1. Management of
Transportation
Seventh Edition
Coyle, Novack, Gibson & Bardi
© 2011 Cengage Learning
Chapter 2
Transportation’s Role
in the Economy
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or duplicated, or posted to a publicly accessible website, in whole or in part. 1

2. Introduction
• Chapter focus: Holistic view on significance
and impact of improved transport
– Transport is pervasive, an essential element of
daily life. Its vital to economic development and
growth and has significant social, environmental,
and political consequences
• Chapter organization
– Historic significance
– Economic significance
– Environmental, social, and political significance
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3. Historical Significance of Transport
• Contribution to growth of early civilizations
– Nile River facilitated trade, communication, defense,
political and cultural growth in ancient Egypt
• Creation of social structures
– Fosters unification of political and cultural ideals
• Facilitation of trade and economic growth
– Canals, rail and road systems spur U.S. expansion
and growth through 19th
and 20th
centuries
• Role in national defense
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5. Transportation and the Economy
Overview
• Conceptual views on the role of
transportation in an economy
– Enabler of utility creation
– Provider of services at a varying costs
– Factor of production
– Influence on market access and extent of
market
– Spatial and temporal relationships
• Transport as a bridge for the producer-consumer or
supply-demand gap
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6. Economic Significance
Value of Goods
• Conceptual foundations
– Influence of transport improvement on
landed cost and size of market area
• Place utility: creation of economic value through
transport cost reduction
• Law of Squares in Transport and Trade (Lardner’s
Law)
• Reduction of producer-consumer gap
– Time utility
– Quantity utility
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9. Economic Significance
Utility of Goods
• Additional concepts: Contribution of
transport to:
– Geographic specialization and principle of
comparative advantage
– Enabling of large-scale production economies
– Increased competition through market area
expansion
– Changing land values
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10. Economic Significance
Transport Patterns
• Principal global trade flows
– East-west flows
• Reflect trade between industrialized nations largely
in Northern Hemisphere
– North-south flows
• Reflect trade between industrialized nations and
developing economies in Southern Hemisphere
• Trade flows within countries
– Principally link major metropolitan areas and
ports
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11. Economic Significance
Gross Domestic Product (GDP)
• GDP: measures size of an economy
– Definition: annual market value of all goods and
services made within border of a nation
• GDP = Consumption + gross investment + government
spending + (exports – imports)
– Transport: 10.5% of 2007 U.S. GDP
• Trails housing, health care, and food, exceeds education
• Downward trend due to improving transport
productivity
• Transport: 18% of household expenditures
– Exceeds all expenditure categories except housing
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accessible website, in whole or in part.
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12. © 2011 Cengage Learning. All Rights Reserved.
May not be scanned, copied
or duplicated, or posted to a publicly accessible
website, in whole or in part.
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May not be scanned, copied
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14. Environmental Significance
• Social costs of transport
– Various forms of pollution
– Consumption of natural resources
• Policy challenge is to develop clear
understanding of relationships between
– Transport investment and operations
– Economic benefits of transport
– Social costs of transport
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15. Environmental Significance
The Environment
• More emphasis today placed on achieving
balance between:
– Sound and efficient transport system
– Clean and safe environment
• Green supply chain concept
• Business leaders and environmental quality
– Increasingly believe business has important
role
– Environmental quality does not have to be a
zero-sum game
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16. Air Quality and Acid Rain
• Acid rain: more acidic rain than normal
– Adversely affects water systems, crops, forests,
human health, and air visibility
– Sulfur dioxide, nitrogen oxides, and volatile
organic compounds produce acid rain
– Internal combustion engine emissions are a
source of these pollutants
– Existing regulations limit emissions
• More reductions may be needed. This may involve
difficult policy-balancing choices
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17. Air Quality and Acid Rain
• Greenhouse effect
– Definition: heat radiating from earth is blocked or
absorbed by gases in atmosphere
• Source of gases – human activity, such as transportation
– Contributes to climate change
• Ozone reduction in stratosphere
– Ozone reduces amount or ultraviolet radiation
reaching surface of the earth
– Concern that chlorofluorocarbons used in home and
vehicle air conditioners contribute to ozone
depletion
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18. Maritime and Water Quality
• Many potential transport-related sources
of adverse impacts on maritime
environment
– Oil tanker spills
– Ship generated garbage dumping
– Hazardous material spills
– Motor oils in water runoff
• Adversely affects birds, marine mammals,
and quality of water used for drinking and
recreation
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19. Noise
• Noise from transport
– Potential annoyance as well as health concern
• Principal transport sources of noise
– Airplanes and motor vehicles
• U.S. DOT and Federal Aviation Administration
– Sponsors research on noise abatement strategies
– Provides funding for noise abatement projects
• Noise emissions governed by Noise Control Act
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20. Safety
• Transport-related injuries and loss of life
– Passenger transport
• 2006: 44,912 transport-related deaths
• 95% of fatalities occurred in highway vehicles
• Number of deaths has remained stable. Death rate
is declining due to:
– Increased licensing requirements
– More reliable vehicle designs
– Freight transport
• Safety trends not as favorable as on passenger side
• Rising number of accidents, spills and explosions© 2011 Cengage Learning. All Rights
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21. Social and Political Significance
• Social significance
– Enhancement of health and welfare
• Famine and other disaster relief efforts
• Political significance
– Wide range of governmental responsibilities
• Regulatory role examples
– Common carrier concept
– Power of eminent domain
• Promotional role
– Facilitation of commerce
• Preservation of national defense
© 2011 Cengage Learning. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
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22. Overview of Modern
Transportation• Prior material: addresses broad impacts
– Economic (micro and macro)
– Environmental, social, political
• Transport system shaped by three decision-
making groups:
– Users: create the demand requirements
– Providers: supply, operate, and manage transport
services to meet demand
– Government: develop policy, supply infrastructure,
and regulate
• Each group’s decisions influenced by impacts
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23. Overview of Transportation
Trends
• Deregulations of late 1970s and 1980s
stimulated major changes in transport
– Affected how carriers organized, priced, sold
services, and managed operations
• Numerous key trends continue to shape
transport
– Key trends in demand for transport services
– Key trends in supply, operation, and management of
transport services
– Key trends in government policy and regulation© 2011 Cengage Learning. All Rights
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24. © 2011 Cengage Learning. All Rights Reserved.
May not be scanned, copied
or duplicated, or posted to a publicly accessible
website, in whole or in part.
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