What is TRANSPORT ECONOMICS?

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What is TRANSPORT ECONOMICS? What does TRANSPORT ECONOMICS mean? TRANSPORT ECONOMICS meaning -TRANSPORT ECONOMICS definition - TRANSPORT ECONOMICS explanation.

Transport economics is a branch of economics founded in 1959 by American economist John R. Meyer that deals with the allocation of resources within the transport sector. It has strong links to civil engineering. Transport economics differs from some other branches of economics in that the assumption of a spaceless, instantaneous economy does not hold. People and goods flow over networks at certain speeds. Demands peak. Advance ticket purchase is often induced by lower fares. The networks themselves may or may not be competitive. A single trip (the final good, in the consumer's eyes) may require the bundling of services provided by several firms, agencies and modes.

Although transport systems follow the same supply and demand theory as other industries, the complications of network effects and choices between dissimilar goods (e.g. car and bus travel) make estimating the demand for transportation facilities difficult. The development of models to estimate the likely choices between the such goods involved in transport decisions (discrete choice models) led to the development of an important branch of econometrics, as well as a Nobel Prize for Daniel McFadden.

In transport, demand can be measured in number of journeys made or in total distance traveled across all journeys (e.g. passenger-kilometers for public transport or vehicle-kilometers of travel (VKT) for private transport). Supply is considered to be a measure of capacity. The price of the good (travel) is measured using the generalised cost of travel, which includes both money and time expenditure.

The effect of increases in supply (i.e. capacity) are of particular interest in transport economics (see induced demand), as the potential environmental consequences are significant.

Regulation of the supply of transport capacity relates to both safety regulation and economic regulation. Transport economics considers issues of the economic regulation of the supply of transport, particularly in relation to whether transport services and networks are provided by the public sector (i.e. socially), by the private sector (i.e. competitively) or using a mixture of both.

Transport networks and services can take on any combination of regulated/deregulated and public/private provision. For example, bus services in the UK outside London are provided by both the public and private sectors in a deregulated economic environment (where no-one specifies which services are to be provided, so the provision of services is influenced by the market), whereas bus services within London are provided by the private sector in a regulated economic environment (where the public sector specifies the services to be provided and the private sector competes for the right to supply those services - i.e. franchising).

The regulation of public transport is often designed to achieve some social, geographic and temporal equity as market forces might otherwise lead to services being limited to the most popular travel times along the most densely settled corridors of development. National, regional or municipal taxes are often deployed to provide a network that is socially acceptable (e.g. extending timetables through the daytime, weekend, holiday or evening periods and intensifying the mesh of routes beyond that which a lightly regulated market would probably provide).

Franchising may be used to create a supply of transport that balances the free-market supply outcome and the most socially desirable supply outcome.