Inroads-Understanding Transportation

If we are going to be investing billions of dollars in transportation, it would probably help to understand how transportation works.

According to Wikipedia, transportation is the act of moving something from one location to another. While this may be mind-numbingly basic, what's really sad is our understanding of transportation doesn't extend much further.

Traffic engineers like to equate the movement of people with the flow of fluids; many conservative-minded people equate movement of vehicles with economic activity. While both of these analogies seem plausible, they are both fundamentally flawed. People do not behave like inanimate particles and can chose from a variety of travel options. Economic activity is not generated during travel, but at the destinations.

In economic terms, the act of moving oneself is fundamentally a wealth destroying activity. Transportation has direct costs (gas) and opportunity costs (time), while the benefits are only achieved at the destination. Economic activity cannot be equated with vehicle movement since there is no benefit to traveling more if the destinations are the same. No wealth is generated by just having people move around in circles.

Why do people get around the way they do? Like anything else, people seek to minimize their costs while maximizing the benefits. People wish to reach destinations (work, school, grocery store) while minimizing their costs of transportation (gas, fares, time, energy).

The cost of transportation can be viewed as three separate costs:

• Direct Costs
• Time
• Inconvenience

Direct costs are the actual costs of transportation. For cars, these would the cost of the vehicle, gas, maintenance, insurance and licensing.

Time is an opportunity cost. The thought it is that the time spent traveling could be better spent doing something else. The cost of time is a very important factor and explains why people may choose nominally more expensive transport modes (driving vs. walking).

Inconvenience is a cost associated with personal preference. For example, some people may not like standing up while taking a bus or enjoy driving. For them, there is an extra cost associated with these modes.

What does this all mean? Well, contrary to many conservatively minded people, you cannot equate additional vehicle movements with additional economic activity. The way you help the economy is by minimizing the total transportation costs, thereby reducing the amount of resources spent on transportation and allowing it to be used for other purposes.