Theoretically, transportation happens when an object moves from ORIGIN to DESTINATION. This usually increases its value more than the costs of relocation. For individual movements the difference in value, and the costs may not be easily quantified. The general principle that the increase in value exceeds the cost of movement should prevail for the aggregate, if not for individual movements. The simplistic notions of 'user pay', 'equity', and 'charging what the traffic will bear' are often used in justifying and pricing transport.
Making up losses from one movement with gains from another is 'cross subsidization' and appears in many forms in transportation and other ventures. Cross subsidization may happen because of the pricing & cost accounting rules. There are many forms of deliberate cross subsidization that are useful. Common movements like the journey to & from work are difficult to explain on a simple basis. These movements show the complexity of estimating costs and benefits. Movements are generally called traffic.
Transportation involves time as well as place reallocations. It is usually not sufficient to move an object from place to place. It is necessary that the object move according to some time schedule and part of the benefits & costs are time related. Arrival time at a destination is often a major determinate of value. Arriving too early wastes time and too late may destroy the value.
The discussions on 'deadline demand' and 'just in time supply' further expand this proposition. A continual difficulty is determining a realistic monetary value for the time of an individual or an object during a trip. Each movement has an implicit value of time that is usually different for benefit vs cost.
E.g. if you are late for an examination by five minutes. and you are locked out, the recovery costs provide a basis for estimating the value of that interval. If the doors were open 30 sec. earlier and you could get in, the cost then would be zero, the benefits quite large. Because of the variability of circumstance it is difficult to develop an acceptable common value of time.
Transport can be considered in the economic terms of 'supply' or provision of service, and 'demand' or requirement for service. In engineering terms these are 'capacity' and 'load'. Demand is often referred to as 'need' which tends to obscure the 'elasticity' of price and time associated with a traffic load.
Most modern transport modes require large investments in vehicles, right of way, roadway structure, terminals, administrative and communication plant, and industrial supply infrastructure to provide service. This means that large amounts of speculative investment prior to any return. There are usually long delays before the discounted net benefits from these investments appear positive. It is questionable if some major transportation modes such as the railways and airlines show long term net profit according to strict accounting rules.
The accounting rules used determine the valuation of costs, revenues, benefits, etc. A good appreciation of, and the ability to estimate costs, benefits, revenues, etc. is necessary for a good understanding of the forces that influence transport decisions.
A great deal of confusion develops over the relative economics of many transport systems and movements because of the differences between accounting for cost and benefits vs revenues and expenditures. When benefits exceed costs an activity can be considered economically sound. However it may be difficult to match the revenues with the expenditures for the same activity. When this happens the activity is not a sound business venture. It may also be true that an activity may produce excess net revenue for one or more individuals while the activity is not economically sound. This may be especially true if it were possible to account for all future costs and benefits such as societal and environmental effects.
In general an activity can be analyzed from either a 'public' or society perspective, or from a 'private' localized set of rules. Each transport system and activity exists from several perspectives. Generally the perspective determines where the boundary between what should be included and what can be excluded from an accounting or analysis.
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