Policy Versus the Market: Transportation’s Battleground

Abstract

The American transportation system is large, pervasive, decentralized, and an enormously important part of the economy. The public demands that it be efficient, available, reliable, and safe, and expects the government to ensure that these demands are met. For more than two decades we have also sought to reduce its highway dominance, reduce its consumption of energy, and reduce its negative environmental impacts. The fact that many of these efforts have failed raises the question of why the system seems so resistant to policy intervention. Americans believe that industry, including transportation, should be left to the private sector, subject to market principles, and competitive economics. Despite this, transportation has some special characteristics that have resulted in government's ownership of most of the fixed infrastructure, while the manufacture, ownership, and operation of vehicles (the big expense) are left in private hands. Government charges the private sector for the use of its facilities to maximize productivity and deal fairly with users. But determining these charges is complex and is necessarily the product of philosophy as well as sophisticated costing. It is the source of endless squabbling between modes and special interests. This tension-combined with the huge size of the system, the dominance of the private sector, its decentralization, and other factors-makes government intervention into the system on behalf of societal goals often challenging and sometimes unsuccessful.