Marginal Cost Controversies in Swedish Transport Infrastructure
(English)Article in journal (Other academic) Submitted
This article analyses pricing and financing policies for road and railroad infrastructure, as these have been reflected in reports from government committees and in government bills in Sweden from the 1920s up to the 2010s. According to an institutional perspective a principle where the full costs of the road and railroad systems are covered by charges paid by the users is appropriate in order to achieve good resource allocation. Viewed through the lens of welfare economics marginal cost based pricing is generally recommended, leading to a situation where the full costs are not covered by the users, other than in congested sections of the systems. These perspectives were analyzed by Coase in two articles from the mid-1940s. The different views and the discussions around them were described as constituting a marginal cost controversy.
Here it is argued that it seems reasonable to interpret the discussion in Sweden around pricing and financing policies related to transport infrastructure as a controversy between the two financing perspectives following Coase’s argument. The controversy seems to have been strongest during the 1970s-1980s. Reasons for the shift from a full cost to a marginal cost policy are discussed. Whether the focus-shift had an impact on the organizational efficiency of the road and railroad agencies is reflected on.
The article offers a deeper understanding of the development of the discussion around the financing and pricing principles for roads and railroads in Sweden since the nationalization-decisions in the 1930s and 1940s. This gives a developed understanding of the policy evolution and a connection to the theoretical perspectives at the time of the nationalization. The formal accuracy of the primary focus during the latest decades on welfare economics as the theoretical basis for financing and pricing policies in the sector might be questioned. These findings can also be useful for the current discussions on alternative financing and organization models for transport infrastructure in many countries. It is important to strike a balance between both an organizational focus and welfare economics in order to achieve efficiency in transport infrastructure systems.
Place, publisher, year, edition, pages
Marginal cost, full cost, controversies, government's role
IdentifiersURN: urn:nbn:se:kth:diva-123590OAI: oai:DiVA.org:kth-123590DiVA: diva2:628207
Trafikdage 2012, Aalborgs Universtitet
QS 20132013-06-132013-06-132013-06-14Bibliographically approved