TRANSPORTATION ECONOMICS. IN: HANDBOOK OF TRANSPORTATION ENGINEERING

This chapter describes how transportation economics is a very broad field. It includes the application of economic principles to pricing, cost analyses, and regulatory issues. It also includes the analysis of transportation impacts on land use, economic development, and the environment. The field of transportation economics also includes the analysis of costs and benefits of transportation improvement and initial construction projects. It is this later aspect of transportation economics that is of interest to transportation engineers and is the subject described in this chapter. The chapter begins with a discussion of the methodology of project appraisal. This includes cost analysis, methods to deal with uncertainty, methods of benefit quantification and evaluation, rate of return analysis, net present value analysis, the appropriate discount rate to use, benefit-cost ratios, net benefit analysis, and suboptimization. The chapter then discusses transportation user benefits, intangible costs and benefits, and the externalities associated with transportation projects.