Faiez Hassan Seyal | Authored during M.A. (Public Economics) degree between 1987-1989
Introduction
Urban transportation has become a major concern of Pakistani’s life and public policy. There is no doubt that Pakistanis are becoming urban people, more and more people are migrating towards urban areas. The roads of Pakistan have become over populated and congested. These roads were not even, capable enough to hold the increasing transportation demand of the cities, but these have to hold the additional transportation load caused by the immigrants from the rural areas resulting swear congestion on the roads. This paper discuss about the Crisis, Effects and Problem of urban transportation. At the end some solutions to the problem are suggested.
Crisis in Urban Transportation
The cities of Pakistan have become very difficult to live in and to work because of over population/congestion. The problems of transportation are mainly because of the growing population and the economic activity in cities. More than 50 Million people are now living in cities and suburbs, and this concentration is even rising constantly. The major factors behind this are a) Increase in Population, b) Increase in Literacy rate, c) industrialization, d) More Job Opportunities, e) More Public Facilities in the cities. The concentration of people and resources in urban areas would have been impossible without all these.
All these factors have enabled number of people to enjoy the cultural, social and economic opportunities that urban areas provide. One reason for this dilemma is that urban areas have failed to adjust to the changing conditions brought by the rapid development of the economy.
How the Transportation System affect the Economy?
Transportation in Pakistan is facing serious congestion problem that seems to become more serious in the years coming. Growth of population and emphasis on urban areas, combined with rising national income and output are increasing the volume of passengers and freight continually. At the same time, shifts from rail to road and from public to private transportation have increased the burden to highways and streets. The role, transportation system plays in the economic development of a country is so visible and understood that I don’t feel any need to discuss it, but there is another aspect of the importance of transportation system, i.e. its impacts on Urban Locations.
Demand of transportation comes from the desire to get access to residential, commercial and industrial areas. The amount of income these areas generate depends upon the accessibility that transportation provides. In order to gain access to these areas, transportation costs occur. We know that transportation used needs money cost as well as time cost. The amount of these costs with the availability of transportation facilities can affect the location of urban areas.
Location of urban areas is dependent upon the transportation due to three major factors a) Economies of Scale b) Economies of Agglomeration and c) Comparative Advantage.
Economies of Scale: – Transportation analysts recognize the time as well money cost enters into a modal choice. Consumers often select a high speed, high cost mode in preference to a low speed, low cost one. Reduced travel time is usually one of the expected benefits of an improvement in the transportation system. Opportunity cost is the basis of all real cost in economics. If time spent traveling is thought of as time that might have been devoted to working, then the opportunity cost of travel time is the individual’s wage rate net of marginal income taxes.
Therefore, we can say that economies of scale are not possible without a good and cheaper transportation system. If the transportation cost is too high then firms may not be able to achieve economies of scale. If the transportation cost (both the money and opportunity) is decreased, the delivery area can be extended which can further bring more economies of scale.
Economies of Agglomeration:– If the economies of Agglomeration exists, then due to the fact that all the firms will be located closely, there will be less transportation cost involved. The greater the transportation costs the greater will be the incentive of these firms to locate closely.
Diseconomies of agglomeration occur when the concentration of population or of economic activity in one place either rises the real cost of production by requiring more inputs per unit of output or reduces the real standard of living by increasing the level of social disseminates. Air pollution and crime are good examples of diseconomies. Both increase with city size.
Transportation requirements are the source of another diseconomy of agglomeration. Average trip length, and therefore the time spent traveling to work, increase with city size. Since time is a resource to which we attach some value, this introduces another element of cost that increases with urban scale. Traffic congestion, too, causes diseconomy, imposing increased travel time on both business and household as city size increases. Therefore easy to say that when urban areas are too much congested, it causes diseconomies of agglomeration, so good transport system will decentralize the urban area which will reduce the diseconomies of agglomeration.
Comparative Advantage: – If different regions have comparative advantage in different products, interregional trade will occur, but the transportation facilities, money and time cost and accessibility will be the determinant of the location of trade centers.
Effect of Improvement in Transportation Technology
Before I give some solutions to improve the Traffic and Transportation system, the effect of change in transportation technology on the location of the urban areas should be considered. The consequences of such changes have been discussed very clearly by Alonso[1], and the following discussion is based on his work.
Following figure shows the bid rent curve of households for land (or, as Alonso calls it, the price structure for residential land) in a metropolis with its business and employment center at O. The land units may be square feet, acres, or whatever you have. Initially, the price structure is given by line AB. OA equals rent at the center, and point B marks the edge of urban settlement. Now suppose that an improvement in technology takes place that reduces the time and/or money cost of transportation from the outlying areas to the center.
Source: – Adapted from William Alonso, Location and Land Use (Cambridge, Mass.: Harvard University Press, (1964), Fig.32, p.112.
Rent in the center is based on the saving in transportation cost obtained by locating there instead of at the city’s edge. Accordingly, rent at the center will be reduced by the technological improvement, other things remaining the same.
To be more specifically, if the lot size were held constant, the outer edge of settlement would remain at B and the bid rent curve would fall to A’B. But with the price of land reduced, lot size will not remain constant. Alonso’s model includes the important fact that to a household space is a consumer good. Other things being equal, if the price of land drops, household will increase the consumption of it so the lot size will increase. That In turn, means that the area needed to house a given population will also increase. The margin of settlement will move out to B”. Instead of falling to A’B, the bid-rent curve will shift to a position such as A”B”.
We know that A” must be above A’ — in other words, that rent at the center falls less than it would have if lot size had remained constant- because then the city’s edge moves from B to B’, the transportation cost saved at a central location increases, and therefore so does the rent at the center. It is interesting to note that although the new bid-rent curve A”B” shows rents lower than before at the center, it also shows them to have increased beyond some point, M. The people now living beyond M could pay more rent than before and still be better off than they were because the technological change has allowed them to gain utility through reduction in the time and/or money cost of transportation.
Solutions to the Problem
Cities of Pakistan and its suburbs have been unable to adopt the revolutionary changes in the economy. Increasing number of automotive transportation has created serious congestion on the roads and highways. Along with the failure of the highway system to meet the modern needs, the increased income and economic development is putting more burdens on transport facilities. The major problem faced by the transportation system is morning and evening rush. Over crowded vehicles and slow service are the common complaints. Traffic congestion is a major loss of business and burden on the industry. The urban traffic is moving with half transportation system i.e., vehicles without the roads and parking facilities. The combination of transit problems and shortcomings of highways and parking facilities have created a serious dilemma for the traffic and the community. In the following pages, some suggestions are given to improve the problems:-
Optimal Pricing:- It is an important objective in any society to make efficient use of productive resources. Optimum or efficient allocation of resources could be achieved if all goods were produced and sold under conditions of perfect competition and no externalities occurred in production or consumption. Under perfect competition, the price of every good sold would equal the marginal private cost of producing it. In absence of externalities, marginal social cost is equal to the marginal private cost. Thus, the price charged in the market will cover the full cost to the society of producing the marginal unit of every commodity. So competition among producers would guarantee that sales price of a commodity could not exceed its marginal cost. Marginal cost pricing would thus lead automatically to optimum resource use in the short run. Unhappily no such automatic optimization can be expected in the urban transportation sector. Optimum pricing is essential if society has to use the existing facilities efficiently.[2]
Let us assume that a network of roads exists of past public investment. The existing roads are owned and operated by the public authority. The question is on what terms should that authority make them available to individual users? The efficient pricing requires that road users should make payment for each trip equal to the cost of all the resources used as a result of that trip. These costs can be classified as under:
- Highway maintenance cost dependent upon use.
- Automobile operating and time costs.
- External costs.
a) congestion costs
b) environmental costs (air pollution, noise, etc)
In these costs 1 is borne by the highway authority, 2 by the trip maker, 3a by other highway users and 3b by the close living population.
If the auto trip-maker can be made to bear all of the above costs, then he or she will undertake only those trips the utility of which is at least equal to the full incremental cost. As long as the trip-maker is not charged more than the sum of these costs, then he or she will make all trips that yield utility greater than cost. Society will be making optimum use of the highway network.
Let’s begin the problem of optimal pricing on the congested roads. In the figure horizontal axis measures number of auto trips per hour along the highway segment. The traffic flow increases as we move to the right. The vertical axis measures cost per trip, including components 1, 2, and 3a of the above list. For the simplicity of the model pollution cost are considered as zero.
In the figure cost per vehicle is OA. The variable maintenance cost curve is AJK, which is a horizontal line because cost OA per vehicle remains constant for a wide range of traffic volumes. The distance AB measures automobile operating and time costs per trip when traffic is light. These costs remain constant up to traffic volume Q1. At that point congestion sets in and the average speed of the cars drops. Because trip now takes longer, their time costs increases. The curve BCGE begins to rise. Its height above B at any point to the right of Q1 shows the extent to which an individual driver bears the cost of congestion; its height above the horizontal axis measures the average variable cost of a trip–including road maintenance, vehicle operation, and driver time costs–at each level of traffic. Therefore it is marked as AVC. The external costs of congestion are shown by the curve CFH, which rises above BCGE once congestion starts. The external cost an additional vehicle entering on the road will impose on all other drivers is the vertical distance between the two curves. In the figure this cost is HE. The demand curve for the use of road is DO’. It is fairly elastic because there are some other routes the drivers may use between the points served by this segment.
Source:- Adapted from A. A. Walters, The Economics of Road User Charges (Baltimore: The John Hopkins University Press, 1968), fig. 2, p.24.
If highway authority start charging each driver a toll equal to OA, covering those maintenance expenditures attributable to use of the road. Then the curve BCGE represents the cost to each driver of using the highway segment. Now BCGE becomes a supply curve, showing the price at which journeys can be obtained, for any level of traffic flow. The demand curve DD’ shows how many trips drivers will make at any given price. Now the traffic flow will settle at level Q2, corresponding to the intersection of the supply and demand curves at point E. At this level each driver will pay a maintenance toll of OA and, in addition, bear private costs of KE per journey.
Q2, however is not the optimal traffic level because the pricing system thus far assumed ignores the external cost of congestion. The full cost of the Q2th journey is not OA + KE, as paid by the marginal road user, but OA + KE + EH, where EH measures the increment to aggregate congestion costs attributable to the marginal journey. Therefore the highway authority must charge a congestion toll equal to the external cost of congestion in addition to OA. That cost varies with the traffic level and equals the vertical distance between curves BGE and CFH. If such a toll is charged, the supply curve of journeys would effectively be shifted to BCFH. Intersection with the demand curve will be at point F, and flow of traffic would be reduced from Q2 per hour to Q3. Now Q3 is the optimum flow. If a large highway can be constructed or operated at a lower average cost per vehicle trip than a small highway, then we say that highways are subject to economies of scale. The optimum pricing policy under these conditions is the same as before. In the short run the highway authority should charge tolls that equate the price to users with the short-run marginal cost (including congestion cost) of a trip. In the long run facilities should be expanded (or contracted) until the price, equal to short-run marginal cost, also equals the long-run marginal cost of providing journeys.
Cost-Benefit Analysis: – In principle, all the transportation investment decisions ought to be made on the basis of a cost-benefit analysis of alternatives.[3] For each alternative, a complete accounting should be made in money terms of all benefits and costs, both direct and external, estimated over the useful life of the project. Next, both the benefit stream and the cost stream should be discounted to obtain the present values. The aggregate present value of benefits should then be compared with that of costs and the excess of benefits over costs calculated for each alternative. This excess, or net benefit, measures the net gain to society as a whole from undertaking a given project.
The appropriate decision rule to follow when using cost-benefit analysis depends on such circumstances as whether or not the projects under consideration are mutually exclusive and whether or not budgetary constraints exist. In the transportation projects, the alternatives usually are mutually exclusive-one builds either a large bridge or a small one, but not both. In such cases, the public authority should choose the alternative that yields the largest excess of benefits over costs within the budget constraints, if there is one. Unfortunately, the cost-benefit approach to evaluating investment alternatives cannot readily be applied to whole transportation systems. Its analytical method assumes a given economic context in which the costs and benefits of alternatives can be measured.
Some General Solutions
Improvements of Highways and Roads: – The major part of the population lives in suburbs and towns outside the city and work in the cities, but due to the congestion on the roads and highways, they are insisted to stay in the cities. If this problem is solved, it will definitely improve the rush on roads. The existing roads are one or two lane roads and even the busiest and the biggest highway G.T. road is two lanes. Building of broader roads will solve the problem a lot. In 1947, at the time of partition Pakistan got 13,900 miles of roads out of which 5,080 miles were highways and 8,820 were low quality. Since then Government and Highway department has done a lot to improve the roads. In the “First Five Year Plan” 20 crore rupees were allocated for roads and highways, in the “Second Plan” 59.60 crore rupees, in the ‘Third Plan” 85 crore rupees, in the “Fifth Plan” 70 crore rupees were allocated for the improvements and construction of the roads. By the end of 1984, the total length of roads was 63,375 miles. This includes 25,100 miles of high quality and 38,275 miles of low quality roads. In the “Sixth Plan”, twenty billion rupees are allocated for improvement plans. As the economic and population growth is much faster, a lot more needs to be done for the improvement of highway structure.[4]
Improve the Bus System:– The bus system is very poor. The buses are over-crowded and that is the reason only poor workers and students travel by buses. All the white collar job holders travel by their own transport. If the bus system and specially the buses are improved people would like to travel by it, which will reduce the rush of private transports. In this regard, another proposal is the use of the “Double Decker” buses instead of the regular, which will further increase the seating capacity of the buses and help reducing the congestion.
Constructing of Urban Expressway: – Because of the fact that all the major cities of Pakistan are located on a single G.T. Road, the construction of “by passes” will be as big help towards the problem. It will prevent the highway traffic into the cities.
Parking Facilities: – Closely related to the construction of modern highways, is the task of providing parking space for vehicles moving over the roads. The prohibition of the shopping centers without adequate parking facilities will be a good step towards the problem. The underground parking facilities should be encouraged. On the road parking in the downtown and the busy business centers should be prohibited. Truck, bus and wagon terminals should be transferred from the cities to the suburban areas. This step alone can help almost 25 percent of the parking problem.
Improvement of the Related Departments: – Departments of regional transport authority, provincial transport authority and the traffic police should be improved and equipped with all the modern facilities. R.T.A.’s and P.T.A.’s department were established to control the number of private owned passenger vehicles by quota system depending upon the route, condition of roads and the congestion. But it seems that these departments have failed to perform their duties. The department of traffic police is now well equipped with all the modern facilities, but there is need for more improvement.
Prohibition of Foot-path Business and Slow moving Vehicles: – The small retailers who use the pedestrian walkways for their earnings should be provided additional places for the business. It will help in keeping the pedestrian rush away from the roads. The prohibition of slow moving vehicles such as Tongas, carts, tractor trolleys and bicycles would also help in the improvement of the system and elimination of the congestion.
Spread over Office Hours: – Another possible solution with less cost is the spread over working, shopping and school hours. In this regard double shift system can be introduced which will spread the load of traffic on the roads at different times.
Arrangements of Living and Working in Same areas: – Almost 65 percent of the population lives in the less developed rural areas. The employment opportunities are almost negligible in these areas. These people come to the cities to find employment. If they start finding employments in their own areas, they will definitely stay there. In this regard Government can make special development or investment plans to provide the employment in those areas. The tax incentives can be given for the investment in less developed areas. On the other side the cheap low cost housing can be provided to the rural population working in the cities.
Department of P.I.A. and Railways: – Pakistan International Airlines can play an important role in the solution of the problem. P.I.A. should start special flights between busy cities at discount rates. This can reduce the traffic rush on highways. Department of railways should improve their service and specially the timings. This will help reduce the traffic rush on roads. Use of subways in downtown areas is another possibility. It is costly but it can help a lot.
Conclusion
The study of transportation system demonstrates that despite all the new methods of administration, finance and planning, the progress in the system has not been satisfactory. There are several reasons for this. A major reason is that all the efforts to improve the transportation system are made on the supply side of the problem and does not deal with the demand side. The second major reason is that improvement of the transportation system needs a lot of finances but the current methods of financing are not meeting the extraordinary requirements of the system. The third reason is the lack of supervision on the different projects. The fourth major reason is the fact that all the sectors of the transportation are dealt independently and the relative role of different sectors are neglected.
Urban transportation in Pakistan is related to many ecological, sociological and economic problems which is due to the many reasons but probably the greater need is for a policy determination. There is no one rapid solution to this big problem. This problem, as it has developed in years will take years to be resolved. But we should start thinking now. Cities can never solve their transportation problem if they continue to grow with more people and more economic activity in a little space. Congestion in the busy hours will remain as long as people live and work in different places. In these conditions, transportation demand should be managed. This can be done with the proper and meaningful planning. Once meaningful planning is implemented there might be some hope for a good future of the urban areas.
Footnotes
[1] William Alonso, Location and Land Use, (Cambridge, Massachusetts, Harvard University Press, 1964). pp. 100-120.
[2] This analysis draws heavily on A.A. Walters, The Economies of Road Uses Charges, (Baltimore, John Hopkins Press, 1968) Chapters II and III.
[3] For an Introduction to the theory of Cost Benefit analysis in transportation System, See, A. R. Prest and R. Turvey, Cost-Benefit Analysis- A Survey, In International Economic Association, Surveys of Economic Theory, Vol. III (New York, St. Martin’s Press, 1966.) pp. 155-207.
[4] For all the facts and figures used in this section, See, Nasir, Saeed M., Economic Problems of Pakistan, (Lahore, New Fine Printing Press, 1987.) pp. 380-390.
Bibliography
Alonso, William, “Location and Land Use”, Cambridge Massachusetts, Harvard University Press, (1964).
Federal Bureau of Statistics, Monthly Statistical Bulletin, Vol. 35, No. 2, Karachi, Federal Bureau of Statistics Press, (August, 1987).
Nasir, Saeed M., “Economic Problems of Pakistan”, Lahore, New Fine Printing Press, (1987).
Prest, A.R. and Turvey, R., “Cost-Benefit Analysis– A Survey, in International Economic Association”, Surveys of Economic Theory, Vol. III, New York, St. Martin’s Press, (1966).