FALL 2001
TUESDAYS, 7:05PM-9:35PM

ARLINGTON, ROOM 303

Background
Transport is a major industry in its own right but also supplies importa= nt inputs into other sectors. It also
influences land-use patterns and the pace of economic development. This course provides a basis for
understanding the economics of the transport system and, in particular, how transportation relates to urban
and regional development.

The course does not focus on any particular mode of transportation, but rather treats transport generically,
although for illustrative purposes a number of case studies will look at specific modal examples. These
case studies will, for instance, cover such things as urban traffic congestion (automobiles), subsidies
(urban transit), infrastructure appraisal (road networks), social cost pricing (automobiles) and economic
regulation (airlines and rail freight). It is primarily based in microeconomics, and hence looks at both the
demand and the supply-side of transportation, but it also consid= ers the interface of transportation
economics with other disciplines such as civil engineering, operations research and human geography.

The Course
The course will entail classes that include student participation. A number of =91guest lecturers=92 will
offer presentations at various times. I have set out a large reading list BUT this is intended to provide a
range of material that will help in individual assignments as well as being core reading. THE KEY
MATERIAL WILL BE ON ELECTRONIC RESERVE IN THE LIBRARY. Access codes to obtain the material
from the library will be given out in the initial class. It will be anticipated that students will have read the
material on electronic reserve for this course (and indeed any other material they may find useful regarding
the topic).

To fit in all the classes and the mid-term it will probably be necessary to reschedule an extra session
during the semester. This will be organised to fit in with people=92s schedules.

The main themes and issues that will be covered in the course are:

1 Transport and Economics
Transport economics makes use of a range of economic ideas and concepts to examine the nature of
markets in which transport services are provided. Initially it is important to understand the general way in
which economists view transport and the nature of the statistical sources that exist to help in the analysis
of the sector.

Readings will be selected from K.J. Button and D. Gillingwater, Future Transport Policy, Croom Helm,
London, 1986; K.J. Button and A. Pearman (eds) Applied Transport Economics: A Practical Case Study
Approach, Gordon and Breach, London, 1985; and K.J. Button, P. Nijkamp and H. Primus (eds) Transport
Networks in Europe: Concept, Analysis and Policies, Edward Elgar, Cheltenham, 1998.

2 Movement, Transport and Location
Transport is not wanted in its own right but is linked to the need for movement by firms and individuals.
Transport also influences where these firms locate their activities and where individuals live. It is import=
ant to understand the interconnections between these effects to develop an analysis of transport markets.
Readings will be selected from K.J. Button, P. Nijkamp and J. Thisse (eds) Location Theory, (2 Volumes)
Edward Elgar, Cheltenham, 1996; K.J. Button, P. Nijkamp, Y. Berechman and N. Kohno (eds)Transport
and Land Use, Edward Elgar, Cheltenham, 1998; and K.J. Button 'Regulatory reform, networks and
economic efficiency', in C. Capineri and P. Rietveld (eds), Networks in Transport and Communications: A
Policy Approach, Ashgate. Alders= hot, pp.309-324, 1998.

3 The Demand for Transport
The demand for transport is a derived one and varies over time (peaks). Understanding the nature of the
factors influencing transport demand is important both for the private actors supplying transport services
and for government bodies that have responsibility for regulation and control. Key concepts here are both
the direct and cross price elasticities of demand and factors that cause shifts in the demand function. The
importance of quality considerations is of importance and the concept of generalised costs has a central
role to place in demand analysis. In many instances for social aspects of transport have resulted in the
notion of demand giving way to that of =91need=92.

Readings will be selected from K.J. Button, 'The use of economics in urban travel demand modelling: a survey' Socio-Economic Planning Sciences Vol.10, 1976, pp.57-66 and K.J. Button and F. Navin, 'A public transport demand forecasting model for Vancouver', Traffic Engineering and Control,Vol= .24, 1983,
pp.27-31.

4 The Direct Costs of Transport
Transport supply involves considerable financial costs. The supply function for transport services is often
complex involving economies of scale, scope and density. There are also often significant indivisibilities in
the provision of transport infrastructure that make the allocation of costs to users difficult.
Readings will be selected from K.J. Button, S. Tolofari and D. Pitfield 'An econometric analysis of the cost
structure of the tanker sector of the shipping industry', International Journal of Transport Economics,
Vol.14, 1987, pp.71-84; K.J. Button, S. Tolofari and D. Pitfield =91Shipping costs and the controversy over
open registry', Journal of industrial Economi= cs, Vol.34, 1986, pp.409-427 and K.J. Button, and
K.O=92Donnell 'An examination of the cost structure associated with providing urban bus services in
Britai= n', Scottish Journal of Political Economy,Vol.32, 1985, pp.67-81.

5 The External Costs of Transport
Transport has been described as =91industry on wheels=92 because of the environmental damage that it
can cause. It is important in the assessment of transport options that all costs, included in the provision of
transport are considered. This, for example, involves the placing of monetary values on the environmental
implications of transport.

Readings will be selected from K.J. Button, Transport, the Environment and Economic Policy, Edward
Elgar, Cheltenham, 1993; K.J. Button and D. Banister (eds) Transport, the Environment and Sustainable
Development, E & FN Spon, London, 1993; J. van den Bergh, K.J. Button, P. Nijkamp, and G.C. Pepping
Meta-analysis in Environmental Economics, Kluwer, Amsterdam= , 1997 and K.J. Button, P. Nijkamp and
Y. Hanyashi Environment and Transport, Edward Elgar, Cheltenham, 1999.

6 Pricing of Transport Services
The complexities of the demand and cost functions for transport services make pricing complex. The
importance of peak load pricing and differential pricing (including two-part tariffs) have long been
theoretically recognised as important and the introduction of new information systems and charging
technologies has seen important moves at implementation.

Readings will be selected from K.J. Button, 'Ownership, investment and pricing of transport and
communications infrastructure', in D. Batten and C. Karlsson (eds) Infrastructure, Economic Growth and
Regional Developme= nt., Springer, Berlin, pp.147=96165, 1996; K.J. Button and M. Brooks, 'Yiel= d
management: a phenomenon of the 1980s and 1990s?', International Journal of Transport Economics,
Vol.21, 1994, pp.177-196 and K.J. Button =91Pricing in the transport sector=92, in H. Meersman and E.
van de Voorde (eds) Transf= orming the Port and Transportation Business, Acco, Leuven, pp.73-98, 1997.

7 Containing the External Costs of Transport
Transport has always been regulated to contain some of the worst implica= tions of external effects such
as congestion and environmental intrusion. Many of these regulations have been of the
command-and-control type (e.g. vehicle bans) but more recently there has been a move at deploying fiscal
measures such as road pricing (to optimise congestion) and environmental taxes. Subsidies to less
environmental damaging modes of transport (e.g. Metro) are also widely used in many countries.
Readings will be selected from K.J. Button and J-P. Barde (1990) Transpo= rt Policy and the Environment:
Six Case Studies, Earthscan/OECD, London/Paris; K.J. Button and E. Verhoef (eds) Road Pricing, Traffic
Congestion and the Environment, Edward Elgar, Cheltenham, 1998 and K.J. Button 'Environmental
externalities and transport policy', Oxford Review of Economic Policy Vol.6, 1990, pp.61-75.

8 Investment Criteria =96 Private and Public Sector Analysis
Transport infrastructure is generally expensive, long-lived, environment= ally intrusive and inflexible. Private
sector infrastructure is appraised using conventional financial criteria but public sector infrastructure
involves the use of techniques that fall under the generic title of =91cost-benefit analysis=92. The latter is
wider and takes a longer view of the implications of investments.
Readings will be selected from K.J. Button and A. Pearman (eds) The Practice of Transport Investment
Appraisal (edited with A.D. Pearman), Gower Press, Aldershot and Renouf, Brookfield, 1983; K.J. Button
and D. Pearce 'Infrastructure restoration as a tool for stimulating urban renewal - the Glasgow Canal',
Urban Studies, Vol.26, 1989, pp.559-571 and K.J. Button 'Models for decision-making in the public sector',
OMEGA Vol.7, 1979, pp.399-409.

9 Transport Planning and Forecasting
Transportation is a complicated, network activity that may not be adequa= tely co-ordinated through the
market. Its implications may also extend beyond those that are included in narrow economic notions of
efficiency. As a consequence transport is the subject of considerable planning of various kinds. To carry
out this effectively, reliable transport forecasts are required and there are a variety of ways in which this
may be undertaken.

Readings will be selected from K.J. Button, A.D. Pearman and A.S. Fowkes (eds), Car Ownership
Modelling and Forecasting, Renouf, Brookfie= ld, 1982; K.J. Button, N. Ngoe and J. Hine, 'Modelling
vehicle ownership and use in low income countries', Journal of Transport Economics and Policy, Vol.27,
1993, pp. 51-67.

10 Transport and Development
Transport policy is often used as part of the development policy of national governments and local
agencies. This is because of its interaction with the location of firms and individuals. These links are often
difficult to trace out and to quantify =96 in many cases there is a tendency to overst= ate the role of
transport in this context. The transport-land-use transport interactions vary between sectors.
Readings will be selected from K.J. Button, S. Leitham, R. W. McQuaid, J. D. Nelson 'Transport and
industrial and commercial location', Annals of Regional Science, Vol.29, 1995, pp.189=96206; K.J. Button,
S. Lall, R. Stough and M. Trice =91High-technology employment and hub airports=92, Journ= al of Air
Transport Management, Vol.5, 1999, pp.53-59; K.J. Button 'High-techno= logy companies: an examination
of their transport needs', Progress in Planning, Vol.29, 1987, pp.79-146 and K.J. Button, E.T. Verhoef and
C.J.M. van den Bergh 'Transport, spatial economy and the global environment', Environment and Planning
A Vol.29, 1997, pp.1195-213.

11 The Regulation of Transport
Transport has long been one of the most regulated of sectors because of its strategic importance, the
potential for market failures and the potential for using transport to meet wider social and political
objectives. More recently there have been moves in many countries to liberalise the economic regulation of
transport (e.g. regarding prices, ownership and market entry) while, at the same time tightened, social
regulation (e.g over safety). There have been considerable developments in the economic theories of
regulation in recent years.

Readings will be selected from K.J. Button and T. Keeler 'The regulation of transport markets', Economic
Journal, Vol.103, 1993, pp.1017-28; .K.J. Button and D. Pitfield (eds) Transport Deregulation - An
International Movement, Macmillan, London, 1991; K.J. Button and D. Banister (eds) Transpo= rt in a Free
Market Economy (edited with D. Banister) Macmillan, London, 1991; K.J. Button and R. Stough (eds)
Transport Policy, Edward Elgar, Chelte= nham, 1998; and K.J. Button =91Lessons from European
transport experience=92, Anna= ls of the American Academy of Political and Social ScienceNo.553, 1997,
pp.157-= 167.

BASIC TEXT:
It would be useful but NOT essential to obtain a copy of: K.J. Button, Transport Economics (2nd Ed.) Edward Elgar.

Assessment.
Assessment will take the form of:
1. Assignments periodically set throughout the semester relating to various classes (25%)
2. Mid-term open book (20%)
3. Final examination (45%)

Contact Points
All students should have an e-mail address recorded with GMU.

As for me:
Kenneth Button
Professor of Public Policy, Findley Hall (Room 16D), Fairfax Campus
TEL: (703) 993 4647
FAX: (703) 993 2284
E-MAIL: kbutton@gmu.edu