Transportation

1. 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 

2. 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

3. 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

4. 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

5. 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

6. 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!

7. 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

8. 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

9. 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?

10. 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

11. 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?

12. 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?

13. 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?

14. 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

15. 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 

16. Transportation Networks • Links • Routes • Networks • Multiple routes • Never built, and rarely planned out, as a network

17. 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

18. 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

19. What causes the volume? • Why is the volume of interaction between two places greater or lesser than other pairs? • Distance decay • Population size

20. 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

21. 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

22. 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

23. 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

24. 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?

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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?

31. 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

32. 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

33. 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

34. 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

35. Competition • Carrier competition • Economics holds that competition serves to lower prices • Competition necessary within a mode as well as across modes

36. 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

37. 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

38. 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

39. 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

40. 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

41. 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

42. 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.

43. FOBA FOBB CIF Cost Prod.Cost Prod.Cost A X2 X1 B

44. 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

45. 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!

46. 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 