[sustran] fwd: Relationship between GDP and mobility

[Paul Barter]

An interesting exchange on the utsg list that may help to clarify some
issues for some of us on sustran-discuss.

>X-Sender: litman at mail.IslandNet.com
>Date: Mon, 02 Nov 1998 09:50:52 -0800
>Mime-Version: 1.0
>Subject: Relationship between GDP and mobility
>From: Todd Litman <litman at islandnet.com>
>To: utsg at mailbase.ac.uk, John Brooks <jbrooks at peeras.demon.co.uk>
>
>At 09:45 AM 11/2/98 +0000, John Brooks wrote:
>>
>>The West European, North American, and several other economies ALL have
>>an inherent and critical dependence on the manufacture, marketing,
>>maintenance, use of, and ultimately, disposal of wheeled vehicles and
>>most particularly private cars.  It is unlikely that any measures that
>>would reduce that dependence could do so without causing at least a
>>slowdown in growth of GDP.  So do not expect any effective measures
>>anytime soon.  :=(
>
>One of my wise old college professors often said that the most interesting
>discussions often begin by examining issues that are often considered so
>obvious that they are not usually considered worth discussing. The
>relationship between economic development and vehicle travel is a good
>example. Many people, including some economists who should know better,
>assume that this relationship is always positive, so constraints on vehicle
>travel are bad for the economy. This assumption is worthy of some critical
>examination.
>
>In fact, both the theoretical and emperical evidence is that beyond a
>certain point, increases in per-capita motor vehicle travel appear to be
>economically harmful. Even countries that are currently dependent on the
>manufacture, marketing, maintenance and use of automobiles do not
>necessarilly benefit from marginal increases in vehicle travel that result
>from underpricing or other market distortions. I would be glad to email a
>copy of the paper, "Automobile Dependency and Economic Development", that I
>wrote with Dr. Felix Laube for presentation at this summers' "Moving the
>Economy" conference in Toronto to anybody who is interested in this issue.
>Here are some of the paper's highlights:
>
>*  Economic efficiency is optimized when consumer prices reflect full
>marginal costs. An optimal transportation market, which would include
>direct charges for roads and parking, distance-based vehicle insurance,
>pollution charges, improved travel choices, and removal of some other
>economic distoritions, would significantly reduce automobile travel (by
>40-50% according to our institute's analysis, described in our paper
>"Socially Optimal Transport Prices and Markets") while increasing economic
>development.
>
>*  Automobile and petroleum purchases provide relatively little economic
>activity in most communities. For example, here in British Columbia, $1
>millon spent on petroleum provides an average of about 4 jobs. The same
>amount spent on public transit provides 21 jobs. Most regional economies
>would benefit if consumers shifted their expenditures from automobiles to
>other goods.
>
>*  Many economies have benefited from exporting motor vehicles and
>petroleum, but there is little benefit from domestic consumption. For
>example, Japan experienced strong economic growth during the 1950-70s when
>it produced vehicles for export but maintained relied on an efficient,
>diverse transportation system. Increasing automobile dependency  increases
>costs and inefficiences that reduce economic productivity and growth. It is
>particularly harmful to countries that import fuel.
>
>*  The automobile and petroleum industries are currently not very
>profitable, and increasing production overcapacity is expected to make
>these industries even less profitable and more dependent on economic
>subsidies in the future. While automobile production helped many countries
>develop their heavy industry in the past, there is little reason to believe
>that this is a good economic strategy now, since the market is glutted.
>
>*  Increasing automobile dependency imposes a number of external costs,
>including accident damages, congestion inefficiencies, roadway and parking
>facility costs, and environmental damages, all of which create burdens to
>an economy.
>
>*  A portion of the GDP growth associated with increased automobile use
>repesents increased costs that reduce social welfare. For example, human
>health maximizes welfare but involves minimal "economic" activity. Crash
>injuries and medical problems from pollution reduce welfare but result in
>all sorts of activities that show up in conventional measures of economic
>growth, such as GDP.
>
>It is a mistake to simply ask how many jobs and businesses in an economy
>are dependent on automobile expenditures. Equally important is to ask how
>many jobs and businesses would benefit if consumers spent their money on
>alternative goods. Most evidence indicates that the alternative goods are a
>better investment.
>