APPLICATIONS OF ECONOMIC ANALYSIS TO HIGHWAY SYSTEMS AND PROGRAMS

ECONOMIC ANALYSIS MUST BE USED TO ASSIST IN MAKING PROPER DECISIONS FOR THE FOLLOWING HIGHWAY ADMINISTRATION PROBELMS: (1) ADDITIONS TO THE HIGHWAY SYSTEM, (2) TRANSFERS FROM ONE SYSTEM CLASSIFICATION TO ANOTHER, AND (3) SELECTION OF ALTERNATE PROJECTS AND ROUTE LOCATIONS. THE OREGON STATE HIGHWAY DEPARTMENT PUBLISHED A TECHNICAL BULLETIN WHICH WAS A TREATISE ON THIS SUBJECT. IT WAS DETERMINED THAT THERE WERE 3 MAIN FACTORS WHICH SHOULD BE CONSIDERED IN THIS TYPE OF ANALYSIS: COSTS, REVENUES, AND BENEFITS. THE 3 FACTORS UTILIZED IN THE ANALYSIS WERE ALL RESOLVED TO AN ANNUAL VALUE SO THAT THEY COULD BE RELATED ON A COMMON BASIS. THE FIRST STEP IN THIS COMBINATION WAS THE DEVELOPMENT OF THE RATIO OF ANNUAL REVENUE AND COST WHICH WAS TERMED SOLVENCY QUOTIENT. THE SOLVENCY QUOTIENT PROVIDED A MEASURE AS TO WHETHER THE PROJECT WAS ECONOMICALLY SOUND OR NOT. HOWEVER, THE SOLVENCY QUOTIENT WILL NOT PROVIDE A COMPLETE ANSWER BECAUSE IT DOES NOT TAKE INTO CONSIDERATION THE SAVINGS WHICH MAY BE ACCRUING TO USERS THROUGH THE IMPROVEMENT OF HIGHWAY ROUTES OR THE ESTABLISHMENT OF NEW ROUTES. THE NEXT STEP IN THE DEVELOPMENT OF A COMPOSITE MEASURE IS THE PROPER COMBINATION OF THE SOLVENCY AND BENEFIT QUOTIENTS. A PROCEDURE OF VECTOR ADDITION IS PRESENTED IN THE OREGON STUDY FOR COMBINING THE COMPONENT QUOTIENTS. THE MATHEMATICAL EVALUATION DEVELOPED COMBINED THE EARNING CAPACITY AND BENEFITS FROM THE PROJECT IN RELATION TO THE COST, THUS PROVIDING THE COMPOSITE OF THE DESIRABILITY OF THE PROJECT. THE PRESENT BENEFIT ANALYSIS REFLECTS PRIMARILY A SAVINGS TO THE MOTOR VEHICLE USERS THROUGH IMPROVED ALIGNMENT RESULTING IN FUEL AND TIME SAVINGS. HOWEVER, THERE ARE INDIRECT BENEFITS, SUCH AS EASE AND COMFORT OF DRIVING CONGESTION-FREE FACILITIES THAT ARE NOT ADEQUATELY MEASURED IN A BENEFIT ANALYSIS. THESE FACTORS SHOULD BE GIVEN CONSIDERATION IN PROGRAMMING FUTURE DEVELOPMENTS. THE PRESENT METHOD DOES NOT PROVIDE A MEASURE OF NEED IN ADDITION TO A MEASURE OF BENEFITS. IT PROVIDES AN AID IN SELECTING THE BEST ALTERNATE ROUTE FOR IMPROVEMENT ONLY. THEREFORE, THERE REMAINS THE PROBLEM OF PROVIDING SOME MEASURE OF NEED WHICH WHEN USED IN CONJUNCTION WITH BENEFIT ANALYSIS WILL ASSIST IN THE ASSIGNMENT OF PRIORITIES. THE DISCUSSERS MENTION SOME FURTHER METHODS OF ECONOMIC ANALYSIS OR BENEFIT-COST ANALYSIS TO COMBINE THE SOLVENCY AND BENEFIT QUOTIENTS. AN EXAMPLE IS PRESENTED WHICH SHOWS THE FALLACY OF THE EXISTING METHOD OF COMPUTING BENEFIT ANALYSES, IN THAT IT IS BASED ALMOST ENTIRELY ON SAVINGS ON TIME AND DISTANCE, OR THE COMBINATION OF THE TWO.