system control and regulation cee 587 prof. anne goodchild may 18, 2011

System Control and System Control and RegulationRegulation

CEE 587CEE 587Prof. Anne GoodchildProf. Anne Goodchild

May 18, 2011May 18, 2011

Transportation ParticipantsTransportation Participants

I need something shipped at the lowest possible

cost!

Transportation ParticipantsTransportation Participants

I need something delivered at the lowest possible

cost!

I need something shipped at the lowest possible

cost!

Transportation ParticipantsTransportation Participants

Carriers: We have the equipment!

Transportation ParticipantsTransportation Participants

Carriers – we can find a shipper!

Shippers – we can find a carrier!

Transportation ParticipantsTransportation Participants

the transportation system is vital for the country’s economic

health

Transportation ParticipantsTransportation Participants

purchase fuel, transportation

equipment, supplies

Transportation ParticipantsTransportation Participants

track shipments

purchase fuel, transportation

equipment, supplies

Transportation ParticipantsTransportation Participants

match products needing to be shipped

with available capacity

purchase fuel, transportation

equipment, supplies

track shipments

Transportation ParticipantsTransportation Participants

Creates demand for transportation

by purchasing products

Economic

Types of Transportation RegulationTypes of Transportation Regulation

• Investments in transportation infrastructure (e.g., highways, airports, ports)

• Control of routes, pricing, schedules

Economic

Types of Transportation RegulationTypes of Transportation Regulation

• Investments in transportation infrastructure (e.g., highways, airports, ports)

• Control of routes, pricing, schedules

Social/Safety

• Protect the public, the environment• Make sure equipment operates safely, cleanly • Safe transportation of hazardous materials (HAZMAT)• Regulating hours worked

History of Transportation RegulationHistory of Transportation Regulation Pre-1920 – establish initial Pre-1920 – establish initial

government controlgovernment control– Act to Regulate Commerce (1887)Act to Regulate Commerce (1887)– Interstate Commerce Commission (ICC)Interstate Commerce Commission (ICC)

History of Transportation RegulationHistory of Transportation Regulation 1920-1940 – regulatory formalization, 1920-1940 – regulatory formalization,

extension to other transportation extension to other transportation modesmodes– Motor Carrier Act (1935)Motor Carrier Act (1935)– Civil Aeronautics Act (1938)Civil Aeronautics Act (1938)– Civil Aeronautics Board (1940)Civil Aeronautics Board (1940)– Federal Aviation Administration (FAA)Federal Aviation Administration (FAA)– National Aeronautics & Space National Aeronautics & Space

Administration (1951)Administration (1951)

History of Transportation RegulationHistory of Transportation Regulation 1940-19701940-1970

– Regulation of water transportation by Regulation of water transportation by ICC (1940)ICC (1940)

– Railroad Revitalization and Regulatory Railroad Revitalization and Regulatory Reform Act of 1976Reform Act of 1976AMTRAKAMTRAKCONRAIL CONRAIL

History of Transportation RegulationHistory of Transportation Regulation 1970-1980 – prelude to deregulation1970-1980 – prelude to deregulation

– Shift from regulation/control to fostering Shift from regulation/control to fostering competitioncompetition

– Department of Transportation (DOT) Department of Transportation (DOT) 19611961

– Airline Deregulation Act 1978Airline Deregulation Act 1978

History of Transportation RegulationHistory of Transportation Regulation 1980-2000 – deregulation1980-2000 – deregulation

– Motor Carrier Act 1980Motor Carrier Act 1980– Staggers (Rail) Act 1980Staggers (Rail) Act 1980– Interstate Commerce Commission (ICC) Interstate Commerce Commission (ICC)

abolished 1996abolished 1996– Ocean Shipping & Reform Act 1998Ocean Shipping & Reform Act 1998

History of Transportation RegulationHistory of Transportation Regulation 2000-Present – focus on technology, 2000-Present – focus on technology,

safety, and securitysafety, and security– Patriot ActPatriot Act– Jones ActJones Act

Copyright © 1998-2007, Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University. For personal or classroom use ONLY. This material (including graphics) is not public domain and cannot be published, in whole or in part, in ANY form (printed or electronic) and on any media without consent. This includes conference presentations. Permission MUST be requested prior to use.

Rail Track Mileage and Number of Class I Rail Carriers, United States, 1830-Rail Track Mileage and Number of Class I Rail Carriers, United States, 1830-20052005

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1830 1850 1870 1890 1910 1930 1950 1970 1990

Mile

s of

trac

ks

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Rail

Carri

ers

Rail Track MileageClass I Rail Carriers

Copyright © 1998-2007, Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University. For personal or classroom use ONLY. This material (including graphics) is not public domain and cannot be published, in whole or in part, in ANY form (printed or electronic) and on any media without consent. This includes conference presentations. Permission MUST be requested prior to use.

Average Speed of Class I Average Speed of Class I Railroads, 1945-2004Railroads, 1945-2004

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1945 1955 1965 1975 1985 1995 2005

Kilo

met

ers

per h

our

Performance of Class I Performance of Class I Railroads, 1964-2005Railroads, 1964-2005

Copyright © 1998-2007, Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University. For personal or classroom use ONLY. This material (including graphics) is not public domain and cannot be published, in whole or in part, in ANY form (printed or electronic) and on any media without consent. This includes conference presentations. Permission MUST be requested prior to use.

0

50

100

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300

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004

Inde

x 19

81 =

100

Productivity Volume Revenue Price

A Supply Chain versus the Freight A Supply Chain versus the Freight Transportation SystemTransportation System

Consider REI’s supply chain between Consider REI’s supply chain between factories in Asia and stores in the USfactories in Asia and stores in the US

Consider the freight transportation system Consider the freight transportation system in Puget Soundin Puget Sound

– Describe the system’s network structureDescribe the system’s network structure– What is the primary objective? What are What is the primary objective? What are

secondary objectives?secondary objectives?– How can we measure performance?How can we measure performance?– Who is the operator of the system?Who is the operator of the system?

Controlling the Freight Controlling the Freight Transportation SystemTransportation System

The behavior of individual transportation The behavior of individual transportation firms is realized in the transportation firms is realized in the transportation systemsystem

These choices are a function of internal These choices are a function of internal and external costsand external costs– Internal costs: fuel, equipmentInternal costs: fuel, equipment– External costs: driver pay rate, congestion, External costs: driver pay rate, congestion,

tolls, driving restrictionstolls, driving restrictions We can influence external costs, which We can influence external costs, which

influence transportation firms behaviorinfluence transportation firms behavior

Induced DemandInduced Demand After supply increases, more of a After supply increases, more of a

good is consumedgood is consumed When road capacity is increased, in When road capacity is increased, in

the short term, drive-time is reducedthe short term, drive-time is reduced This encourages more driving, which This encourages more driving, which

reduced drive-timereduced drive-time Homes and business are developed Homes and business are developed

that create demand for that create demand for transportationtransportation

What limits demand?What limits demand? Why would you choose not to go Why would you choose not to go

somewhere?somewhere? Alter your departure time?Alter your departure time? Would you visit Vancouver for the Would you visit Vancouver for the

weekend? Whyweekend? Why Did people 100 years ago?Did people 100 years ago?

The cost of congestionThe cost of congestion Increases transportation costIncreases transportation cost Increases inventory costIncreases inventory cost Causes travel time variabilityCauses travel time variability

– Reduces a company’s ability to operate Reduces a company’s ability to operate efficientlyefficiently

Mitigating Induction of DemandMitigating Induction of Demand Road pricing (users pay for journey time Road pricing (users pay for journey time

reduction)reduction) HOV lanes (reduces the cost for particular HOV lanes (reduces the cost for particular

users, encouraging a shift to that use)users, encouraging a shift to that use)– Adding a new oneAdding a new one– Converting an existing laneConverting an existing lane

Zoning (controlling land-use)Zoning (controlling land-use) Reducing demand by introducing, Reducing demand by introducing,

tolerating, or accepting congestiontolerating, or accepting congestion

What are the goals of the What are the goals of the transportation system?transportation system?

Consumer surplusConsumer surplus PollutionPollution Distribution of benefitsDistribution of benefits Environmental justiceEnvironmental justice

How should we price?How should we price? Gas taxGas tax Road tollsRoad tolls

– Time sensitiveTime sensitive– Congestion sensitiveCongestion sensitive

Taxation mechanismsTaxation mechanisms– Property taxProperty tax– Sales taxSales tax

Import feesImport fees

How do we set the price?How do we set the price? What is it worth to drive?What is it worth to drive? ToolsTools

– SimulationSimulation– Economic theoryEconomic theory– Utility theoryUtility theory– OthersOthers

What are the consequencesWhat are the consequences– Distribution effectsDistribution effects– EquityEquity