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Improving the Efficiency of the U.S. Highway System. Clifford Winston The Brookings Institution. Overview. Summary comments on roads Raising revenue efficiently Reducing costs efficiently Spurring technical innovation. Highway Performance: Delays.

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Improving the Efficiency of the U.S. Highway System

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Improving the efficiency of the u s highway system

Improving the Efficiency of the U.S. Highway System

Clifford Winston

The Brookings Institution


Overview

Overview

  • Summary comments on roads

  • Raising revenue efficiently

  • Reducing costs efficiently

  • Spurring technical innovation


Highway performance delays

Highway Performance:Delays

Average Annual Traffic Delay in Major Metropolitan Areas, 1982-2001


Highway performance finances

Highway Performance: Finances

  • The road system is always “balanced” but that is misleading

  • Revenue sources (the fuel tax) are volatile

  • Costs can be reduced by deferring maintenance and expansion

  • Innovation is rarely considered


Mode shares

Mode Shares


Revenues efficient pricing

Revenues: Efficient Pricing

  • Fuel tax is largely unrelated to motorists’ contributions to delay—doesn’t vary by time of day or location

  • Efficient tolls (road pricing):

    mitigate delays

    raise revenues efficiently (self financing)

    improve land use (other effects)

  • Redistributive effects exaggerated


Efficient pricing continued

Efficient pricing (continued)

  • Fuel tax provides wrong incentives for trucks to reduce weight per axle—the primary source of pavement damage

  • An axle-weight tax should be used to reduce maintenance costs

  • Generally, the fuel tax is an inefficient tax (emission, safety)


Reducing costs x inefficiency

Reducing Costs: X-Inefficiency

  • Eliminate Davis Bacon (reduce labor costs)

  • Optimize capital/maintenance cost tradeoff with thicker pavement

  • Make contracting more flexible

  • Improve oversight to reduce cost overruns


Reducing costs improve allocation of funds

Reducing Costs: Improve Allocation of Funds

  • Allocate highway expenditures to reduce total highway costs, accounting for users’ cost of congestion

  • $1 of spending reduces users’ congestion costs 11 cents; under optimal allocation $1 reduces costs 25 cents

  • Eliminate demonstration projects

  • Use prices as efficient signals of investment—cannot build our way out of congestion


Innovation motivation of privatization

Innovation: Motivation of Privatization

  • Vast pricing and investment inefficiencies in highway

  • Efficient pricing and investment would produce billions of dollars in welfare gains

  • Objectives of privatization:

    Reduce costs

    Make suppliers more responsive to users

    More rapid introduction of innovations


Developing evidence to make the case for privatization

Developing Evidence to Make the Case for Privatization

  • The experience with deregulating intercity transportation in the United States

  • Foreign experience with privatization: private road builders

  • Experiments in the US to show competition can develop


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