Masood Mortazavi's Weblog

Saturday February 17, 2007

[ Economics ] Driving To Work

Consider the table below, originally published by The Wall Street Journal.

It shows the growth in traffic costs (fuel and lost personal time) in various urban areas in the U.S. from 1983 to 2003. The actual and aggregate "cost" of a transportation system that relies, primarily, on individuals driving themselves to places goes well beyond that of fuel and lost personal time. One must also include other costs such as health care, insurance, repairs, etc., which arise when people have no reliable public transportation choice and have to drive themselves to work and other places over long distances.

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Table from the WSJ.

When active producers in an economy spend large parts of their time and resources driving back and forth to work, they are contributing to the aggregate transaction costs of that economy, making it less "competitive" than economies that make better use of time and resources ("Bush Plays Traffic Cup in Budget Request," WSJ, Feb. 5, 2007). Witness, as examples, public transportation systems in Tokyo and Berlin.

Travel congestion is "increasingly troubling," Transportation Secretary Mary Peters said in an interview. "It's a cost to business and probably affects our ability to be competitive on the global market. But it's also something that just drives people crazy."

It would be misleading to think that work-from-home in the Internet age will solve the problem. A quick analysis of the social life of information would make it clear that work from home has its own significant transaction costs for corporations. So, while by working from home we reduce some aggregate transaction costs, we add others.

2007-02-17 00:08:45.0 -- Comments [2] ; Permalink ; Trackback.
costs traffic transaction

Comments:

There's always public transportation. I get F2F time, I save on fuel, and my time isn't wasted (I worked solid for 1 1/2 hours this morning on my BART/Bus trip from Berkeley to Menlo Park this morning). Combine that with work from home part time, and it seems like a pretty good balance.

Posted by David Van Couvering on February 20, 2007 at 04:13 PM PST #

David - Thanks for your observation and sharing your experience. Yes, I agree that good public transportation is the key to reducing transaction costs associated with people getting to work and other places of interest. Your case is an example of how it can be used effectively. Unfortunately, public transportation facilities in our Bay Area still lag far behind comparable regions in Europe, making it impractical for many to use them. Hence, the majority of folks still languish behind the wheel of their car, driving back and forth to work, when technologies other than a private car (e.g. subways and surface trains) can drive them back and forth much more efficiently if they were better available (e.g. as is the case in metropolitan Berlin, London or Paris). In short, we need more and far better public transportation infrastructure to arrive at significantly greater competitiveness in our regional economy. The problem is that such infrastructure requires long-term planning, on which the regional legislature and leadership frequently fall quite short. Also, as land ownership becomes more and more fragmented, deploying such infrastructure may become progressively harder.

Posted by M. Mortazavi on February 20, 2007 at 04:27 PM PST #