The Common Room
Page 82
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By George Wilmot
Lecturer in Transport Studies. University of London
TRANSPORT ECONOMICS THE USES OF SOCIAL BENEFIT
LAST week I discussed the meaning of the term "social benefit"now commonly used by economists and in general use in transport examination papers and transport management coursesand indicated many items of investment which occasion benefits to society as a whole. Such benefits arise from a steel works (in bringing employment to an area). a trade journal (in creating a more informed occupational group) or a motorway (in speeding traffic and reducing accidents).
' These benefits are diffused over a mass of recipients who make no direct payment for the benefit conferred. Clearly, they should be included in any assessment of the rate of return on the capital sum involved. Equally clearly, such benefits are much more important in assessing the rate of return on government-inspired investment than in private-sector investment, as so much of the former yields fruits which are distributed for the population at large.
This is particularly the case with road investment where the Government (whether central or local) has the task of investing in roads for which the users will not pay directly as toll roads have never been really favoured in this country since the days of the turnpike trusts.
Unlike the private sector. money benefits do not exist in this type of investment but the Government needs some guide in deciding its choice between investment projects. Obviously, there must be some way of assessing the comparative benefits of rival road schemes and the virtues of additional roads as compared with additional schools or hospitals.
In the latter type of choice-between rival government invest ment projects I am of the view that the benefit to the nation of additional health on the one hand and additional road safety on the other usually defies measurement. It is, however, quite feasible to assess the choice between road schemes by reference to the social benefit of accident reduction and speed improvement in each scheme expressed in money terms. Prof. A. A. Walters has recently invoked this principle to argue the case for investing in urban road schemes rather than in schemes linking towns.
There is also scope for quantifying the social benefits accruing from extra roads and then comparing this rate of return with the money rate of return normally being earned in the private sector to see whether road investment is as worthwhile an investment as, for example, new steel strip mills.
This was the principle of the Road Research Laboratory and Birmingham University study of M I which I propose to discuss next week as a concrete example of the uses of social benefit studies. This particular study is notable in being the model upon which so many later studies have been based.