Social costs can be said to be the sum of the private costs that result from a transaction and the costs imposed on the consumers as a consequence of being exposed to the transactions for which they are not compensated or charged. But on a more up-close look, social costs can be said to be the social part of the cost of production. This implies the production's cost to the society. Transport economics, on the other hand, is the study of the movement of people and goods over space and time (Pearce, 2014). There are a number of ways that social costs influence commercial transport. This paper will focus on these ways because social costs are essential in transport economy.
It is important to point out that social costs influence the economic benefits of an industrial transport system. It is correct to point out that transportation projects can have various impacts on a community's economic development objectives. This may include productivity, employment, business activities, property values, investment, and tax revenues. Important to note is that the term community is used broadly in transport economics to refer to a scale that ranges from individual households to cities, regions, nations or even the entire world. Generally speaking, transport projects which improve overall accessibility include objectives that will enhance the business' ability to provide goods and services, and people's ability to access education, employment, and services ( Stubbs, Tyson, & Dalvi, 2017). Transport projects that improve transportation costs include travel time, vehicle operating systems, road and parking facility costs, accident, and pollution damages. These transport projects to increase economic productivity and development. However, great care is needed to avoid instances of double counting impacts which are already counted in travel time and vehicle costs savings, emission or safety benefits.
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Many economic impacts of social costs are economic transfers that are one person or group or area benefiting at the expense of another. Other economic impacts are true resource changes which imply overall economic productivity increase or decline. In many situations, the distribution of effects is important for instance from the perspective of the people who gain from an economic transfer; it is an actual benefit, but not from a society's overall outlook. It is essential to consider the full range of economic impacts, which are both positive and negative, that a mode of transport may cause (Litman, 2017). For instance, an urban highway expansion may improve the motorists' access and reduce their costs per vehicle mile, but by creating a barrier to pedestrian travel stimulating more dispersed land use development patterns, reduces access by other modes, and increases the total amount of travel required to reach destinations. In the same sense, improving access to a particular area can expose businesses to more competition. Consider the case of previously captive local customers more easily accessing regional shopping centers, thereby reducing business activities in the domestic region.
In either of the above scenarios, it is apparent that the benefits flow to parties that depend on transportation facilities and services from their activities. In most instances, the ultimate beneficiary is the business operation that can achieve operating cost savings or greater productivity which is output per unit of cost. In cargo deliveries, the recipients may be senders and receivers, and not the transportation company that actually does the traveling. It is equally possible to account for many business operations and scheduling benefits, as well as logistics benefits and production economies of scale, as additions to the valuation of travel time benefits for truck trips. Similarly, they can be addressed separately as additional economic benefits.
It is crucial to note that there are many broader forms of economic impacts of communities, regions, and states in which transportation facilities lead to business expansion, additional job creation, and other tax revenues. Economic impacts are the effects a project or policy has on the economy; in this case, it is the effect of social costs as a strategy has on the economy of the transport system. This is measured in terms of the change in business sales, jobs, value added, income, or tax revenue ( Vasconcellos, 2014). Economic impacts can result from various sources, including time savings to businesses, household and business vehicle operating cost savings, the strengthening of local and regional market connectivity, induced land development, or increased tourism. In all of these cases, economic impacts arise because a transportation investment causes a change in prices, a change in household behavior, or a change in business behavior which improves business investment. Attraction, expansion, retention, or competitiveness in the area of study whether the impacts are positive or negative.
Economic development impacts are not included in the benefit-cost analysis since they occur as the end result of the direct effects of a transportation project on travelers and non-travelers. A transportation project may improve local business competitiveness hence promote economic growth (Litman, 2017). This is because when too many investors are present in a region due to transport accessibility, social amenities and facilities are bound to be developed to aid in the investment, such as good road network. This leads to economic development and growth in the said region. It also helps in reducing existing transportation costs both for the employees and the freight. It leads to the expansion of labor market access by providing access to a broader job base. Social costs may also affect economic growth by saving money for area residents through increasing available income to spend elsewhere in the economy or by improving the attractiveness of the area as a place for people to live and locate their business activities.
Most problems associated with the transport system and networks are best solved through the growth of national income. However, for this to be realized, it is essential for the negative social costs to be tackled and corrected through more positive measures. This could include the redistribution of income for the benefit of the poor and the provision of goods and services such as public roads and parks which no private individual can build on their own and where the principle of exclusion does not apply. This is because not everybody can be able to afford set standards of revenue for transportation of goods as far as logistics are concerned. Social costs come in handy in the sense that it realizes this and seeks to provide flexible services and rates to serve the diverse population. The result of such a move would be affordable services which boost productivity in the sense that more people will be able to benefit from the transport network, rely on it for the transportation of their goods, hence facilitating their businesses. With such a system in place at the end of the day, companies will be boosted leading to economic expansion. This will be important to economic transport because the more people are encouraged to rely on such a system for their trade, the more they are empowered to boost their productivity, and the more they can afford transportation on whatever rate in the future. In other words, social costs in transport economics play a long time duty in securing future clientele. It is more like empowering the general population to afford better services in the future. On the other hand, there is the issue of pollution, contamination, and diseases. Social costs come in handy in providing measures to minimize these effects to the general society.
References
Litman, T. (2017). Evaluating transportation economic development impacts . Victoria Transport Policy Institute.
Pearce, D. W. (2014). The Valuation of Social Cost (Routledge Revivals) . Routledge.
Stubbs, P. C., Tyson, W. J., & Dalvi, M. Q. (2017). Transport economics . Routledge.
Vasconcellos, E. A. (2014). Urban Transport Environment and Equity: The case for developing countries . Routledge.
