Book Reviews | Gordon Campbell | News Flashes | Scoop Features | Scoop Video | Strange & Bizarre | Search

 


Auckland Transport Blog: The Value of Time

The Value of Time

by Peter Nunns
July 3rd, 2013

http://transportblog.co.nz/2013/07/03/the-value-of-time/

Readers of this blog will be familiar with the notion of the benefit cost ratio (BCR), a figure that compares the forecasted benefits of a project with the financial cost of building it. It’s often used as a shorthand for the quality of a project: If the BCR is high (i.e. substantially above 1) it is seen as a good use of public money; if not, it can be criticised as a boondoggle.

Everyone plays this game. Opposition politicians often criticise motorway projects such as Puhoi-Wellsford and the Kapiti Expressway on the basis of BCRs that fall below 1, while the Minister of Transport has in the past expressed scepticism about the City Rail Link on the same grounds.

However, there is relatively little public discussion of the hows and whys of these seemingly consequential numbers. How, exactly, does one calculate a BCR?

The procedures for conducting an economic evaluation of a transport project are set out in excruciating detail in the Economic Evaluation Manual (EEM) published by the New Zealand Transport Agency. This manual defines the exact procedures that need to be followed when evaluating any transport project and specifies the values that should be used in the evaluation.

Read it at your leisure (or peril). Here’s the summary version.

The traditional method of estimating the economic benefits of a transport project involves three main steps.

First, you need to define the project carefully – that is, you need to figure out what you are planning to build, when you will build it, and the new service patterns that you’ll introduce as a result. Take, for example, the case of the Avondale-Southdown rail line, which is in the Auckland Plan but hasn’t been defined carefully enough to enable us to figure out what it will do. We can’t evaluate that until we know exactly what we’re building and when.

Second, you need to forecast the effects that the project will have on travel behaviour. Let’s stick with the example of Avondale-Southdown. In the short term, we might expect adding a new rail line to encourage some people to switch from buses or cars, thereby reducing congestion, and to encourage some people to take trips when they wouldn’t otherwise have travelled. In the longer term, it might change the patterns of population and employment location, by making it easier for people to live and work in certain places.

This forecasting is typically done by regional transport models, which estimate (on the basis of existing travel patterns and forecast changes to land use in a region) how people will get around in the future and how much time it will take them.

Third, you need to quantify the benefits of changes to travel behaviour. This is where the EEM comes in. It summarises the types of benefits that you should expect from transport projects, and defines values that allow you to monetise those benefits. Broadly speaking, the benefits considered in the EEM fall into four main categories:

• Reduced travel time
• Reduced vehicle operating costs
• Reductions in accidents and health costs
• Reduced vehicle emissions.

(There are obviously a whole bunch of important things that are not assigned any value under this framework. We might, for example, want a transport system that provides us with a choice of multiple modes, or increases our resilience to shocks such as tectonic plate activity or sudden oil price increases. These benefits are often considered in other stages of the evaluation but not quantified.)

NZTA considers travel time savings to be the most consequential economic benefit. Forecast travel time savings make up the largest share of quantified benefits from most large transport projects in and around Auckland. This is based on the idea that the time we spent in transit could be spent more productively on other activities. If we weren’t stuck on congested road and PT networks, we would be working more, or doing things that we found at least as satisfying or remunerative as work. For many projects, the time savings on an individual trip might be small – but they can add up quite rapidly over large numbers of trips.

Take the case of the CRL. Removing the Britomart bottleneck is expected to increase capacity and hence frequency across the whole network. This will make it quicker for PT riders to get into the city centre. The effects are larger on the Western Line but still significant from the South and East, as this table released by Auckland Transport indicates:


Click for big version.

CRL time savings

In short, reductions in travel time are an important topic! So how, exactly, do we place a monetary value on them?

The answer is buried in the appendices to the EEM – Tables A4.1 and A4.2 to be exact. I’ve summarised some of the key features in two handy charts. Unfortunately, the figures themselves present some logical conundrums.

The first chart compares the value of time assigned to trips on urban arterial routes and in rural areas. Urban travel during the weekend is considered to be less valuable than weekday travel – which is fair enough, as most people work during the week. But – perplexingly – urban commuter travel is considered much less valuable than rural travel of any type.

In plain English, the EEM places a much higher value on the average JAFA’s time when s/he is on holiday in the Bay of Islands than commuting across the Harbour Bridge to get to work.

Is this logical? It’s hard to say, because the EEM contains no attribution or explanation for these figures. They are apparently derived from willingness-to-pay surveys , in which people are asked what value they place on their own time. But they don’t seem to bear any relation to differences in productivity, which is another important measure of the value of time.

The econometric research suggests that urban areas in New Zealand, and in particular the Auckland city centre, have a large productivity premium over other areas. Take, for example, the findings of a 2008 paper by David Mare (“Labour productivity in Auckland firms” ). Based on this, one would expect Aucklander’s time to be counted as relatively more valuable, not less:

So far, so strange. Now look at the second chart, which compares the additional value of time assigned to commuter trips on different modes. The EEM places a much lower value on trips that aren’t taken in single-occupant cars. If you’re walking or cycling rather than driving, your time is worth $1 an hour less; if you’re taking the bus or train, it’s worth $3 an hour less.

Once again, it’s impossible to say whether or not these values make any sense, because no source or attribution is provided. In theory, there might be some logic to these differences. For example, time spent in a bus might be less onerous as it enables one to multitask while travelling. And people might not object to time spent walking or cycling due to the health benefits. But counter-arguments could also be raised – many people enjoy driving cars and don’t mind spending a bit more time on the road.

What can be said is that the values of time defined in the EEM have consequences. They allow the transport outcomes from different projects to be quantified and compared with each other. Decisions about what to build and not to build are then based on those comparisons. So it’s tremendously important to know that we are evaluating projects using a method that undervalues the time of urban travellers relative to rural travellers, and undervalues the time of PT users, cyclists, and car-poolers relative to drivers.

*************

Peter Nunns is an economist working in Auckland with an interest in transport past, present, and future.

© Scoop Media

 
 
 
 
 
Top Scoops Headlines

 

Don Franks: Thwarting National's Tea-Break Busting Bill

National's tea break busting bill will pass through parliament this week. What will this mean? The Government's Employment Relations Amendment Bill makes several changes, including removal of guaranteed tea breaks and meal breaks. More>>

Jim Miles: Canada’s Heart Of Darkness

Once upon a time, Canada was able to create the illusion that it was the “peaceable kingdom”, an illusion accepted domestically and arguably by most of the rest of the world. This history has been well discredited with newer historical research outlining how Canada’s position as a “peacekeeper,” generally under UN auspices, remained effectively within the realm of U.S. foreign policy... More>>

ALSO:

Michael Collins: Jet Fighter Shoot Down Of MH 17 Still On Table

A senior prosecutor investigating the MH17 shoot down for the Dutch Prosecutors office, Fred Westerbeke, offered up as many questions as he did answers in an interview with SpiegelOnline yesterday. More>>

Jonathan Cook: How Israel Is Turning Gaza Into A Super-Max Prison

It is astonishing that the reconstruction of Gaza, bombed into the Stone Age according to the explicit goals of an Israeli military doctrine known as Dahiya, has tentatively only just begun two months after the end of the fighting. More>>

Binoy Kampmark: Dysfunctional Hagiography: Australia & Gough Whitlam's Death

Hagiography is the curse of the Australian Labor movement. It is a movement that searches for, and craves, mythical figures and myths. Such a phenomenon might be termed mummification, and detracts from closer examination. More>>

David Swanson: On Killing Trayvons

This Wednesday is a day of action that some are calling a national day of action against police brutality, with others adding 'and mass incarceration,' and I'd like to add 'and war' and make it global rather than national. More>>

Uri Avnery: Israel Ignoring “Tectonic Change” In Public Opinion

If the British parliament had adopted a resolution in favour of the Israeli occupation of the West Bank, the reaction of our media would have been like this: More>>

ALSO:

| UK MPs blow a “raspberry” at Netanyahu and his serfs

Byron Clark: Fiji Election: Crooks In Suits

On September 17 Fiji held its first election since Voreqe “Frank” Bainimarama seized power in a 2006 coup. With his Fiji First party receiving 59.2% of the vote, Bainimarama will remain in power. More>>

Get More From Scoop

 
 
 
 
 
 
 
Top Scoops
Search Scoop  
 
 
Powered by Vodafone
NZ independent news