are the positive externalities of good public transportation?
1. Quicker commuting times, less congestion
2. Saving on private car infrastructure (parking ramps, street repairs, etc.)
3. Less pollution: less frequent house painting
4. Health benefits (asthma especially)
5. More efficient labor market, especially for poor (easier to get to jobs), therefore less need for welfare
6. Less need for multiple cars in a family
7. Energy savings
Key Question: What is the true economic value of the positive externalities of good public transportation?
Solutions Solutions
1.1.No free parkingNo free parking
2.2.Build infrastructure for transportation Build infrastructure for transportation alternatives: bike paths, rapid transit, etc.alternatives: bike paths, rapid transit, etc.
3.3.Increase residential density within citiesIncrease residential density within cities
4.4.The full cost of driving should be reflected in gas The full cost of driving should be reflected in gas taxestaxes
5.Fully recognize the value of positive externalities in the price of public transit tickets. (Implication: perhaps tickets should be free).
0 1 2 3 4 5 6 7
USA
Canada
Australia
New Zealand
Japan
Switzerland
Spain
Ireland
Austria
Korea
France
Sweden
Germany
UK
Belgium
Italy
Netherlands
Norway
U.S. $ per gallon
Price/gallon
Tax/gallon
Solutions Solutions
1.1.No free parkingNo free parking
2.2.Build infrastructure for transportation Build infrastructure for transportation alternatives: bike paths, rapid transit, etc.alternatives: bike paths, rapid transit, etc.
3.3.Increase residential density within citiesIncrease residential density within cities
4.4.The full cost of driving should be reflected in gas The full cost of driving should be reflected in gas taxestaxes
5.5.Fully recognize the value of Fully recognize the value of positivepositive externalities externalities in the price of public transit tickets. (Implication: in the price of public transit tickets. (Implication: perhaps tickets should be free).perhaps tickets should be free).
Positive externalities & ticket pricesPositive externalities & ticket prices1.1. Suppose: (a) the direct costs of a ride = $3, and (b) there is Suppose: (a) the direct costs of a ride = $3, and (b) there is
some kind of some kind of negativenegative externality = $1/rideexternality = $1/ride
2.2. Then the true cost per ride = $4Then the true cost per ride = $4
3.3. To cover these costs, the ticket price should be $4, not $3.To cover these costs, the ticket price should be $4, not $3.
4.4. Now suppose: (a) the direct costs of a ride = $3, and Now suppose: (a) the direct costs of a ride = $3, and (b) there is some kind of (b) there is some kind of positivepositive externality = $1/ride externality = $1/ride
5.5. Then the true cost per ride = $2Then the true cost per ride = $2
6.6. So, the ticket price should be only $2So, the ticket price should be only $2
7.7. But the transit company has spent $3 in direct costs to pay But the transit company has spent $3 in direct costs to pay for the ride.for the ride.
8.8. Therefore the society has to somehow pay for the $1 of Therefore the society has to somehow pay for the $1 of value everyone receives to reimburse the transit company value everyone receives to reimburse the transit company for providing the ridefor providing the ride..
Big Take-Home Message Big Take-Home Message from lecture on Transportationfrom lecture on Transportation
For the free market to enable people to make efficient choices For the free market to enable people to make efficient choices two things must be truetwo things must be true::
1.1. There are no significant externalities – positive or negative – There are no significant externalities – positive or negative – to your individual choice: what you chose does not affect to your individual choice: what you chose does not affect other people.other people.
2.2. The full range of feasible alternatives from which to make The full range of feasible alternatives from which to make your choices can itself be provided by the market.your choices can itself be provided by the market.
Transportation violates both of these principlesTransportation violates both of these principles: :
People will make very different private choices depending People will make very different private choices depending upon whether or not there exists a good, efficient, cheap upon whether or not there exists a good, efficient, cheap public transportation option, public transportation option, but the market itself can but the market itself can never provide this even if it would be economically never provide this even if it would be economically efficient to do soefficient to do so..
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