[sustran] Optimal Transport Pricing and Markets Paper

[Todd Litman]

Dear Colleagues and Friends,

I recently completed a 40-page draft paper titled "Socially Optimal
Transport Prices and Markets; Principles, Strategies and Travel Impacts."
In it I attempt to define the major criteria for optimal pricing and
markets, estimate optimal prices for an average automobile, use the results
to calculate the change in vehicle travel that might result from optimal
pricing, and discuss the implications of changing from current to more
optimal pricing. Below is the report abstract.

I am looking for up to a dozen reviewers of this paper. Please let me know
if you would like a copy, and if so, whether I can send it as a Word 97
file attachment, or whether you need a hard copy (and if so, your preferred
mailing address). 


Sincerely,

Todd Litman, Director
Victoria Transport Policy Institute
"Efficiency - Equity - Clarity"
1250 Rudlin Street
Victoria, BC, V8V 3R7, Canada
Phone & Fax: 250-360-1560
E-mail:      litman at islandnet.com
Website:     www.islandnet.com/~litman


		===========================================
		Socially Optimal Transport Prices and Markets
		  Principles, Strategies and Travel Impacts

				      DRAFT
	    			   2 April 1998

				  By Todd Litman
			Victoria Transport Policy Institute

	
					ABSTRACT
This paper explores the potential of developing more optimal transport
prices and markets, and resulting impacts on vehicle travel, consumer
costs, environmental and land use impacts, economic development, and social
welfare. 

Optimal pricing must balance economic efficiency, equity, and transaction
costs. Optimal markets must offer consumers choices and information,
minimize distortions, encourage producer competition, and avoid social
traps. Current transport prices and markets often fail to meet these
criteria. Although distortions may have been justified when transaction
costs were high and motor vehicle externalities relatively small, new
pricing technologies and increasing concern over external costs justifies
increased emphasis on marginal and full-cost pricing, and efforts to
eliminate market distortions.

Eleven specific strategies are proposed to create more optimal pricing and
markets. These strategies would significantly increase the perceived cost
of motor vehicle use while reducing fixed vehicle costs and externalities,
increase consumer choices, and reduce market distortions. Higher vehicle
costs would be offset by reductions in other taxes, consumer expenses, and
motor vehicle externalities. Employment, productivity and economic
development should increase. Most consumers should benefit overall.

Full implementation of these proposed changes is predicted to reduce motor
vehicle use by 40-65%. This indicates that current high levels of
automobile use is partly an artifact of mispricing and market distortions,
not consumer preference. Differences in the magnitude of vehicle travel
between current and optimal pricing and markets represents reduced consumer
welfare. Although there are a number of barriers to implementing more
optimal pricing and markets, these can be minimized through good planning
and management practices which make charges predictable and gradual,
maximize public involvement, and address specific public concerns.

===========================================