Urban Transport Market Theoretical Analysis.

1.The Institute for Transport Studies (ITS) was commissioned by the Department of Transport (DoT), the Association of Metropolitan Authorities (AMA) and the Passenger Transport Executive Group (PTEG) to undertake this project in November 1992. 2.The objectives of this study were: (a)to establish a simple economic model of urban transport operations, based on present policies; (b)to estimate, using the model, the theoretically optimal form of intervention in urban rail under the present policy constraints, and differences between this optimum and current procedures; (c)to investigate how improved procedures might be implemented in practice in the light of the kind of data which are currently available or become available in the course of a Section 56 appraisal and to make suggestions for additional data collection

The Uncogent Auxiliary Hypotheses of Gordon and Modugno: Reply to a Review

Lester‘s reply to the review by Gordon and Modugno of Escape from Leviathan was due to appear in a later edition of the same periodical, but it was eventually dropped without notice or a reason being given. Subsequently, their review has occasionally been cited in isolation as a refutation of that book‘s theory of liberty, the compatibility of such liberty with welfare maximisation, and the use of "Popperian views" as though a complete reply did not exist and were not freely available and easily found online. To make it harder to avoid the reply, whether by accident or design, it is reproduced here (but with sundry small emendations for greater clarity)

Do welfare maximising water utilities maximise welfare under common carriage?

Due to the increasing discussion about liberalisation in the piped water industry municipal authorities in several European countries consider modifications of their water utilities’ structure such as legal constitution, business objectives or private participation. The purpose of this paper is to evaluate the extent to which it is socially optimal to compose water utilities as welfare or profit maximising companies when assuming the introduction of competition in the market based on common carriage – as applied in England and Wales. Using a game theoretic model of mixed oligopolies that contains water markets specificities we show that welfare tends to be higher in a regime, where utilities are instructed to maximise profits rather than welfare.Water, Networks, Corporate Governance, Mixed Oligopoly

Water Management in France: Delegation and Irreversibility

The problem that we address in this paper stems from the trend to delegation in the water management field. It refers to the municipality’s negotiating disadvantage in the face of cartelized water management firms that makes delegation, once undertaken, virtually irreversible. We show why the characteristics of the delegation auction render is useless as a tool for collective welfare maximization. We also show that the remaining tool for achieving collective welfare maximization, i.e. the municipality’s right to revoke delegation and return to direct management, is also ineffective due to a lack of credibility that is essentially financial in nature. Thus, if the credibility of revocation could be restored, the municipality’s bargaining power could also be restored. Using standard methods of stochastic calculus, we model the municipality’s right of revocation as a call option held by the municipality. We show that the key variable for the value of this option, and thus for the municipality’s position, is the exercise price, which is partly determined by objective economic criteria and partly by legal and institutional conventions. We show that community welfare maximisation occurs at the point where the exercise price is determined exclusively by objective economic criteria. Since the delegated firm as a simple agent has the right to abrogate the contract if delegation becomes unprofitable, we then model this right as a put option held by the firm. Its value also depends to a large extent on the exercise price, which is partly determined by objective economic criteria and partly by legal and institutional conventions. Combining the exercise points of the two options enables us to determine the price-profit interval over which delegation will be acceptable to both parties. We conclude that the optimal interval will be the one where the exercise prices are determined entirely by objective economic criteria.Water management; Delegation; Insurance mechanisms; Technological Changes; Real Options

Production Effects of Agri-environmental Policy Measures: Reconciling Trade and Environmental Objectives

In addition to generating commodity outputs, agricultural production activities affect water, air, and soil quality, influence eco-systems and biodiversity, and shape rural landscapes. Many of these environmental effects exhibit the characteristics of negative or positive externalities or public goods, for which private markets do not exist or are poorly functioning. OECD countries implement a variety of agri-environmental policy measures with the aim of addressing the environmental effects associated with agricultural production. Policy measures include regulations and taxes to contain or prevent environmental harm, information and training programmes to promote environmentally friendly farming practices, and payments that remunerate farmers for environmental services they provide. Over the past 10-15 years, the scope and complexity of agri environmental policies has increased, not least because of growing concerns of society for the state of the environment. In parallel to the rising importance of agri- environmental considerations, agricultural trade policy reforms, in particular through policy changes following the Uruguay Round Agreement on Agriculture, have gradually opened domestic agricultural markets to international competition. Trade barriers, export subsidies, and domestic support have been bound and are being scaled down. In this context of greater international interdependence, there are two related policy debates on the possible impact of environmental standards, programmes, and payments on agricultural production and trade. The first is concerned with the impact of differences of agri-environmental regulations among countries on agricultural production costs and farm competitiveness, and the second with the issue whether and to what extent domestic agri-environmental policies influence international trade. The two policy debates do not have the same prominence in all OECD countries, and in some countries the underlying issues are seen to be of no relevance at all. Yet, the discussions have the potential to influence negotiations on agricultural trade and the environment at the international level. This paper examines several related questions: What are the effects of agri environmental policy measures on agricultural trade? To what extent do agri environmental regulations influence farming costs and international competitiveness? Would an international harmonisation of agri environmental policies increase welfare? Which characteristics might policy measures have to possess in order to be considered minimally trade distorting?Trade and environment, regulations, payments, competitiveness, harmonisation, WTO green box

Taxes, Status Goods, and Piracy

This paper studies the design of indirect redistributive taxation and of corrective taxation, as well as the formation of equilibrium indirect tax policies via a political process, in the presence of status goods, allowing for the possibility that illegal copies of those goods may be purchased on black markets (the phenomenon of "piracy"). Heavy taxation of status goods, despite the fact these are typically overconsumed, is not particularly favoured in a social welfare maximisation context, because the tax rate is highly distortionary, due to the presence of piracy. Corrective taxation, aimed at remedying the inefficiencies associated with the consumption externalities generated by the status goods, is made ineffective by piracy. In contrast with the normative results, the median voter model predicts an inefficiently large tax rate on status goods when piracy is widespread.social status, indirect taxes, corrective taxes, median voter, piracy

Delegation or abrogation: The impossibility of objective social welfare maximisation by government

A model widely used for decisions which have a public interest element is delegation of parliamentary authority to a bureaucratic agency, within the confines of a legislative framework which directs the relevant agents how social welfare should be maximised within the context of the issue at hand. This is intended to remove the politicisation of decision-making, and allow for an objective approach. However, except in very limited circumstances, it is unlikely that bureaucratic agents will be able to act in this fashion. Using Arrow?s (1950) Impossibility Theorem, this paper outlines why this is the case, and the consequences of delegation

Pricing transport networks with fixed residential location

We consider a congestible static traffic network which is used by different households and analyse the conditions for optimal congestion taxes on network links, when not all links in the network can be taxed (partial network pricing). This is done under two assumptions about the toll revenues. First, lump sum transfers are assumed to be available. It is shown that social welfare maximisation leads to unequal treatment of equal households, because of differences in transport costs, and that constraints on network pricing imply complex deviations from marginal social cost pricing, because of network interactions. The second assumption is that the congestion tax revenue is redistributed to households according to predetermined shares. In that case, the optimal link taxes consist of a Pigouvian component, a Ramsey-Mirrlees component and a network interaction component. The taxes will deviate from marginal external congestion costs, even in the absence of network pricing constraints. This result is qualitatively different from the partial equilibrium analysis. Stylised examples of two networks are used to illustrate (a) the impact of unequal treatment of equals and of tax redistribution rules on optimal link taxes and on their effectiveness in terms of social welfare, and (b) the effect of network pricing constraints. The results suggest that (1) the effectiveness of congestion taxes is strongly reduced when not all links in the network can be taxed, (2) assignment inefficiencies are of less importance than excess demand levels when no taxes are present, and (3) that optimal parking charges may outperform partial pricing schemes when the assignment inefficiencies are small.congestion; road transport; pricing; networks