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Public Investment Criteria for a Comprehensive Transport System Using an Interregional Input-Output Programming Model
Abstract
This paper focuses on the derivation of the criteria to decide (i) where, (ii) how, and (iii) by what amount, public funds should be allocated to investment in transportation infrastructure such as railways, new trunk lines, highways, expressways, ports, airports etc. The methodology adopted is that of an extended interregional input-output programming model. This approach solves concurrently the problem of the measurement of the social benefits of private and public sector production, and the problem of derivation of the public investment criteria themselves.
This chapter analyzes the main topic in Chap. 4 with the expanded model specification in terms of the number of: (1) regions; (2) sectors; (3) transportation infrastructures and modes, which transport cargo as well as passengers; and (d) the targets of public investments, which are extended to include social overhead capitals, based on Kohno and Mitomo (1982).
As aforementioned, on the occasion of closing this volume of the Economic Effects of Public Investment, let me say a few words. Looking back through all the Chap. 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10, I am fully or in some sense satisfied, for so far there has been no chance of putting my thoughts together systematically in such a style that is different from the series, New Frontiers in Regional Science: Asian Perspectives, volume 2: : Using an Interregional Input–Output Programming Model [14], for which the chance to write a survey paper has occurred two or three times. So, until having finished, I cannot expect to cover all the details of Volume 1.
This survey attempts to provide an overview of the major issues concerning economic interactions between environmental and trade policies. Such a review is necessary because of the pressure that the accelerated pace of globalisation is placing on environment and trade. Not only is world trade increasing rapidly but global industrialisation related to trade has spawned severe environmental degradation. As a consequence, growing numbers of researchers have attempted to analyse the linkages between these areas. This study attempts to provide a perspective on received and future research by employing a dual approach economic studies of the major environmental and trade issues are analysed first and then progress in the methods necessary to analyse their interactions is assessed second. The conclusions suggest new possibilities for research design and policy goals.
1) Objective The task that to which higher priority should be given, the improvement of the productive social over-head capital, e.g., transport facilities, etc., or the non-productive one useful for regional living-environment, e.g., sewerage systems, etc., will be one of the most important topics in recent regional policies. As for constituents of the non-productive social over-head capital, there are environmental sanitation (sewerage system, etc.), public rental housing, health and welfare (hospital, etc.), and education (school requisites, etc.). These form the ‘regional living-environmental facilities for permanent settlement’. We intend to construct a synthesized model which has the efficacy and ability to investigate consistently the efficiency and priority of public investments to various facilities such as proposed 5 future new trunk railway lines, proposed future national trunk expressway systems, branch expressways, ordinal trunk highways, local airports and harbors, which are competitive and mutually alternatives, and are planned over a more lengthy period than the planning horizon of the Third National Land Comprehensive Development Planning. To cope with such a task, it is urgent and indispensable requisite to develop a general model which can manage ‘goods traffic’ and ‘passenger traffic’ concurrently. All the models hitherto, e.g., our interregional input-output programming model also had not this concurrently built procedure. The reason is that transport facilities such as expressways, highways, ordinal railways are under the mixed utilization of goods traffic and passenger traffic. 2) Pedigree of this model This paper is an extension of “Optimal allocation of public investment using interregional input-output programming model” [H. Kohno (1975)] which was based partly on the Moses's model (1960) and Lefeber model (1958). 3) Development of several sub-models to meet conprehensive valuation We have this time, developed several sub-models to meet the comprehensive valuation of social benefits due to the allocation of public investments. These are shown under the itemized sub-titles: (1) Establishment of passenger travel-consumption activities and its incorporation into input-output programming model, (2) Generalization of objective function of GNP to the maximization of social benefits incorporating the rate of valuation as to the travel service and improvement of social overhead capital based on the multi-attributed utility function, (3) Setting up of alternative mixed combinations of ordinal railway passenger service of any link and new trunk railway passenger service of any link, for each type of route, (4) Systemization of row vector of transport service sector in order to make parametric computation easy, (5) Establishment of activities of living emvironmental social overhead capital service, and (6) Estimation of ‘necessary volumes of living-environmental social overhead capital-shipments of industrial and living activity’ coefficient matrix. Incorporating above six developed ideas into the base model [Kohno (1975)], we have constructed a synthesized programming model to meet our objective. The computational results of this model are omitted, due to space restriction. © 1980, JAPAN SECTION OF THE REGIONAL SCIENCE ASSOCIATION INTERNATIONAL. All rights reserved.
This paper presents sufficient conditions for a multiattribute utility function to be either multiplicative or additive. The number of requisite assumptions to imply the main result is equal to the number of attributes. Because the assumptions involve only trade-offs between two attributes at a time or lotteries over one attribute, it is reasonable to expect that decision makers can ascertain whether these assumptions are appropriate for their specific problems. Procedures are given for verifying the assumptions and assessing the resulting utility functions. The paper concludes with a sketch of a recent application of the results to a six-attribute problem relating to the development of Mexico City's airport facilities.
1. THE NECESSITY OF MEASURING THE MARGINAL RATE OF VALUATION OF PUBLIC NUISANCE In recent years, the use of environmental assessment techniques has become common in the identification and valuation of potential public nuisances associated with large development projects. These techniques have become institutionalised in the assessment of projects prior to public approval. There are strong arguments, however, based on the theory of investment criteria, that the negative effects of a project should be considered jointly with the positive effects, and that a synthesis of the two should be established. It has become more important for the conventional economic effects of a project (normally considered to be positive) to be considered alongside those social costs of a project, normally considered to be negative. One of the main problems in achieving such a synthesis is the unit of measurement. The effect of most public nuisances can be measured only in some physical unit such as decibels (noise), or parts per million (air or water pollution). Since these have not been directly convertible to money terms it has been difficult to compare the effect of the nuisance easily with economic effects. It has been necessary therefore, to convert these ]ghysical units into money units for the purposes of establishing equivalence. This paper describes a conversion coefficient for this purpose, and designates it as a "marginal rate of valuation of a public nuisance." This coefficient has a potentially important role to play in the synthesis of the economic and non-economic effects of a project, particularly since the price of a public nuisance is not normally established in the market. Although the market prices for common private goods may be considered to be a planning assessment of their value, the same economy cannot be applied to the valuation of a public good, and it is necessary to develop techniques to assess the value of public goods, including public bads or nuisances. This is a very difficult assessment to make, but is the concept contained in the term the "marginal rate of valuation of a public nuisance," which is the topic of this paper.
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