Transport Economics

Transport Economics

1. The nature of transport

   • Transport infrastructure
     • The physical and immovable transport routes
     • e.g. roads, railways, airports, sea ports, canals etc
     • Generally provided by government due to the problems arising from public goods and the externalities caused
   • Mode/ type of transport
     • e.g. walking, cars, trains, bike, plane, boat etc
   • Derived demand
     • "When a good is demanded as a result of demand for another product"
     • Factors affecting demand for transport
       • Physical characteristics of the good being transported
         • Low quantities of high cost goods - air
         • High quantities of low cost goods - rail/ ship
       • Price of transport
       • Relative prices of different modes of transport
       • Passenger income
       • Quality of service
       • Consumer choice

2. Ownership and organisation of transport

   • Public ownership
     • Government owns the means of production and takes responsibility for it
   • Private ownership
     • Ownership of resources rests with the private sector
   • Direct government provision
     • Government strategically provides goods and services on a non-commercial basis
     • e.g. new motorways and roads funded either by central or local government through tax revenues
   • Public-Private partnerships (PPP)
     • Private enterprise joins the public sector in sharing some of the financial and operational risk of running the service
     • e.g. Tube Lines (private company) responsible for maintenance and upgrade of London's underground, commissioned by Transport for London (public body)
   • State-owned company
     • Operates commercially, profits returned to public ownership for re-investment into the capital and infrastructure of the service itself
     • e.g. Network Rail
   • Private ownership
     • Economic value generated remains in private hands
     • Either fully self-funding or rely on subsidies from the government
     • e.g. UK port authorities/ train operation

3. Forecasting road transport demand

   • The National Transport Model (NTM)
     • Three drivers of road use demand: 1) Gross Domestic Product 2) Fuel Efficiency and fuel prices 3) Population growth

4. Costs and Revenues

   • Types of firm
     • Sole proprietor
       • Owned and often run by one person who makes all the decisions and bears all the risks.
       • Have unlimited liability - can lose all they own in the event of bankrupcy.
     • Partnerships
       • 2 to 20 people jointly bearing decision making and risks
       • Have unlimited liability
     • Joint stock companies - issue shares
       • Private limited companies (Ltd.)
         • Split into shares giving shareholders partial ownership and a right to a share in profits
         • Shares sold in private exchanges with specific contact between buyer and seller not on stock market
         • Generally smaller than PLCs
       • Public limited companies (PLC)
         • Sell (at least a proportion) of shares on the stock exchange.
           • Anyone can buy shares
         • Owned by shareholders, run by directors who are elected by shareholders
         • Limited liability- can only lose what you invested