Transport economics majorly entail matters related to the economics of transport systems such as environmental implications of transport supply, role economics plays in enhancing transport logistics and the financing of transport infrastructure. Modern transport is characterized by the intensive support of roads, rails ports, air control systems, and bridges among others. The intensity and modernity of contemporary transport systems have led to the growth of the study of transport economics beyond the elements of repair or build. Part of the new discussions relating to transport economics is transported systems associated costs. According to elementary economics theory, the supply of anything is an appositive function of its price. Part of transport economics price is external costs which refer to the uncompensated effects. Instead, costs, transport system, and its users have on the society and or part of it which are the social costs (Button, 2010). Social values refer to the cost of externalities to the community that comes with a business or an economic sector. The transport sector is highly characterized by social costs and more so negative externalities. Social costs are significant in transport economics due to their high association, frequency, and implications in transport logistics and systems. It is important for stakeholders in the infrastructure system to understand the importance of social expenses on transport economics.
Several categories of social costs characterize transport economics. Some of the standard types of social transport costs explored include congestion delays, accidents costs, noise, and air pollution and greenhouse gases. Other minor categories that are less reviewed include water pollution, vibrations barrier effects, and security risks and research continues to develop the various social costs of transport. The minor categories are essential to transport economics in the long run when the accumulation of their effects is significant. The social costs from the critical transportation type externalities, however, are substantial in the short term making them a topic of interest in transport economics (Gillen, Lawson, Waters II & Zhang). Examples of the social costs of transport are broad. For instance, in road congestions, the individual user only considers their personal costs without considering the costs to other users such as the costs of delays to appointment or workplaces or emergency health conditions that are held by the congestion. The externalities raise matters of environmental justice, health and safety, climate change and resources preservation among others making them essential considerations in economics. Therefore transport externalities are critical in transport economics for various reasons.
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First, social costs are essential in transport economics for determining the full value of transportations. Social costs of transport account for a significant percentage of the entire total cost. The full total price of any business activity includes the cost of externalities. Computation of full expenses for transport is relevant in transport economics for use in policy analysis and implementation especially since transportation is a public service. The social cost is real and significant in the society and as such should be included in the calculation of full expenses used to analyze and design policies and hence the importance in transport economics (Full Cost Investigation Task Force, 2009). Secondly, social costs are essential in transport economics for determining the means of mitigating them and their effect on society. Social costs have an adverse impact on the community and amount to complexities that ultimately are more costly in the long run. For instance, traffic congestion leads to high consumption of fuel which increases consumption costs. Also, externalities like air pollution lead to a health issue that incurs health costs and in worst case scenario amount to permanent health issues. Often in the calculation of costs, institutions fail to account for social costs in pursuit of profit maximization. However, the long-term impact is a cost to the third party (Dova et al., n.d). Identifying the externalities helps to develop a mechanism to mitigate and provide for them in action plans to reduce social cost and achieve total profits.
Thirdly, social costs of transport help the government in developing policies that are universally beneficial. Externalities costs are not always negative. However in drafting public plans that the government has to consider the social cost-benefit analysis to ensure that transport systems offer more benefits than costs. The government controls transport systems since transport is a public good. There is hence the need to determine the social costs of transportation profits in order to input regulations that eliminate the social costs and at the same time provide the benefits of the transport system. The government can look at the transport logistics and identify areas to adjust such as regulation on quality of vehicles on the road to curb air pollution, safety measures to navigate the safety risk of accidents and traffic control to ease with traffic congestion. Social costs of transport are also relevant to climate change policies development and implementation. Notably, the social costs of carbon emission are the relevant economic concept to the economics of climate change. Social costs of carbon refer to the economic costs caused by each additional ton of carbon dioxide emission. The social cost of carbon is applicable in determining regulations surrounding greenhouse gases in climate change policy (Nordhaus, 2017). Social costs of carbon include the total range of effects that emissions have on the environment through the carbon cycle including economic damages caused by climate changes.
Transport machinery exceptionally high load vehicles extensively contribute to a significant amount of carbon emissions through exhaust from burning fuel on the engine. Vehicle exhausts contain a wide range of pollutant gases including ozone, carbon monoxide, and carbon dioxide. The gases trap heat within the earth atmosphere leading to increased temperature stimulating climate change. Therefore, social costs provide for the contribution of carbon emissions from the transport system to help in drafting climate change policies.
Furthermore, social costs in transport economics help policymakers and investors understand that social costs are externalities which characterize market failure. Social costs are considered problematic to the efficient allocation of resources a characteristic of market failure. Social costs are an inevitable product of the built-in sense of free enterprise, with distinct political dimensions which questions the search for solutions through the market or economic computations. Social costs are unintentional consequence economic agents such as transport that affect the productivity of others in the economic realm in a way that they cannot seek compensation. The problem of social cost is, therefore, the inability of the price mechanism to internalize the effects by assuring compensation. Therefore, market failure in that market proves incapacitated in allocating resources efficiently. According to the theories of economics, the Pareto optimum is violated when remedies fail to be located efficiently. It is impossible to achieve optimality in situations where the negative externalities of one economic sector exceed its benefits to other sectors of the economy (Caldwell, 2012). Social costs in transport economics help to ensure that the benefits of an economic agent are maximized over their adverse effects. Investors, therefore, take the time to conceptualize different alternatives and prioritize resources such that actual profit maximization is achieved as opposed to maximum profit that disregards social costs. The social cost in transport economics help assesses the purpose of the transport sector towards meeting the basic needs of the community sufficiently without adverse effects. Sustainability is also critical for transport economies since it involves systems that are long-term and whose impacts are bound to the future. Therefore, considering social cost at implementations helps incorporate measures that prevent the long-term effects and cost of corrective measure in the future. Consequently, it is crucial to identify and discuss the social cost of the transport sector to draw government intervention through taxes and subsidies.
Social costs are important in transport economics to help identify, analyze and account for them in the development of transport systems. Transport economics address transport sector a key agent of the economy which has significant social costs to the society. There is hence the need to identify and counter social costs in transport economics for the ultimate good of the society and consequently the sector. The role social costs play in transport economics to create awareness to the extent of externalities as characteristics of market failure. After drawing an understanding of the concept of social costs and defining them, then relevant powers are motivated to provide for them in drafting their action plans and policies for the cake of the government. The ultimate goal of market systems is to provide fully for the populations hence the quest for market optimization. However, social costs reflect on the market as a failure and incorporating their study in transport economics brings policymakers and investors to think about them. Social costs and benefits analysis as proven particularly helpful in helping analysis economic conditions under given sectors. As a result, better implementations are made within the transport sector that ensures its sustainability in the long term in meeting societal need appropriately. Transport systems and machinery contribute significant externalities to the society that need to be accounted for. Therefore, incorporating the social costs in the study of transport economics helps create awareness and draw the necessary measure to reduce and manage theme towards more optimal markets.
References
Button, K. (2010). Transport economics . Cheltenham: Edward Edgar Publishing Limited .
Cardwell, S (2012). Social costs: Where does the market end? RCCSAnnual Review, 4 (4).
Dovas, D., Mavridakis, T., & Politis-stergiou V. The Dimension of social cost in the work of KW KAPP. Economics e-transaction into and from European Languages. Retrieved on 13 October 2018 from https://eet.pixel-online.org/files/research_papers/GR/The%20Dimension%20of%20Social%20Cost%20in%20the%20Work%20of%20K.W.%20Kapp.pdf
Full Cost Investigation Task Force. (2009). Estimates of the full cost of transportation in Canada. Economic Analysis Report . Retrieved on 13 October 2018, from http://publications.gc.ca/collections/collection_2009/tc/T22-165-2008E.pdf
Gillen, D., Lawson, W. G., Waters II & Zhang, A. Trying to put the “full” in full costs of transportation. European Commission 5 th framework project, UNITE. http://www.sauder.ubc.ca/Faculty/Research_Centres/Centre_for_Transportation_Studies/~/media/Files/Faculty%20Research/OPLOG%20Division/OPLOG%20Publications/GILLEN/Gillen%20-%20Full%20Costs.ashx
Nordhaus, W. D. (2017). Revisiting the social cost of carbon. Proceedings of the National Academy of Sciences of the USA, 114 (7), 1518–1523. doi: 10.1073/pnas.1609244114
