Transport networks are awash in spillovers, or externalities. When you travel, your choices don’t just affect you – they also have an impact on others around you. When you drive a car, you might be putting others at increased risk of a crash, reducing air quality on the street, or delaying other people in cars or buses. When you park a car, you are often the recipient of a regulatory subsidy, as minimum parking requirements artificially increase parking supply and bundle its costs into other goods and services. When you take (most) buses and trains, you benefit from a fare subsidy intended to encourage you to avoid participating in road congestion.

When you travel by foot or by bike, you really don’t do much harm at all.

Because transport externalities are so pervasive, there is an important role for government policy to enable or encourage people to avoid them, or at any rate to offset their ill effects. Sometimes this might mean regulating – e.g. imposing tighter pollution standards on road vehicles. Sometimes it might mean investing – e.g. building grade-separated public transport to give people the opportunity to “opt out” of congestion. And sometimes it might mean improving price signals – e.g. by putting congestion pricing or demand-responsive parking charges in place.

But how much do we need to care about these externalities (and related subsidies)? How large are they, anyway?

To get a sense, I’ve compiled the existing data and made some rough estimates where no comprehensive data was available. Here’s the summary:

ExternalityAnnual costSource / derivation
Congestion$250 million to $1.25 billionWallis and Lupton (2013); lower figure is their estimate of the avoidable cost of congestion
Road crashes$677 millionMinistry of Transport monitoring data
Poor air quality$466 millionHealth and Air Pollution in New Zealand study; data reflects mortality and morbidity costs associated with PM10 emissions from motor vehicles
Greenhouse gas emissions$150 millionEstimated based on Ministry of Transport data: 12,688,000 tonnes CO2 emitted from road transport in 2013; Auckland had 30.1% of national VKT in 2013; CO2 emissions valued at $40/tonne
Public transport fare subsidies$170 millionEstimated based on forecast annual average opex of $320 million over the 2013-2022 period (see page 26 in 2012 RPTP) and a PT operating cost recovery rate of 45%
Parking subsidies$500 millionBased on Donovan and Nunns (2015) estimate that applying MPRs to business activities may cost up to $10,000 per employee, multiplied by 700,000 employees in Auckland and converted to annual values using a 6% discount rate
Total externalities / subsidies
$2.2 to $3.2 billion

A few observations on these estimates:

  • The most significant transport externalities are associated with driving motor vehicles.
  • Even under the most generous assumptions, congestion costs are no larger than the health costs of vehicle operation – crashes and bad air. Yet we prioritise congestion reduction to a much greater degree than health and safety.
  • Some of these costs have direct financial implications – parking and PT subsidies come out of someone’s pockets, after all – but the largest ones don’t. Congestion wastes people’s time and frustrates them, while the cost of crashes and poor air quality is reduced enjoyment of life and premature death.

Lastly, $2.2 to $3.2 billion in annual costs seems quite large. But how do transport externalities measure up against Auckland’s overall economy and Aucklanders’ transport habits?

First, perhaps we should compare these externalities against the size of the Auckland economy. According to Statistics NZ’s nifty Regional GDP data, in 2014 Auckland’s economy was worth $81.2 billion. This suggests that, even if we fully eliminated all transport externalities and the resulting gains translated into increased income for Aucklanders, it would have a pretty minor impact on our wellbeing.

Second, perhaps we should compare transport externalities to the costs that users directly bear when they travel. Because we’ve accounted for both monetary and non-monetary externalities above, we have to do the same here and bundle together the time and money that Aucklanders spend travelling.

According to the 2013 Household Expenditure Survey, the average Auckland household spent $176 per week on transport, including vehicle purchase, vehicle operating costs, PT fares, and air travel. As there are around 470,000 households in Auckland, this equates to roughly $4.3 billion in annual transport-related spending. Furthermore, 2011-14 Household Travel Survey data suggests that Aucklanders spend around 558 million hours travelling per annum. If we value travel time at 40% of current median hourly earnings of $22.83, it would be “worth” around $5 billion. In total, user costs are equal to around $9.3 billion per annum.

Consequently, transport externalities are equivalent to 23-34% of user costs, which is quite significant. It suggests that transport users – principally drivers – can externalise many of the costs of their choices on others and on society. While the gains from eliminating transport externalities might be small relative to Auckland’s GDP, policies that “price in” externalities may have a considerable effect on individuals’ decisions about transport.

What do you think about transport externalities? A big problem, or not such a concern?

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78 comments

  1. Great piece of work, Peter. The key observation for me is that “we prioritise congestion reduction to a greater degree than health and safety”.
    It’s time this was flipped on its head and we got serious about the safety of passive road users and everyone’s health.
    Most organisations with effective H&S systems report not only incidents but near misses so maybe we need to introduce this form of reporting to road safety stats. A simple self reporting app would be a good start.

  2. Sitting in an apartment 30m from Symonds St, the largest externality affecting me directly is noise. Much of it is from dirty noisy diesel buses.

    Apart from the large and real quality of life impacts, this unpriced externality is shown in numerous studies to have serious health impacts. These include heart attacks, high blood pressure, and mental health impacts. Just because it is not yet priced doesn’t mean it should not be counted.

    Needless to say, the externality imposed by walking and cycling noise (see how stupid that sounds) is nearly zero.

      1. Any reason why we did away with the Gas powered buses used in the 80’s and 90’s? They were quieter, less polluting and didn’t have particulate matter or gross diesel fumes.
        I’m guessing that they cost more to run than diesel. There are many cities around the world that have gas powered buses.

        1. Obviously 50 people on a diesel bus or 200 on a diesel ferry is better than that many more single-occupancy cars (some of which will also be diesel), but I can’t help thinking that there are cleaner ways yet of moving the same number of people. Electrified light rail in place of some of those buses would be a great start (and would be quieter too).

      2. Noise is now

        Its a real pity that the new electric trains have unbelievable noisy brake squeal that has developed over the past year when stopping at the stations. They were very quite to begin with but a lack of maintenance ? or design fault ?

        One of our neighbors some months ago spoke to I believe potential developers looking at the land adjoining the Greenlane station for an apartment development. One of the comments was how noisy the trains were in stopping.

        1. Yes, I can hear them if I’m outside at my place 2km from the tracks. It’s not annoying from that far away, but I imagine living near a station with a train arriving every five minutes it would be rather irritating. Something AT will have to sort if we a going to increase density near the tracks and run more services later at night.

    1. Good point! I’ve done some work on noise impacts from transport. The problem is that it’s hard to model noise with a high degree of precision. NZTA’s got a way of valuing noise impacts – they think that they “cost” $170 per added decibel per affected household per annum.

      From experience, transport noise is heaviest on or near arterial roads. Let’s assume, for the sake of argument, that the combination of vehicle fleet, traffic volumes and road surface – NZ has quite loud road surfaces – increases average noise levels by 5 dB near arterial roads. Let’s also assume that roughly 10% of Auckland households are directly affected – so around 50,000 households. In that case, the annual noise externality would be in the range of ~$40m per annum.

      Of course, if you tweak the assumptions you get a different result. Worth pondering!

      1. That makes no sense because sound follows an inverse square law. A linear function is utterly ridiculous.

        If you think 200db is only twice as bad as 100db, have I got a jet engine for you

        1. Yes, that’s correct. I believe NZTA’s linear approach is based on some research on the impact of noise on property values, but I haven’t read the underlying literature in detail. Here’s a meta-analysis that seems relevant: http://oaklandinternational.com/pdf/effects_aircraft_noise_property_values.pdf

          It’s possible that the effect is linear (or linear-ish) within certain ranges that are commonly experienced. Unless you live next to a speed metal band, you probably aren’t regularly exposed to 100dB or more.

    2. On Hobson street the biggest sources of noise are motorcycles and tuned cars. It’s hard to see any benefit from actually allowing that.

      And I think you can already get demerit points if you car is too loud. That’s another thing that we maybe could start to enforce.

    3. “Needless to say, the externality imposed by walking and cycling noise (see how stupid that sounds) is nearly zero.”

      Try telling the Northcote NIMBYs that are blovking the SkyPath that!

  3. Externalities are important.

    However, I’d like to see the methodology behind some of these calculations. For example your paper on MPRs and their cost per employee – does this take into account different MPRs across the city? And so on. If it does, wonderful, but I know from experience once you start unpicking these calculations you can often find a host of challengeable assumptions.

    And I agree entirely that we need to focus on health and safety. However, that isn’t an engineering problem – it’s a criminal problem (if dangerous driving is defined as a crime). The solution isn’t different roads, it’s enforcing the rules in a proactive fashion. Prevention first. Not just speed, but intersection behaviour and so on. If drivers knew they could get 25 demerits for stopping on a bicycle “green square” instead of behind the line, it’d stop pretty quickly.

    1. You can take a look at the sources – I’ve linked to them and provided a summary of key calculations where needed.

      On the MPRs: It’s not a precise estimate. I’ve only considered the costs of providing free parking in smaller business centres, not at residences. If you radically change some of the assumptions in the underlying model, you get a result that’s maybe half as large. On the other hand, if you take some higher assumptions about the price of land, etc, you’d get a considerably larger number.

      I did a bit of cross-checking from other empirical sources and I think the estimate’s on the right order of magnitude.

      1. I have no doubt of your talents, but even Piketty made some errors in his calculations.
        It’s not so much errors of omission, but rather errors of assumption I find the most harmful.

        I’ll give the most basic error of assumption in very common economic modelling.. (grossly simplified)
        1. humans are self-maximisers (naturally non altruistic)
        2. humans will therefore seek to avoid high tax regimes / go towards high income areas
        3. therefore we should reduce taxes / increase wages

        It relies on the assumption that the sort of people we want are self-maximisers (rather than altruistic), and when taken to its extremes leads to what I think are unchallenged economic assumptions about the design of the economy.

        Whereas if you started from the principle that we want people willing to sacrifice themselves for NZ, you’d actually consider deliberately punitive tax rates (a sort of Salusa Secundus to winnow the wheat from the chaff)

        1. Externalities are exactly the sort of thing that pigouvian taxes would potentially seek to fix.

          In terms of the methodologies that were used to derive the above numbers, I suspect most of them applied partial equilibrium analyses of primary and secondary markets.

          These models tend to make relatively few assumptions about people’s underlying motivations and actions. Instead, they simply try to quantify people’s willingness-to-pay (WTP) to avoid said externality. Sometimes this requires intermediary steps, e.g. estimating people’s WTP for time. But the calculations themselves are rather often simple, even if the inputs require a bit of work. E.g. costs of congestion = value time x time lost to congestion.

          Naturally, there’s uncertainities and even errors in all estimates.

          Where this sort of analysis is useful, however, is for providing a sense of the order of magnitude of the different externalities, so that you can then focus policy attention on areas that are most important to people. As Peter notes, government institutions such as NZTA and MoT place an heavy emphasis on congestion reduction, when a number of other externalities seem to be of a similar order of magnitude.

  4. Great article, conclusions better still

    Another externality is that half of local roading costs are paid from rates, that that one also benefits car users

  5. “This suggests that, even if we fully eliminated all transport externalities and the resulting gains translated into increased income for Aucklanders, it would have a pretty minor impact on our wellbeing.”

    The lower end of the externalities you have calculated amount to 2.7% of GDP. How can you say that is a minor impact on well being? What other policy or development of any kind could give us a 2.7% boost to GDP?

    1. health costs related to vehicle accidents and air quality are included in the numbers above. Health costs related to other impacts on morbidity are not.

  6. the MOT did a lot of work on the real cost of road transport and externalities back in the 1990s, looking at how those costs might be factored into the pricing of roads, I recall that the biggest issue was that the upper and lower bounds of the estimated cost of each externality were so far apart that it wasn’t possible to accurately price the activity; in the end it was given away as just too hard

    the Wallis/Lupton figures for congestion illustrate this problem

    1. yeah – that’s often the case.

      However, I wonder much of the uncertainty orginates with trying to estimate a figure for the whole of New Zealand? In reality, most of these externalities are relatively localised, albeit large. So spatially differentiated pricing might allow you to narrow the uncertainty a bit.

      1. that’s quite right Stu, the greatest enthusiasm for road pricing was in Auckland, the rest of the country was “what’s the question again?” part of the problem with the governmental apparatus as a whole is the failure to realise that Auckland IS different from the other 2/3 of the country in so many ways

        consequently pricing the Auckland urban area as distinct from Waipukurau or Naseby seems the only logical solution

  7. Is covering the city in tarmac and then having no land to build houses on an externality?
    Surely the biggest hidden cost of roads is poor land use?

  8. While the gains from eliminating transport externalities might be small relative to Auckland’s GDP, policies that “price in” externalities may have a considerable effect on individuals’ decisions about transport.

    I think that pricing in externalities is a highly regressive form of taxation that will impact primarily on lower socio-economic groups. This will produce negative health and social outcomes.

    1. Two problems with your conclusion:

      1 Vehicle ownership and kilometres travelled both tend to increase with income, so wealthier households will tend to pay more of the costs arising from pricing externalities.
      2 To conclude whether pricing externalities was regressive, you have to draw conclusions on how the revenue generated would be used. For example, if the revenue was used to reduce/offset other (more regressive) forms of taxation, such as the Council’s Uniform Annual General Charge, then it could be progressive.

      For these reasons I suspect you’re … err … wrong.

      1. 1, regressive taxation refers to the proportion of wealth, not absolute value.
        2, please have a look at the fifth category – public transport fare subsidies – explain how you prefer “costing in” this externality.
        3, Uniform Annual General Charge, is a rating instrument applied to property owners in Auckland. It is not a very regressive form of taxation, because there are several socio-economic groups less well off than Auckland property owners.

        1. Oh Angus, let me spell it out for you.

          1) You’ve defined regressive taxation, but not presented evidence to suggest that taxing transport externalities would be regressive. I’ve presented some evidence (data on relationships between vehicle ownership and income) which suggests it may not be regressive. The burden of proof still lies with you to show they are regressive.
          2) Moreover, I’m suggesting taxing externalities in a fiscally neutral way, i.e. revenues raised would be used to reduce taxes elsewhere, or increase transfers. In this context, the relevant question is whether taxing externalities and simultaneously reducing other taxes (or increasing transfers) is regressive or not?
          3) Public transport fares are an externality, but they are also a transfer. As such they could go up or down following the implementation of such taxes. Moreover, if we taxed vehicle externalities accurately then I would expect the need for PT subsidies to decline substantially. So it’d reduce of its own accord …
          4) You claim the UAGC “is not very regressive”. Perhaps. Although just because someone doesn’t own a property themselves doesn’t mean they don’t pay rates. Indeed, most economic models of the housing market indicate that rates are indirectly paid, at least in part, by the tenants.

          1. Stu,

            1) Increasing the cost of a necessity is more impactful on people with less discretionary income. You’ve mentioned car ownership (an internalised cost) and newer cars are safer, less injurious to health, less carbon producing and afford the owner the choice to avoid accepting a fare subsidy.
            2) Yes.
            3) Yes. By increasing the prices of competing modes of transport we will be able to increase the price of public transport and eliminate its subsidy requirements. We will make transportation in general have a higher price.
            4) I think rents are defined by the supply and demand of housing.

          2. 3) Nope, increase the utilisation of vehicles/drivers and eliminate the need for subsidies.

            4) Rates are part of the supply side of housing.

          3. 1) Yes increases in the price for inelastic goods can be regressive when it occurs in isolation. But my point is that no-one is proposing to do this in isolation, but instead as part of a package of changes in which taxes (transfers) are reduced (increased) elsewhere. The net effect on low income households is ambiguous.
            2) Cool
            3) Yes, I think that’s actually a key point underlying all this discussion: If we priced vehicle travel accurately (which would involve increasing the price in some places and reducing it elsewhere), then this would deliver efficiency gains not only in terms of the road network, but also other related markets such as public transport.
            4) Rents are defined by the supply and demand for housing, and as Sailor Boy notes rates affect the supply side of that equation.

    2. P.s. We’ve previously written about the equity implications of minimum parking requirements, for example, which you can read here: http://greaterakl.wpengine.com/2015/07/21/the-equity-implications-of-minimum-parking-requirements/

      Peter concludes the aforementioned post with: “Because car-free households are living more or less everywhere in Auckland, the blanket application of MPRs in residential areas is likely to be inappropriate. And, because low-income households are more likely to own no cars, MPRs will tend to be heavily regressive. It’s a policy that many Aucklanders simply can’t afford.”

      1. I think MPR is a horrible, stupid, idiotic policy. I want it to be eliminated.

        You want it to be paid for by commuters or eliminated. We are half way to an agreement.

        1. I think we are completely in agreement on parking. That is, I would prefer to 1) eliminate MPRs and 2) priced publicly-owned parking based on demand.

    3. I agree with Stu’s points. Furthermore, I would note that you haven’t considered the *incidence* of these externalities. Poor air quality, for example, disproportionately affects low-income households as they are more likely to live in polluted areas. Vehicle crashes are more likely to hurt low-income families, as they tend to drive older, less safe cars and tend to live in areas with worse pedestrian safety records.

  9. I could not agree more. Ultimately, the long-term effects of CO2 pricing is the single most important impact on Auckland. Elon Musk and as I understand it perfectly orthodox economists think that to make any difference it should be 200$/tonne or more, 5 x your estimate. The current CO2 trading scheme prices CO2 at an absolute maximum of 25$/tonne. It was 20$ before they allowed international units into the country, the price then crashed, and is currently ~ 10$ per todays news.

    What does the cost look like if you charge it at the full 200$/tonne?

    1. Using a social cost of carbon of $200/tonne would raise my estimate of this externality from ~$150m per annum to ~$750m. That’s a considerable difference.

      I would prefer policymakers to use the higher figure – the marginal cost of each additional tonne of CO2 is probably rising as we run out of time to avoid the worst effects of climate change.

      1. Fuel tax could be converted to a Piguovian Carbon Tax, and road costs, including other externalities, be funded by Road Pricing. Preferably through a GPS based all network system, not just pricing State Highways.

        Seems to me to combine both fairness and transparent incentives to reduce forcing those negative externalities on others, while producing an income to re-shape our networks to be ‘fit for purpose’ for the demands of this century.

    1. A sum which is almost entirely caused by heavy vehicles, yet is larger than annual Road User Charges income, and trucking’s vociferous lobbying for more expensive roading, ie East/West is entirely framed within the idea that they pay for it through these charges.

      They don’t even cover maintaining what’s there let alone expanding supply infittely. If the same rationale was used for road freight as rail freight, roads would be closing to trucks all over the country, and/or RUCs going up significantly. They are cross subsidised by the private car user and the rate and tax payer.

  10. Very interesting that H+S is similar in quantum to congestion. Arguably H+S is a more “real” (technological) externality, and therefore more worthy of being addressed. Congestion to me just appears to be a pecuniary externality – other peoples demand raises the “cost” to you of demanding the same thing. Of course the cost is in terms of time and other congestion costs (fuel usage) rather than a dollar value, but that is just a function of how we choose to (not) price our road network.

  11. I think you missed the major externalities of transport. The benefit people get from the activity at their destination and the benefit they get from choosing a nice location to live.

    1. um if those benefits are captured by the users of the transport system then how are they externalities?

      Externality = the cost or benefit that affects a party who did not choose to incur that cost or benefit.

      1. Yes sorry Frank I will rephrase. The benefit your employer, customers, workmates get from having you there and the benefit the rest of your family get from not having to live in a little box in the city. Those are externalities.

        1. No those are not externalities either. They are all benefits internalised in transactions/contracts. Based on your definition positive externalities would pour out of every corner of our economy. e.g. My not starving would be a positive externality of farms (or negative, depending on what you think of me).

          1. Not quite an externality is a cost or benefit to someone who did choose that cost or benefit. My kids didn’t choose to live in a larger house with a yard rather than a dog-box in town, you did choose to buy buy some meat off a butcher who bought it from a farm.
            And my point is that real economies ooze externalities despite the best efforts of most economists to assume them away.

          2. You’re going down the rabbit hole on this one, mate. By your logic, you impose externalities on your children when you choose what to have for dinner, where they should go to school, etc. However, I would observe that parents derive consumption benefits from seeing their children happy, which would tend to minimise the potential for distortions from any such hypothetical externalities.

            As always, I’m willing to be convinced that it’s important – but you have to show your work!

          3. yes. But the point I am making is when your consumption choices affect others you have a consumption externality regardless of if it is loud music, travel or whatever. Similar with production externalities. Economics ignores everything outside of the price model. That is ok so long as it is regularly stated that everything else is ignored. But most of life sits outside that model- duty, love, honour, values, trying to give a better life to your kids.
            When I started out economists gave us values for human lives saved. They were a pitance based on the discounted value of future earnings. Talk about economics being the dismal science! That improved when they took it away from economists and went to a willingness to pay approach that captured peoples values. at that time the value of life went from around $250,000 to around $1mill.
            It took me three years of undergrad econ to realise life is in the externalities.

          4. Ok so you have restricted your arguments to kids (not spouses or customers or workmates, thats contractual). Well kids are kind of a special case.

            Your argument is kids incur externalites from the contracts their parents enter into. Ok, but that is kind of a pointless observation in this context, as it would apply to almost everything a kid gets. To continue my farm example, your kid gets a positive externality from the butcher/parent trade because he doesn’t starve. Kind of ridiculous if you are trying to make a policy relevant point.

          5. My first point was confused as I come at it from two backgrounds. Doing BCR work for roads an externality is anything not already included ie not travel time, VOC or crashes. But in economics an externality is the impact of one persons choices on another person either production or consumption. The point I really wanted to make was we choose where we live only in part on transport issues, family life and weekend amenity is a huge reason why most of us end up in the suburbs after being in town when we are young. I accept that the amenity we get is not an externality as I get to enjoy the benefit of being in a nicer place. But in the EEM it is an externality as there are no travel time, vehicle operating cost savings or crash reductions that reflect my improved amenity. The cost to me is some traffic congestion when I go into town but I pay that cost because I am still better off. Oh and if parking subsidies are an externality then so is the benefit of that parking to the user who didnt have to pay for it.

          6. If what you are saying is correct, that is an issue with the EEM, it doesnt make it an externality. However the amenity value of living where you live is basically captured in travel time and VOC benefits. Any one of us could live in some rural hideaway up in Northland and commute to Auckland if we so chose, we dont because the benefits from living there are outweighed by travel time and VOC benefits. There is nothing preventing us from getting the amenity benefits of living in a particular location, we just weigh it up against the costs.

          7. No the fact we trade one thing against another doesn’t mean one measures the other or even includes it. Most transport studies assume we are indifferent to location outside of travel cost. That is why the ART3 model leads to a conclusion a compact city is desirable. We plan future residential beside rail lines rather than beside the coast because one has a better travel time and the other has no benefit in the assessment. Yet if people could be anywhere they wanted they would opt for the coast first (for revealed preference consider our historical development pattern).

          8. “No the fact we trade one thing against another doesn’t mean one measures the other or even includes it.”

            We can infer the relative value of one thing from what we are prepared to trade it for.

            If we are prepared to travel up to an extra hour a day to live in a 4 bedroom house rather than a 2 bedroom apartment, all else being equally we can say: The incremental value to us of living in the 4 bedroom house compared to the 2 bedroom apartment is equal to the value of 1 hour travel time and associated VOC per day.

            I have no idea about the ART3 model, but you are right that for anyone to reach a conclusion about whether a compact city is desirable they need to know something about how much people value living in different types of living arrangements, and I agree you couldnt do this by relying on travel time benefits and VOC alone.

          9. Answered like a true economist. “This new gas to methanol plant will cost $200 Gazillion therefore its benefits must be at least that much!” Or “My new bridge and motorway straight through the CBD will cost the homes of at least 12,000 people so the benefits of what I am proposing must be amazing!”
            More seriously we can’t measure utility off veh.km or veh.hrs not even as a proxy. We have no idea what value each trip actually has nor do we no the value of the trips that almost happened but didnt. I have come to the view the only real way to value transport projects is actually to look at the change in land values that occur. The rest is bunk. Our models all fail the Lucas critique and end up simply restating the input data and prejudices.

          10. I think Matthew is actually an engineer, not an economist. (Although he certainly thinks like an economist!)

            Matthew’s point relates to the trade-offs that *individuals* make when weighing up how to travel and where to live. That’s different from the trade-offs made by *politicians* about how to spend other people’s money, such as Think Big projects or RONS.

            However, on your comment that “the only real way to value transport projects is actually to look at the change in land values that occur”, you might be interested in a conference paper I co-authored last year on just that topic. It’s available online (in .docx format) here.

        2. Not living in a little box in the city – with all its parks, culture, activities and shorter (and not single mode centric) commute time to, on average? higher wages.

          Far better to be out on the boring urban fringe, fenced into the excitement of the local dairy, with nothing to look forward to except the wasted commute time each day in a car, just to have to try and earn the highest wage possible.

          Please try harder entrenching, forever, your personal bias for how everyone should live.

    2. Frank’s right. Those are user benefits, not externalities. However, I agree that they are an important factor in people’s decisions about whether and how to travel that should be considered when making transport policy.

    1. In most economic analysis (e.g. the hedonic pricing literature), property markets are treated as *surrogate markets* in which many of the benefits and disbenefits of transport systems are capitalised. For example, opening a new motorway may improve the accessibility of properties, thereby raising their value to occupants, while also worsening air quality and local road safety, which would offset some of those gains. In other words, there are no additional externalities associated with property prices.

      1. What can we conclude about the monotonal spending on motorways in AKL over the last 60 years as expressed by the changes in residential property prices as that system matures?

        One obvious conclusion is that people are willing to pay ever higher sums in order to avoid daily involvement with motorways at all: those that can afford it are bidding up property in places that mean they can entirely avoid driving on the motorway system for everyday travel, reserving their use of them to get out of town on own timetable. Living in Herne Bay, St Mary’s Bay, Ponsonby, Grey Lynn, Parnell, Devonport, Newmarket, Grafton etc….you can avoid driving at all, especially driving on m’ways… It seems the near completion of the m’way system has helped reinforce and return the power of proximity in the Auckland residential property market…. That wan’t at all predicted.

  12. A surrogate market is a way of estimating the external value of a good. This analysis has listed a multitude of negative externalities. Therefore we would expect (from the above analysis) the surrogate market to be losing capital value.

    The Auckland property market is not losing capital value, perhaps the analysis is incorrect.

    1. Two points. First, transport externalities are only one of many factors that affect property prices.

      Second, you’re confusing levels with rates of change – a classic error in data analysis. Several important negative externalities – vehicle accidents and poor air quality – have reduced over the last decade. This would tend to increase prices in surrogate markets even if nothing else was happening.

      1. Guys, this is getting a bit too personal. Mfwic said something about his vision of the good life. That’s fair enough. Others disagree – and that’s also fine. You can state your preferences without attacking the people you’re disagreeing with.

        Personally, my dream home doesn’t come with a lawnmower, but I don’t begrudge others their lawns as long as they’re not voting to require me to have one too.

  13. His was a thinly veiled view on intensification as evidenced by the term “dog box in the city”. That is much more than putting forward a particular view of paradise. Thats disparaging someoene elses view, as per my sarcastic response.

    If you make those kind of calls, you need to be able to handle the inevitable response. Its nothing personal.

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