Transport Management

Transport management is now far more sophisticated than it was a decade ago.

Transport activities generate a wide range of economic benefits. Between 2% and 4% of total OECD employment, for example, is derived from transport services, and an estimated 4-9% of GDP in the OECD area is attributable to spending by the users of transport (including expenditure on infrastructure). More than 10% of total household expenditure now goes to purchase transport services (OECD Publications/ECMT). The balance of international payments is also strongly influenced by trade in transport equipment.

Enormous changes have taken place in the transport sector in recent years. The most marked is its unprecedented growth. Both stock variables (fleet size, kilometres of road and rail infrastructure, and so on) and flow variables (number of trips taken, volume of goods transported, and the like) have expanded rapidly. The world's automobile fleet, for example, doubled between 1970 and 1990, to stand today at approximately 500 million vehicles. These numbers are expected to double over the next 20-40 years, although at a slower rate in OECD countries than in the past.

Substantial structural, changes have also taken place. For one thing, there has been a major shift in where transport growth is occurring. In 1950, 75% of all automobiles were located in the United States. Since then, the number outside the United States has grown by about 8% per year (Mackenzie Walsh 1990) with even more remarkable increases in some locations. In Athens, for example, car ownership burgeoned from 35,000 in 1964 to 650,000 in 1984, and is expected to be about 900,000 by this year (Glaoutzi Damianidias 1990). Most future growth in global vehicle stocks is projected to occur in the developing world, as the industrialized countries become increasingly saturated with vehicles, as the developing countries undergo urbanization and industrialization processes of their own, and as people there begin to realize their longstanding aspirations for more mobility. There has also been a significant shift in the shares of different modes of transport. In the past twenty years, the volume of road freight traffic has doubled, while rail and waterway volumes have remained stable.

In view of the rapidity of these changes, it is not surprising that transport problems are generating considerable political debate in most countries. The traditional approach used to be to step up the supply of services; increasingly, calls are being heard for policies that curtail demand. Whichever approach is preferred, much of the discussion centres on the so-called 'social costs' of transport. These costs derive from 'negative externalities', which occur when transport consumers/ producers impose higher costs on society at large than they bear themselves.

Some of the economic benefits produced by transport are also 'external' in the sense that they accrue to economic actors beyond the original consumers/ producers of the services in question. Although there is no conceptual difference in the basic definitions of external costs and benefits, different incentives are inherently at work in each case. Specifically, there are built-in might generate, thereby 'automatically' internalising these effects in the form of lower prices or higher economic rents/ profits. On the other hand, no similar incentive exists on the cost side. All of the incentives here work in the direction of avoiding additional costs, so government action will usually be necessary to force their internalisation into transport decisions. That is why most of the debate about transport externalities focuses on costs rather than on benefits.

Of course, the economic benefits and costs of transport activities accrue not only to the transport sector itself, and the intersectorial sharing of these impacts has become an important political issue in many countries. Lobbyists often argue, for example, that transport activities generate benefits for other sectors of the economy, which are not properly recognized (much of the debate about state participation in the financing of transport infrastructure is based on this view).

And finally, because transport activities generate net economic benefits, society will usually be willing to accept that some externalities should be tolerated. On the other hand, externalities do change the point at which the costs of transport activities begin to outweigh their benefits, so these externalities should always be factored into transport decisions, even if they are not completely eliminated.

What Size the Externalities?

Much research has been carried out in recent years on the extent of the social costs of transport, and several order of-magnitude estimates are now available. For example, it has been estimated that 16% of the citizens of OECD countries

...