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The 5 Es. David Levinson. Framework. Motivation. Welfare comprises efficiency and equity . We are also concerned with the environment and the experience of users.

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The 5 es

The 5 Es

David Levinson


  • Welfare comprises efficiency and equity. We are also concerned with the environment and the experience of users.

  • An allocation is Pareto Efficient if there is no other allocation in which some other individual is better off and no individual is worse off.

  • Benefit/Cost analysis concerned with net benefits, not distribution.

  • Transportation projects and policies create both winners and losers from mobility, accessibility, environmental, and economic standpoints.

Externality theory
Externality Theory

  • An externality is “a commodity bundle that is supplied by an economic agent to another economic agent in the absence of any related economic transaction between the two agents. (Spulber).”

  • Arise from lack of property rights.

  • May be positive or negative. Positive include consumption externalities and network externalities. Negative include congestion, pollution, accidents, etc.

  • First Best Solution: Internalize Externality: Polluter Pays Principle.

  • Transactions costs may make internalization difficult.

Measures of effectiveness moe
Measures of Effectiveness (MOE)

  • Second-Best Solution: Regulate Developer

  • Infrastructure Has Multiple Attributes - A Doctor Looks at More Than Temperature, Planners Should Consider More Than Capacity

  • The Right MOE’s Vary Based on Facility Being Analyzed,

  • MOE’s Should Consider Not Only Current Status of System, but also Its Direction of Change.

Second best regulation minimizes the cost of
Second Best Regulation: Minimizes the Cost of:

  • Prevention

    • (Build) The cost of infrastructure required to maintain the performance indicators (Engineering or Statistical), or

    • (Manage) The cost of demand and supply management to maintain the performance measures.

  • Damage

    • (Accept) The cost to the community of worsening the performance indicators in the absence of the infrastructure.

Criteria for choosing moe
Criteria for Choosing MOE

  • Different measures (e.g. transit and auto level of service) should be collectively complete in that one could combine them to attain an overall measure.

  • Each measure should scale or aggregate well (e.g. it should be possible to combine measures of auto level of service measured on separate links or for separate trips).

  • The measure should align with user experience and be understood by those users.

  • The performance indicator must be measurable, or calculable from available (observable) data.

  • The measure should be predictable, or able to be forecast

  • It must be useful in a regulatory or control context (so that the measure can be used to allow or restrict new development to maintain standards, or to help guide operational traffic engineering decision).

Criteria for selecting measure of effectiveness
Criteria for Selecting Measure of Effectiveness

  • It aids in identifying opportunities to increase the systemwide net benefits through public investment in improvements or changes in management,

  • It minimizes the cost to achieve necessary measurement accuracy, and

  • It produces the right incentives.

Normative and positive
Normative and Positive

  • To say that the speed on a link is 50 kilometers per hour tells us nothing about whether that is good or bad, it simply is.

  • By comparing the measure to a normative standard (for instance, a speed limit), we can then determine whether we have a speeding problem (the speed limit is 30 km/h), a congestion problem (the speed limit is 110 km/h), or no problem.

Data sources and collection
Data Sources and Collection

  • Supply Data

    • Measured - Engineering Cost Study

    • Predicted - Statistical Cost Study (Many Projects)

  • Demand Data

    • Measured - Operating Agency Utilization Data

    • Predicted - Statistical Forecasts

Reason for multiple measures
Reason for Multiple Measures

  • Planning, investment, regulation, design, operations, management, and assessment.

  • Each profession claims to represent traveler.

  • Professions take the "objective" viewpoint of the omniscient central planner (who may in fact be an engineer, manager, or economist) rather than the "subjective" perspective of the travel consumer.


  • Highway Capacity Manual (segments)

  • Texas Transportation Institute (metro areas)

  • Quantitative and Qualitative

  • Auto and Non-auto

  • Scale: Intersection, Link, Subnetwork, Trip, Network

  • Basis: Time or Flow

Qualitative mobility measures

Volume &Capacity

Parking Availability and Cost


Conflict with Non-auto System


Auto Service Stations





Destination Distribution

Information System

Qualitative Mobility Measures

Consumers surplus




Supply (Metering-off)

Supply (Metering-on)



Change in Consumer Surplus


Qoff Qon

Total Flow


Consumers’ Surplus

Consumers surplus criticisms
Consumers’ Surplus Criticisms

  • Transportation rather than activities as the base for consumer's surplus

  • Aggregation error involved.

  • No consideration of choice and the existence of non-user benefits in the consumers’ surplus metric.

  • The costs and benefits associated with spillovers and externalities are often improperly captured

Equity some terms
Equity: Some Terms

  • Horizontal equity: allocation of benefits and costs among individuals and groups who are similar.

  • Vertical equity: distribution of benefits and costs across different groups.

  • Process equity: equal access to the planning and decision making process.

  • Result equity: examines the outcome.


Gini coefficient and Lorenz Curve

Gini = 0: Perfect Equity Gini = 1: Perfect Inequity

Measuring equity entropy
Measuring Equity: Entropy

To analyze traffic data, we can take:

yi = proportion of total delay accrued by each individual

H statistic approaches zero as the distribution approaches complete inequality

Measuring equity redundancy
Measuring Equity: Redundancy

  • R-value of 0% represents complete equality

Racism transit
Racism & Transit

  • Bus transit is perceived as largely serving poor and minority passengers.

  • Rail transit is perceived as largely serving middle class white passengers.

  • Efforts to build rail transit absorb a large share of transit funding, and serve those who have choices, at the expense of those who don’t.

Nimby and equity
NIMBY and Equity

  • NIMBYs - Not in My Back Yard ‘selfishly’ oppose new road projects

  • Assumed to be on “property value” grounds.

  • May in fact be on “mobility” basis.

  • Neighbors do not gain mobility benefits in same way as through trips. Roads often benefit non-locals at expense of locals.

  • Most projects create both winners and losers.

  • Losers use politics to stop projects which may have an overall net benefit to society.

Environmental justice
Environmental Justice

  • Only considers "fair treatment for people of all races, cultures, and incomes (Executive Order 12898)" regarding the development of environmental laws and policies. It thus only examines environmental outcomes and only addresses a few strata.

  • What about Transportation Justice?

  • What about Economic Opportunity?

Experience travelers and subjectivity
Experience: Travelers and Subjectivity

  • Just as Einstein noted that the point of view of the observer shaped the measurement of time, point of view also affects the perception of time as a measure of transportation level of service.

  • Moving towards trip-based measures of effectiveness will more closely align with user experience


  • Externalities Provides Underlying Efficiency Rationale for Development Regulation

  • Unfortunately, “First Best” Solution (P=MC) is Not Always Feasible

  • Regulating Supply is a “Second Best” Solution

  • Multiple Measures of Effectiveness are Required to Understand Impact of Development on Capacity Utilization

  • Efficiency is not the only issue.

Conclusions efficiency is multi splendored
Conclusions: Efficiency is Multi-Splendored

  • Four Classes of Efficiency Measures: Mobility, Utility, Productivity, Accessiblity.

  • Each is a gauge, none should be exclusive.

  • None captures the subjective perspective of travelers.

  • New measures must be developed which do reflect the customer.

Conclusions equity is efficient
Conclusions: Equity is Efficient

  • Equity matters for 2 reasons

    • Equity is the “right thing” to do

    • As minority groups become empowered, Equity becomes the efficient thing to do, since in the absence of its recognition, nothing could be built. In economic terms, the “side payments” are worth the cost

  • Race and location are the source of among the greatest inequities in our society, though not the only ones.

  • Need to think beyond single project: Develop means for compensation of losers from gains of winners. Side payments, bargains, and bundles of projects may accomplish this.

  • Danger of log-rolling turning into pork barrel.

  • Equity must be broadly considered.

  • Things need not be strictly fair, but the unfairness inherent should not be unknown.


  • Select Measures of Effectiveness

  • Collect and Forecast Data

  • Establish Standards (Absolute or Relative)

  • Open System to Peer Review and Public Scrutiny

  • Continuously Evaluate System

  • Implement Monitoring System in Regulation