The Economics of Transportation Systems:

A Reference for Practitioners



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Economics as a Tool for Transportation Decision Making

From travel time savings to job creation (both direct and indirect), income growth to property value changes, motor vehicle crashes to air quality and noise impacts, and microeconomic choices to macroeconomic shifts, transportation policies and investments carry great weight. This Reference was designed to introduce transportation practitioners to the underlying economic realities of their profession. Ultimately, "good engineering judgment," which is vital to defensible and optimal decision-making, depends in large part on good economic judgment.

"I am an engineer, so I never use economics -- do I?"

It is common for transportation planners and engineers to feel unfamiliar with economic principles, and some assume that economics does not apply to their job duties. In practice, most transportation professionals can regularly employ economic concepts and techniques for decision-making -- and many do, albeit unconsciously. Due to a variety of time and data constraints, many transportation practitioners' decision-making processes are not formally documented and emerge via "engineering judgment." However casual in nature, the wisdom behind such judgment comes from past experiences, which is rarely without economic considerations and consequences (e.g., whether to install an asphalt or cement-based pavements or a rural two-lane highway).


Table of Contents

I. Introduction and Overview

II. The Microeconomics of Transportation

Chapter 1. Costs and Benefits of Transportation

Chapter 2. Pricing of Transportation Services

Chapter 3. Regulation and Competition


III. Transportation Planning and Policy

Chapter 4. Transportation, Movement, and Location

Chapter 5. Investment and Financing


IV. Methods for Analysis

Chapter 6. Project Evaluation

Chapter 7. Economic Impact Analysis of Transportation Investments and Policies

Chapter 8. Econometrics for Data Analysis


V. Data Sets

VI. Case Studies


Example Questions Addressed in this Reference

  • How much should contractors be charged for project schedule delays?
  • Should DOTs prioritize capacity-expansion projects over maintenance projects?
  • What is better for DOT budgets, the environment, and travelers: gas taxes, VMT fees, or variable tolls?
  • Should a new highway include or exclude frontage roads? What are the monetary and other costs associated with constructing these frontage roads relative to the benefits they provide?
  • Should a speed limit be raised (to save travel time) or lowered (to guard against severe crashes)? What speed changes (and times savings) can we expect from drivers, and how do all costs and benefits compare?
  • If adding a relief route attracts a new big-box retailer to the bypass frontage, but the competition closes several smaller shops in the city's historic downtown, what is the overall economic impact to the city? And to the region?
  • Should right-of-way (ROW) acquisition for a new-build project include room for a future passenger rail corridor?

These are just a few of the questions where successful solutions require an economic understanding. In reality, transportation is essential to regional and national economies, impacting almost every facet of human life, directly or indirectly.

Citing this Reference & Making New Contributions

The Reference is copyrighted to Professor of Transportation Engineering Kara Kockelman and associated contributors, and is published via Amazon's createspace.  Any use of this content must be freely shared with others, and appropriately referenced.  We look forward to hearing your suggestions for changes to the Reference!  And we welcome questions.



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Last Updated: 1.24.14