Friday Feb 16, 2007

Driving To Work

Consider the table below, originally published by The Wall Street Journal.

It shows the growth in traffic costs (fuel and lost personal time) in various urban areas in the U.S. from 1983 to 2003.  The actual and aggregate "cost" of a transportation system that relies, primarily, on individuals driving themselves to places goes well beyond that of fuel and lost personal time. One must also include other costs such as health care, insurance, repairs, etc., which arise when people have no reliable public transportation choice and have to drive themselves to work and other places over long distances.

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Table from the WSJ.

When active producers in an economy spend large parts of their time and resources driving back and forth to work, they are contributing to the aggregate transaction costs of that economy, making it less "competitive" than economies that make better use of time and resources ("Bush Plays Traffic Cup in Budget Request," WSJ, Feb. 5, 2007). Witness, as examples, public transportation systems in Tokyo and Berlin.

Travel congestion is "increasingly troubling," Transportation Secretary Mary Peters said in an interview. "It's a cost to business and probably affects our ability to be competitive on the global market. But it's also something that just drives people crazy."

It would be misleading to think that work-from-home in the Internet age will solve the problem. A quick analysis of the social life of information would make it clear that work from home has its own significant transaction costs for corporations. So, while by working from home we reduce some aggregate transaction costs, we add others.

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