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Transportation. Ever wondered why we have transportation? What determines the # of transportation connections to a place? Why do we find some places attracting more people than other cities? Will find out . Transportation. Movement of people and goods is characteristic of every economy

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transportation
Transportation
  • Ever wondered why we have transportation?
  • What determines the # of transportation connections to a place?
  • Why do we find some places attracting more people than other cities?
  • Will find out 
transportation1
Transportation
  • Movement of people and goods is characteristic of every economy
    • Scale and types of transportation systems differ among economies
    • These depend on the sophistication of the economy
transportation us history
Transportation & US History
  • Local era
    • Short distance hauls
    • Practically no roads, and railroads not yet implemented
  • Economic side
    • Continued to rely on farming in the Northeast
    • Short growing season, not too rich soil
transportation us herstory
Transportation & US HerStory?
  • Growth of the trans-Appalachian route
    • Erie canal and other interregional canals
    • Growth of the railroad
  • Economic side
    • Growth of NY as the prime city
    • Growth of agriculture in the Midwest
    • Decline in agriculture in New England
working on the railroad
Working on the Railroad
  • Dominance of the railroad
  • Near abandonment of canals
  • Roads not well developed
  • Growth of cities inland
    • Decline of cities along sea coasts/rivers
    • Chicago as the second largest city
but what is the story
But, what is the story?
  • Transportation is the link in the story
    • Without transportation the pioneers would never have ventured west
    • Without transportation the Midwest would never have become the grain-capital
    • Without transportation we would not have even had a standard time for the US!
    • Without transportation there is no trade!
transport communications
Transport & Communications
  • Movement of ideas
    • Modern parlance referred to as moving data
  • Similarities to moving goods or people
  • Hence, the usage “spatial interaction”
    • People and activities at different locations interact over geographical space
interaction matrix
Interaction Matrix
  • If we merely represent the presence or absence of connections
    • It is a connectivity matrix
  • If we also show the volume of movement among places
    • Flow matrix
  • Figures 5.1 and 5.2 in the book
interaction matrix1
Interaction Matrix
  • Why do we see that pattern of connections?
    • Because of the economies of those places
  • Why is there a need for goods and people to flow between two nodes?
reason 1
Reason # 1
  • Complementarity
    • One are has a surplus of an item that is demanded in another area
    • Key: that item must be needed in that second area
  • It is immediately obvious that transportation becomes important
reason 2
Reason # 2
  • Transferability
    • Ease with which that item which is in demand can actually be transferred
    • For instance, will transportation be dependent on the distance
      • More distance more flow? Or
      • More distance less flow?
reason 3
Reason # 3
  • Intervening opportunity
    • What if that item can also be brought in from some other place?
    • Or if along the way, there is some other place where that item is in demand?
in unison
In unison
  • These three reasons are not mutually exclusive
  • Together they explain spatial interaction among places
  • Question: do a similar set of reasons explain the flow of data as well?
data or data
Data or Data?
  • Data flow not quite in response to “demand”
  • Data flow not quite vulnerable to intervening opportunities
  • Data flow not quite dampened by distance
distance decay
Distance Decay
  • Decrease in interaction with increase in distance
  • Why?
    • Interaction drops off until it is not economically justifiable
    • Simply said, it is too darn costly 
transportation networks
Transportation Networks
  • Links
  • Routes
  • Networks
    • Multiple routes
    • Never built, and rarely planned out, as a network
congestion capacity
Congestion & Capacity
  • We have experienced congestion on the road networks
  • Will building additional lanes/freeways help?
  • Initially, yes
    • Later, more vehicles “induced” into the network
growth of a typical network
Growth of a Typical Network
  • Development first along a coast, and later into the interior
  • Interesting to note the relationship between
    • The importance of a city, and
    • Its position on the transportation network
what causes the volume
What causes the volume?
  • Why is the volume of interaction between two places greater or lesser than other pairs?
    • Distance decay
    • Population size
spatial interaction
Spatial Interaction
  • How can we estimate the potential for transportation between cities or regions?
    • We want to understand the level of spatial interaction
  • And keep in mind that nearer things are more related than distant things—distance decay
the gravity model
The Gravity Model
  • We use the gravitational theory developed by Isaac Newton
    • Gravitational force between two bodies
      • Directly depends on their masses
      • Inversely depends on the square of the distance between them
the gravity model1
The Gravity Model
  • In transportation,
    • Mass is replaced by population
    • K is replaced by a friction factor
      • Friction factor varies by mode
      • Time and other costs factors are different for each mode
  • This same model used to estimate movement of data as well
the gravity model2
The Gravity Model
  • Bottom line:
    • Areas with larger populations have a greater drawing power
    • Areas that are more distant have weaker attraction than those that are closer
the gravity model final notes
The Gravity Model—final notes
  • Is only a beginning step in estimating spatial interaction between areas
  • A place’s wealth has a bearing on its demand for spatial interaction
  • Perhaps money (such as per capita incomes) is a better measure than population?
the gravity model final notes1
The Gravity Model--final notes
  • Cost of spatial interaction has a more direct bearing on its volume
    • Volume of spatial interaction not affected by cost of interaction if the cost is relatively low compared to the price of the good
    • The ability of the customer to pay could determine the volume of interaction
      • E.g., rich people travel more than poor
market areas
Market Areas
  • It is reasonable to assume that at some distance from a city A:
    • The attraction of that city will decrease
    • Some other city B may have more “gravitational” force
  • Market researchers try to figure out where a city’s market boundary lies
    • Again, the link between trade and transportation
smokey and the truck driver
Smokey and the Truck Driver
  • Growth of trucking since WWII
    • Thanks to Ike
  • Strictly on a ton-mile basis
    • Rail more important than truck (Table 6.1)
  • Earnings by transport mode
    • Trucking first, then air (Table 6.4)
    • Difference in value of goods transported
pipe it down will ya
Pipe it down, will ya?
  • Not to forget the hundreds of thousands of miles of pipelines
    • To transport natural gas, oil
  • And then the millions of miles of other pipelines
    • Cable TV
    • Phone
    • Electricity
is the price right
Is the Price Right?
  • Cost of transportation greatly affects the pattern of commodity flow
  • Cost depends on
    • Type of good
    • Special handling needs
    • Shape, volume, weight issues
    • Distance
pay as you go
Pay as you go?
  • Intuition leads us to think that more the distance, more the transportation cost
    • Does it mean a constant cost per mile?
    • Increasing cost per mile?
    • Decreasing cost per mile?
  • The per mile cost decreases with distance
  • Why so?
haul the terminal
Haul the Terminal
  • Two basic components of cost
    • Terminal costs
    • Line-haul costs
  • Terminal costs associated with the infrastructure necessary for loading, unloading, paperwork, etc.
    • Varies with the type of commodity
    • Varies with the mode of transportation
termina tor l
Termina(tor)l
  • Difference in terminal costs
    • Trucks have minimal terminal costs
    • Aircrafts and ships have high terminal costs
      • The need for passenger and cargo handling infrastructure
ergo miles we go
Ergo, miles we go
  • With distance, transportation costs increase at slower rates
    • Average cost per mile decreases
      • Referred to as economies of the long-haul, or the tapering principle

Cost

Distance

zoned out
Zoned Out?
  • In order to simplify cost calculations over distance
    • Costs charged in a stepped up manner
      • Same cost if origin and destination are in the same zone
      • More zones to travel ==> higher cost
      • Think about long distance calls
    • On a per mile basis, long-distance hauling may be cheaper than short-distance hauling
competition
Competition
  • Carrier competition
    • Economics holds that competition serves to lower prices
    • Competition necessary within a mode as well as across modes
damned or demand
Damned or Demand?
  • More demand means that the fixed costs will be shared by more consumers
  • Results in lowering costs for all
  • Generally charges in higher demand routes lower than comparable distance but lower demand routes
piggy goes to the market
Piggy Goes to the Market
  • If transport costs will be high to take the finished product to the market
    • Firm will be located closer to the market rather than to the source of raw materials
  • What happens when raw materials have to be transferred from one mode to another?
    • Processing facilities close to the transfer location
piggy goes to the market1
Piggy Goes to the Market
  • Rarely is a location in between the source and the market
    • Transport cost is not linear
    • The role of terminal costs
  • Thus, a firm has the choice of
    • Saving terminal cost on assembly by locating at the source, or
    • Saving on the cost of distribution by locating at the market
transportation cost location
Transportation Cost & Location
  • If transport costs will be high to take the finished product to the market
    • Firm will be located closer to the market rather than to the source of raw materials
  • What happens when raw materials have to be transferred from one mode to another?
    • Processing facilities close to the transfer location
gimme a break
Gimme a Break
  • Sometimes intermediate locations are preferred
    • At break-of-bulk points
    • Where goods may have to be repackaged or refined
    • Some sense of the good not ready for the market yet
fob cif
FOB & CIF
  • Cost of a good varying over distance is the Freight-on-Board (FOB) pricing
  • A different option is Cost-Insurance-Freight (CIF)
    • All consumers of a good pay the same price for a good (think about goods we buy)
    • I.e., those who are closer to the source, end up paying more than a FOB price
fob a cuss word
FOB a Cuss Word?
  • Many widgets we buy in the real world have the same price wherever they are sold—irrespective of the distance.
  • This means that nearby customers are overcharged and distant customers are overcharged.
slide43

FOBA

FOBB

CIF

Cost

Prod.Cost

Prod.Cost

A

X2

X1

B

bored of freight
Bored of Freight?
  • While it expands the market area for the seller, distant customers are subsidized by nearby customers.
    • X1 ends up paying more with uniform pricing
    • X2 gets a break—FOB would have cost more
overanalyzing is the problem
Overanalyzing is the Problem!
  • Take the case of electricity deregulation
    • There is a cost to generate electricity
    • There is a cost to distribute it to consumers
    • However, a flat rate does not reveal the two components
  • Result:
    • Hides the true cost of production and distribution
    • So, deregulate? Oh no!
visualize whirled peas
Visualize Whirled Peas
  • Global trade is a logical extension of the discussions on transportation
    • Interaction between geographies is now worldwide
  • Volume of interaction and types of goods traded
    • Related to the level of economic development
    • More manufactured goods bought and sold by advanced countries
  • More coming in the next few weeks 