System Control and Regulation CEE 587 Prof. Anne Goodchild May 18, 2011

Transportation Participants I need something shipped at the lowest possible cost!

Transportation Participants I need something delivered at the lowest possible cost! I need something shipped at the lowest possible cost!

Transportation Participants Carriers: We have the equipment!

Transportation Participants Carriers – we can find a shipper! Shippers – we can find a carrier!

Transportation Participants the transportation system is vital for the country’s economic health

Transportation Participants purchase fuel, transportation equipment, supplies

Transportation Participants track shipments purchase fuel, transportation equipment, supplies

Transportation Participants match products needing to be shipped with available capacity purchase fuel, transportation equipment, supplies track shipments

Transportation Participants Creates demand for transportation by purchasing products

Economic Types of Transportation Regulation Investments in transportation infrastructure (e.g., highways, airports, ports) Control of routes, pricing, schedules

Economic Types of Transportation Regulation Investments in transportation infrastructure (e.g., highways, airports, ports) Control of routes, pricing, schedules Social/Safety Protect the public, the environment Make sure equipment operates safely, cleanly Safe transportation of hazardous materials (HAZMAT) Regulating hours worked

History of Transportation Regulation  Pre-1920 – establish initial government control –Act to Regulate Commerce (1887) –Interstate Commerce Commission (ICC)

History of Transportation Regulation  – regulatory formalization, extension to other transportation modes –Motor Carrier Act (1935) –Civil Aeronautics Act (1938) –Civil Aeronautics Board (1940) –Federal Aviation Administration (FAA) –National Aeronautics & Space Administration (1951)

History of Transportation Regulation  –Regulation of water transportation by ICC (1940) –Railroad Revitalization and Regulatory Reform Act of 1976  AMTRAK  CONRAIL

History of Transportation Regulation  – prelude to deregulation –Shift from regulation/control to fostering competition –Department of Transportation (DOT) 1961 –Airline Deregulation Act 1978

History of Transportation Regulation  – deregulation –Motor Carrier Act 1980 –Staggers (Rail) Act 1980 –Interstate Commerce Commission (ICC) abolished 1996 –Ocean Shipping & Reform Act 1998

History of Transportation Regulation  2000-Present – focus on technology, safety, and security –Patriot Act –Jones Act

Copyright © , Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University. For personal or classroom use ONLY. This material (including graphics) is not public domain and cannot be published, in whole or in part, in ANY form (printed or electronic) and on any media without consent. This includes conference presentations. Permission MUST be requested prior to use. Rail Track Mileage and Number of Class I Rail Carriers, United States,

Copyright © , Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University. For personal or classroom use ONLY. This material (including graphics) is not public domain and cannot be published, in whole or in part, in ANY form (printed or electronic) and on any media without consent. This includes conference presentations. Permission MUST be requested prior to use. Average Speed of Class I Railroads,

Performance of Class I Railroads, Copyright © , Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University. For personal or classroom use ONLY. This material (including graphics) is not public domain and cannot be published, in whole or in part, in ANY form (printed or electronic) and on any media without consent. This includes conference presentations. Permission MUST be requested prior to use.

A Supply Chain versus the Freight Transportation System  Consider REI’s supply chain between factories in Asia and stores in the US  Consider the freight transportation system in Puget Sound –Describe the system’s network structure –What is the primary objective? What are secondary objectives? –How can we measure performance? –Who is the operator of the system?

Controlling the Freight Transportation System  The behavior of individual transportation firms is realized in the transportation system  These choices are a function of internal and external costs –Internal costs: fuel, equipment –External costs: driver pay rate, congestion, tolls, driving restrictions  We can influence external costs, which influence transportation firms behavior

Induced Demand  After supply increases, more of a good is consumed  When road capacity is increased, in the short term, drive-time is reduced  This encourages more driving, which reduced drive-time  Homes and business are developed that create demand for transportation

What limits demand?  Why would you choose not to go somewhere?  Alter your departure time?  Would you visit Vancouver for the weekend? Why  Did people 100 years ago?

The cost of congestion  Increases transportation cost  Increases inventory cost  Causes travel time variability –Reduces a company’s ability to operate efficiently

Mitigating Induction of Demand  Road pricing (users pay for journey time reduction)  HOV lanes (reduces the cost for particular users, encouraging a shift to that use) –Adding a new one –Converting an existing lane  Zoning (controlling land-use)  Reducing demand by introducing, tolerating, or accepting congestion

What are the goals of the transportation system?  Consumer surplus  Pollution  Distribution of benefits  Environmental justice

How should we price?  Gas tax  Road tolls –Time sensitive –Congestion sensitive  Taxation mechanisms –Property tax –Sales tax  Import fees

How do we set the price?  What is it worth to drive?  Tools –Simulation –Economic theory –Utility theory –Others  What are the consequences –Distribution effects –Equity