Baker, Forrest

English

Research Papers in Economics

THE  ROLE  OF  TRANSPORTATION  IN
POPULATION  DISTRIBUTION
Forrest Baker,  President
Transportation Research and Marketing
If  the  effects  of  transportation  on  population  distribution  and
land  use  policy  are  to  be  properly  evaluated,  the  subject  must  be
defined  more  precisely  as  the  role  of  population  in  transportation
economics,  with  emphasis on the role of population as the determining
transportation  factor in enterprise  selection  and location theory.  With
the  existing  technology  in  physical  distribution  and  transportation,
any  amount  of  goods  or  commodities  can be  moved  effectively  and
efficiently between  any two or more points on the continent.  The diffi-
culty is that physically efficient  moves are not necessarily economically
efficient  moves.
Our  goal  is:  (1)  to  develop  the relationship  between  transporta-
tion and  population  distribution  as  it  pertains  to enterprise  selection
and  location  theory  and  (2)  to  develop  this  relationship  in  such  a
manner  that  it  can  be  understood  by  those  individuals  involved  in
the decision making.  This requires  an objective approach  to the devel-
opment  of  regional  economic  activity  rather  than  the  strongly  sub-
jective  "we shall overcome"  approach to enterprise development  which
has  long  prevailed  in  rural  and  semirural  areas.  Too  often  this  ap-
proach  makes  overly  optimistic  assumptions  concerning  both  supply
and demand.
TERMINOLOGY  AND  CONCEPTS
Before developing  this  discussion  certain  concepts  and principles
must  be  understood  and  accepted.  Some  of  these  are  elementary
principles  of  economics.  Some  are  basic  concepts  of  transportation.
All  of  them  have historically  been  ignored  or misunderstood  in  con-
sidering  the  role  of  transport  in economic  growth  and  development,
if the  role of transport has been  considered  at  all.
First,  the  supply of  transport  is  physically  limited  and  the  limits
of economic  transport are  clearly defined.
Second,  the transport  sector is subject to  all of the basic principles
of economics.  Price theory  is  as  applicable  to the transport sector  as
it  is  to  all  other  areas  of  economic  activity.
Third,  back-haul is  the  "distressed"  pricing  of  surplus  transport.
The movement  of each  commodity  must be  analyzed  in terms of the
75economics  of the movement  of that commodity  at all levels of flow to
specified  markets  and  not as  a function  of a  carrier's  pricing activity
in  disposing  of  only  a  fixed  amount  of  surplus  capacity.  Back-haul
is  valid  only  as  long  as  the commodity  demand  does  not exceed  the
carrier's  surplus  capacity.
Fourth,  transport  takes  place  in  a complex  environment  of  inter-
action  between  goods  and  commodities,  and  it  must  be  recognized
that changes  in  any  commodity  market,  supply  or demand,  have  an
impact  on  the  movement  of  other  commodities  that  depend  on  the
same transport mode.
Fifth,  the capacity  of transport  vehicles  and  the cost  of ultilizing
them  vary  with  the  type  of  vehicle  and  not  the  commodity  trans-
ported.  Transport  vehicles  are  not entirely  interchangeable.
DISCUSSION
Having  spelled  out  and accepted  the  above,  we  can  now develop
the relationship  of population  to transportation.  The basic  transporta-
tion  cost equation  is:
TCmc  [1  +  (1  - {probbalR})]  [at  +  w,  (hrp)  +  f(hra)]
where:
TCmc  the  total  transport  cost  of  a  commodity  movement
by motor  carrier.
(prob balR}= the probability of  revenue balance against  the  specific
commodity  movement  (the  probability  that  revenue
will be  generated  on  the return  trip).  The  expression
[1  +  (1 - {prob balR })]  is the revenue balance factor.
at =  the  fixed  cost  per day of  ownership  of  the power  unit
and its supporting  trailers  multiplied by  the number  of
days  required  for  the  specific  commodity  movement.
wp  =  actual  fully costed  wage  paid.
hrp  =  hours  paid for-not necessarily  worked.
f = fuel  expended  per hour  of operation.
hra  hours  actually  operated-not  necessarily  the  same  as
hours paid.
In  considering  the  above  equation  two  things  should  be  empha-
sized:  (1)  transport  must be  costed on  a time,  not  a  distance  basis,
for all  of the  hours involved  in  the  movement;  and  (2)  the revenue
balance  factor  determines  the  actual  cost  burden  with  a  potential
76variance  of 100  percent.  Expressing the cost function  in cost per unit
of  time  rather  than  cost per unit  of distance  allows  a very  accurate
description  of  costs with linear  components.
If the probability of revenue balance equals 1, the revenue balance
factor becomes  [1  +  (1  - 1)]  1, and the  cost  of the commodity
movement  becomes:
[(1  +  0)  (a  +  wp(hrp)  +  f(hra)]
but  where  the  probability  of  revenue  balance  equals  0,  the revenue
balance factor becomes  [1  +  (1  0)] =2, and the cost of the com-
modity movement  becomes:
[(1  +  1)]  [a  +  wp(hrp)  +  f(hra)]
thereby  doubling  the  cost  of  the  movement.
The  importance  of this multiplier is  clear  when  it is realized  that
the  raw,  out-of-pocket,  cost approximates  $15.50  per  hour.  Such  a
relationship  clearly ties the  economic ability of  a region or community
to  market  a  commodity  directly  to  the  ability  of  that  same  com-
munity  to  consume  a second  commodity  or  a good  derived  from the
destination  region.  This  linkage  brings  the  relationship  of population
and  transportation  into  focus.  Since  the ability  of  a community  or  a
region  to  absorb  a good  or commodity  is  primarily  a function  of its
population  size,  it must be axiomatic  that a community or region can
absorb  no more of any  good or commodity than its annual per capita
consumption  times  its population.  The  amount  of  the  good  or com-
modity actually imported  will be annual per capita consumption  times
population  minus  local  production  consumed.  (Due  to  the  mobility
of  the transport  sector,  particularly  the  motor  freight  sector,  empty
movement  within  a region  is  common.  Thus,  generally  the region  is
the dominant  area.)
INTERREGIONAL  COMPETITION
The  ability  of  any  community  or  region  to  achieve  balanced
transport  is  equal  to  the  total  of  all  imports  segregated  by  type  of
product  and  by  community  or  region  of  origin.  Beyond  this  point
the probability  of balance  for each  additional  shipment  of  any  given
commodity  is 0. Each  additional  load with a 0 probability  of balance
diminishes  the  over-all  probability  of  balance  until  the point  where
the total probability of balance  approaches  0. For example,  that point
is reached  very rapidly when  a processing plant is located in a sparsely
populated  area.  A  diminishing  over-all  probability  of  balance,  of
course,  adds  to  the  advantage  of  a  competitive  region  of  greater
population  density.  The competitive  cost position  of  a  densely  popu-
77lated commodity supply area with a probability of balance of 1 located
twice  the  hours  from  a  given  market  is  exactly  equal  to  the  com-
petitive  transportation  cost  of  the  commodity  supply  area  with  a
probability  of balance  of  0,  all  other  other  factors  remaining  equal.
Unfortunately  all  other  factors  do not  remain  equal.  Many  com-
modity demand  markets  are not level  day by  day but vary with  retail
consumer shopping patterns. A surging  demand structure  works to the
advantage  of  the  supply  area  in  direct  ratio  to  the  distance  from
the demand market.  This  is because  the total number of days of trans-
port  utilization  will  be  increased  by  virtue  of  the  longer  transport
arc  charged  against the  commodity  movement.  A  shipper  in Oregon
shipping  beef  to  San  Francisco  could  well  be  limited  to  two  days
of  transport  equipment  utilization  per  week  against  a  Thursday
market  while  a shipper  in Nebraska  could achieve  five days of equip-
ment  utilization  against  the same  market.  With  labor  and  equipment
being  bought  in  five-day  or  longer  increments  the  only  reduction
in  cost offered  by nonuse in terms of the basic  equation becomes  fuel.
Obviously such a situation  as  two-day use would not exist  in a market
place  if  it could  be  eased by  the  use of multiple  trailers  or any  other
device.  However,  because  any such device would  increase  cost, it can
be  seen  that proximity  to market  can  be  a  decided  disadvantage  if
the  proximity to  the market  is  coupled  with sparse  population.
Tables  1,  2,  3,  and  4  delineate  the  primary  production  areas
for  red  meat,  poultry,  fruits,  and  vegetables  in  the  United  States.
Dominance  in  market  share goes  almost without exception  to produc-
tion  areas  with  the  population  density  to  support  an  economically
efficient  inbound  flow  of  transport  equipment.
Market  dominance  in  agricultural  processing  is  held  by  those
areas where population  density supports  an inbound  movement of the
specialized  transport  requirements  needed  for  effective  marketing
while less densely populated regions produce  and market commodities
adaptable  to lower  cost  bulk  forms  of  transport.
POLICY  IMPLICATIONS
The interactions  of transportation  and population  are well defined.
The import  sector  must lead the export sector  in  a market economy.
This  is  a truism  well understood  by  the  early traders  and colonizers
but somehow  overlooked  in the  current  scheme  of  things.
The  implications  of  this  relationship  to  programs  of  population
distribution are  clear.  Any program of population  redistribution  must
recognize  the  significance  of  the  role  of  distributive  transport  in
achieving  the  desired  redistribution.  This  is  true  whether  the  redis-
78TABLE  1.  RED MEAT  PRODUCTION:  RANK  OF STATES  BY  NUMBER  OF
HEAD SLAUGHTERED,  1969
Cattle  Calves
Rank  State  Number  State  Number
1,000 Head  1,000 Head
1  Nebraska  4,159  New  York  795
2  Iowa  4,130  Pennsylvania  459
3  Texas  3,011  Wisconsin  428
4  California  2,936  New  Jersey  381
5  Minnesota  1,868  Texas  313
6  Colorado  1,714  Iowa  262
7  Kansas  1,664  New England  240
8  Missouri  1,590  California  235
9  Wisconsin  1,245  Louisiana  225
10  Ohio  1,123  Florida  203
Sheep and Lambs  Hogs
Rank  State  Number  State  Number
1,000 Head  1,000 Head
1  California  1,748  Iowa  26,738
2  Colorado  1,351  Minnesota  6,090
3  Texas  1,184  Illinois  5,475
4  Nebraska  845  Ohio  4,470
5  New  Jersey  841  Pennsylvania  3,870
6  Utah  830  Indiana  3,625
7  Illinois  720  Virginia  3,204
8  Minnesota  563  Missouri  3,118
9  Iowa  475  Wisconsin  3,084
10  South Dakota  376  Tennessee  2,893
TABLE  2.  POULTRY  PRODUCTION:  RANK  OF  STATES  BY  NUMBER  OF
HEAD  SLAUGHTERED,  1969
Young Chickens  Young  Turkeys
Rank  State  Number  State  Number
1,000 Head  1,000 Head
1  Georgia  32,217  California  1.424
2  Arkansas  28,788  Minnesota  982
3  Alabama  23,021  North  Carolina  642
4  North Carolina  22,119  Texas  609
5  Mississippi  16,399  Virginia  530
6  Texas  14,238  Missouri  483
7  Maryland  14,145  Iowa  443
8  Delaware  7,688  Ohio  393
9  Virginia  7,082  Pennsylvania  282
10  Pennsylvania  6,237  Wisconsin  280
79TABLE  3.  FRUIT  CROPS  BY  AREA  AND  STATE  OF  PRIMARY  PRODUCTION:
PERCENT  OF  TOTAL  MARKET,  1970
Fruit  Region  Percent  Primary Producing States
Apples
All
Delicious
Peaches
Cling
Freestone
Pears
Grapes
Cherries
Tart
Sweet
Plums
Apricots
Dates
Figs
Nectarines
Olives
Berries
Cane
Strawberries
Grapefruit
Oranges
Lemons
West
West
West
South
West
West
West
Great Lakes
Great Lakes
West
West
WAest
West
West
West
West
West
West
South
South
West
34
50
100
48
34
92
95
94
30
60
80
100
100
100
100
100
100
80
65
80
100
Washington,  California
Washington
California
Georgia,  North and South  Carolina
California,  Washington
California,  Washington,  Oregon
California,  Washington
Michigan,  New York
Pennsylvania,  New York, Michigan
Oregon,  Washington,  California
California
California
California
California
California
California
Oregon,  Washington
California,  Oregon, Washington
Florida
Florida
California
TABLE  4.  LEADING  FRESH  MARKET  VEGETABLE  STATES,  1970
Percent of
State  Total Production
California  39.3
Florida  12.6
Texas  10.1
Arizona  5.7
New  York  5.3
tribution  focuses  on  a  single  plant location  or regional  and  national
development.
Should  the  national  decision  be  to  concentrate  the  majority  of
the population  into large urban  areas, while simultaneously  improving
the  lot of  the urban  dweller,  the  market mechanism  discussed  above
requires  no  adjustments.  However,  should  the national  goal  become
one  of population  dispersion  with the  development  of  smaller  urban
centers throughout the land, then  one of two general  approaches  must
be  adopted:  (1)  a policy  of dispersing  labor-intensive  activities  with
80little  or no  export  product  (government  agencies,  military  installa-
tions,  electronic  factories)  to  serve  as  a nucleus  for the  community;
and then building export industries  (agricultural or industrial)  around
these  importing  nuclei;  or  (2)  a  policy  that  recognizes  the  role  of
the market and defeats it by subsidizing export industries by an amount
equal to the difference  between  the  actual  probability  of balance  and
a probability  of balance  of  1.
81

THE ROLE OF TRANSPORTATION IN POPULATION DISTRIBUTION

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