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Government's Role for Transport Infrastructure: Theoretical Approaches and Historical Development
KTH, School of Architecture and the Built Environment (ABE), Urban Planning and Environment, Urban and Regional Studies.ORCID iD: 0000-0003-3878-0930
2013 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis analyzes and discusses the development of the Swedish government’s role as owner and financier of roads and railroads from the 1930s until the 2010s. The influence on the development of the government’s role from two main theoretical paradigms is discussed and analyzed. These are:

a) neoclassical and welfare economics; and

b) new institutional economic theory with an organizational focus.

The thesis shows that there has been a shift from an institutional view on the organization and financing of the road and railroad systems following the nationalization in the 1930-40s, to a view more based on welfare economics from the 1970s.

Technology, economics and politics are three important factors influencing the development of the transport systems and of the government’s role. In the thesis these factors are covered in a co-evolutionary approach applied for analysis of the historical development. This approach connects to a dynamic view on organizations and firms in institutional theory.

Over time there have been shifts in the strength of the factors (technology, economics and politics) influencing the development. There have also been controversies around financing principles and contradictions between different elements in the policies actually pursued over time. One such controversy has been whether to aim for full cost coverage or for marginal cost coverage.

The thesis discusses how planning and coordination in the transport infrastructure sector can come about. A centralized public sector planner mode is contrasted towards a private sector spontaneous ordering mode. It is argued that it is difficult for a centralized planner to collect the necessary information and transform it into deepened knowledge in order to coordinate. A decentralized spontaneous ordering mode might though allow for including the necessary knowledge.

The thesis illustrates a number of trade-offs that must be taken into consideration when discussing a possible future development for transport infrastructure and the government’s role. The following aspects are discussed:

- the balance between public and private as the basic organizing principle;

- the balance between government and regions/local governments when it comes to

- the geographical division of responsibility; and

- the balance between the national and EU levels for strategic transport infrastructure planning and coordination, also in relation to spontaneous coordination and centralized planning.

The government has acted reluctantly and pragmatically and gradually developed its ownership role and the general policies in the sector. The government’s emphasis on market failure as its basic assumption has become stronger over time.

The thesis brings a deepened understanding of the long-term development of the government’s ownership and policy formation in the transport infrastructure sector in relation to the two theoretical paradigms. This combination of a historical view with the theoretical economic background gives new insights into the past and future of the government’s role for transport infrastructure.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2013. , 107 p.
Series
Trita-SOM , ISSN 1653-6126 ; 2013:05
Keyword [en]
Government, Market, Planning, Transport Infrastructure
National Category
Economics
Identifiers
URN: urn:nbn:se:kth:diva-123626ISBN: 978-91-7501-765-5 (print)OAI: oai:DiVA.org:kth-123626DiVA: diva2:628222
Public defence
2013-08-26, F3, Lindstedtsvägen 26, KTH, Stockholm, 09:00 (English)
Opponent
Supervisors
Note

QC 20130614

Available from: 2013-06-14 Created: 2013-06-13 Last updated: 2013-06-14Bibliographically approved
List of papers
1. The Reluctant Infrastructure Manager: 70 Years of Government Ownership of Transport Infrastructure in Sweden
Open this publication in new window or tab >>The Reluctant Infrastructure Manager: 70 Years of Government Ownership of Transport Infrastructure in Sweden
2013 (English)Report (Other academic)
Abstract [en]

Governments have a choice whether to intervene in the transport infrastructure sector to manage, finance and organize and sometimes own the assets of the sector or to rely on markets and private sector actors for the provision of these systems. In Sweden, like in most other countries, the government has, since the 19th century, gradually taken a more active role both for railroads and roads, including most of the roles outlined above.

From the 1840s, railroads and a more modern road system developed based on a mix of government and private/local government initiatives. A step towards centralization was taken in the 1930-40s, as the private- and local government-owned railroads and rural public roads, a majority of the total system, were taken over (nationalized) by the State. The government still owns these assets.

In this paper, the development of railroad and road infrastructure is analyzed based on a co-evolutionary perspective, including the influence of technology, economics and politics. The perspective is used in order to facilitate an understanding and explanation of the successive steps that led to the decision to nationalize railroads and roads. The following time periods up to 2010 are also analyzed with the perspective as a relief.

Based on a study primarily of the public documents of the time it is argued that the nationalization can be seen as a more or less logical step in a process of centralization that had been going on since the mid-1800s. Business economics rationality and cost reduction were important arguments for nationalization. Arguments in favor of the nationalization were that it was seen as a modernization of the sector, which also allowed for the introduction of new technology and a reduction of differences in road taxes. Welfare economics reasoning and discussions on natural monopolies were, however, not the focus.

It is further argued that the government waited for some time to take the final steps to nationalize the railroads and roads. The government entered the scene as a rather reluctant infrastructure manager.

The Parliament’s 1963 decision on transport policy, which is generally seen as among the most important policy decisions in the sector since the 1940s, might, it is argued, have been given a too important role. However, it is argued that the proposals put forward by the 1944 Transport Committee, which were never formally decided upon, were perhaps more influential. These proposals were largely market-friendly within the framework of the government ownership and financing model. The railroad and road systems should be run more or less as private businesses within this framework, with a focus on business economics efficiency, a full cost responsibility, and a competition view on the transport market.

The transport policy decision was formally approved in 1963, and it was largely based on the principles of the 1944 Transport Committee. These policies opened for a further restructuring of the transport sector, including transport infrastructure. The road system was expanded, while the railroads contracted, suffering from high costs and a decreasing market. There was, however, a gradually growing criticism towards both the planning practices and new construction programs for the road system, and against the effects the policies seemed to have for the railroad system.

The transport polices were changed during the 1970s. The 1979 Parliamentary decision on a revised transport policy brought a formal end to the policies based on market forces, competition and business economics, all of which were features of the 1963 decision. The new management philosophy was based on welfare economics, which should be the new basis for transport infrastructure and transport policies when it came to planning, management and pricing/taxation.

An interesting phase in the historical development of transport policy was a return in the 1988 Parliamentary decision to a goal structure closer to the earlier (1963) formulation of transport policies. In a following decision in 1998, another turn was made, which has since established welfare economics as the basis for transport infrastructure policies.

The principles set in the 1940s, with a firm base in a “cost responsibility principle” and a business economics perspective on transport infrastructure combined with government ownership and financing, was finally shifted to more of a welfare economics basis during the 1980-90s.

This was, it is argued, a way of reflecting a more active political agenda with new goals for transport policy. The policy shift was combined with deregulation and some privatization steps from the 1980s onwards. If the former policies might be seen as expressing a contradiction between government ownership and business economics, the new policies made a contradiction between deregulation and more developed and wider political goals in combination with welfare economics obvious. The government might be seen having gone from reluctance to contradiction as the basic stance of its policies as owner of railroads and roads.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2013. 80 p.
Keyword
Government's role, transport infrastructure, roads, railroads
National Category
Economic History
Identifiers
urn:nbn:se:kth:diva-123651 (URN)
Note

 20130614

Available from: 2013-06-13 Created: 2013-06-13 Last updated: 2013-06-14Bibliographically approved
2. The Swedish Government as Owner of Transport Infrastructure: Policy formation from the 1930s to the 2010s
Open this publication in new window or tab >>The Swedish Government as Owner of Transport Infrastructure: Policy formation from the 1930s to the 2010s
2012 (English)In: Scandinavian Journal of Public Administration, ISSN 1402-8700, Vol. 16, no 4, 49-71 p.Article in journal (Refereed) Published
Abstract [en]

Governments have a choice whether to intervene in the transport infrastructure sector to manage, finance and own the assets of the sector, or to rely on markets and private sector actors for the provision of these systems. In this article the development of rail and road infrastructure in Sweden and the choice between government and market provision of these systems are analyzed from a co-evolutionary perspective. Technology, economics, and politics have influenced the government’s policy formation and decisions on organizational models over time, such as the nationalization of roads and railroads in the 1930s-40s. The aim for improved economic efficiency and reduction of cost differences between different parts of the country rather than political ideology explain why roads and railroads were nationalized. Through adjusting its ownership role and policy content the government has, over time, accommodated to the different influences from technology, economics and politics. The government’s ownership of transport infrastructure has not been challenged since the nationalization. This could be seen as a sign of a successful gradual policy adjustment from the government’s side, thereby avoiding private sector solutions.

Place, publisher, year, edition, pages
Göteborg: Förvaltningshögskolan, 2012
Keyword
Government, roads, railroads, co-evolution
National Category
Economic History
Identifiers
urn:nbn:se:kth:diva-123579 (URN)
Note

QC 20130614

Available from: 2013-06-12 Created: 2013-06-12 Last updated: 2013-06-14Bibliographically approved
3. Pricing Principles, Efficiency Concepts and Incentive Models in Swedish Transport Infrastructure Policy
Open this publication in new window or tab >>Pricing Principles, Efficiency Concepts and Incentive Models in Swedish Transport Infrastructure Policy
2013 (English)In: VTI Transportforum 2013 – Granskade artiklar: VTI rapport 787 / [ed] Göran Blomqvist, Linköping: VTI , 2013, 22-35 p.Conference paper, Published paper (Refereed)
Abstract [en]

In this article the shift of the Swedish goverment´s policies for the financing through taxation, fees and prices paid for the use of roads and railroads from 1945 until the 2010s is discussed. It is argued that the shift from a full-cost coverage principle to a short term social marginal cost principle can be seen in the light of the controversy between a Coasean and a Pigovian perspective.

The Coasean perspective furthers an institutional view where organizations and dynamic development matters while the Pigovian perspective furthers a welfare economic equilibrium view where organizations are less focused. It is argued that the shift in policies coincided with less interest and focus on the organizational perspective and incentives for organizational efficiency, which can be seen in the public documents from the time.

The government seems to have been guided by a mar ket failure stance since the 1970s which has motivated growing intervention, following a mar ket-economy stance in the first 25 years after the nationalization of roads and railroads. A current opening in transport infrastructure policies with more room for alternative financing, user charges and fees might, even though also consistent with short term social marginal cost principles, signal a revival of a perspective more in line with the Coasean view.

Place, publisher, year, edition, pages
Linköping: VTI, 2013
Keyword
Pricing principles, marginal cost, full cost
National Category
Economic History
Identifiers
urn:nbn:se:kth:diva-123580 (URN)
Conference
Transportforum 2013
Note

QC 20130614

Available from: 2013-06-13 Created: 2013-06-12 Last updated: 2013-06-14Bibliographically approved
4. Marginal Cost Controversies in Swedish Transport Infrastructure
Open this publication in new window or tab >>Marginal Cost Controversies in Swedish Transport Infrastructure
(English)Article in journal (Other academic) Submitted
Abstract [en]

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
Aalborgs Universitet:
Keyword
Marginal cost, full cost, controversies, government's role
National Category
Economics
Identifiers
urn:nbn:se:kth:diva-123590 (URN)
Conference
Trafikdage 2012, Aalborgs Universtitet
Note

QS 2013

Available from: 2013-06-13 Created: 2013-06-13 Last updated: 2013-06-14Bibliographically approved
5. Strategic transport infrastructure planning: centralisation or decentralisation?
Open this publication in new window or tab >>Strategic transport infrastructure planning: centralisation or decentralisation?
(English)In: European Journal of Transport and Infrastructure Research, ISSN 1567-7133, E-ISSN 1567-7141Article in journal (Other academic) Submitted
Abstract [en]

In this article strategic planning in transport infrastructure is analysed based on the two concepts coordination and knowledge. It is asked whether the knowledge base necessary for a successful coordination on higher, centralised spatial levels, is possible to access for public sector planners. Decentralisation of strategic planning might lead to more adequate access to information but less probably to successful coordination, since fewer aspects can be coordinated on lower spatial level. This knowledge problem would pose a true dilemma for strategic infrastructure planning.

Currently the USA seems to be taking steps in the direction of decentralisation of transport infrastructure planning while the EU seems to be striving for centralisation. It is suggested that these developments seem understandable, taking the different challenges in the EU and the US into consideration. Both strategies might though run the risk of leading to new government failures.

Openings for spontaneous market orderings might offer an alternative to these measures. Market structures might address the knowledge problem better than centralised public sector planning. A combination of centralised strategic planning and market openings could be an alternative for the EU to combine strategic planning experiences from the US with structures that allow for developed knowledge creation.

This view contrasts against the dominant perspectives in most of the recent research in transport infrastructure planning. Mainstream planning literature treats public sector planning as the expected model for how to organise strategic transport infrastructure planning.

Place, publisher, year, edition, pages
Delft: Delft Universtity of Technology
Keyword
Coordination, knowledge, transport infrastructure, strategic planning
National Category
Economics
Identifiers
urn:nbn:se:kth:diva-123608 (URN)
Note

QS 2013

Available from: 2013-06-13 Created: 2013-06-13 Last updated: 2017-12-06Bibliographically approved

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