Positive Externalities and the Public Provision of Transportation Infrastructure: An Evolutionary Perspective

Abstract

Do transportation systems, comprising infrastructure, service, and use, produce external benefits? If they do, should positive externalities be accounted for in the evaluation of infrastructure investments? This paper argues that while direct, technological, external benefits from transportation are difficult to find, meaningful positive externalities can arise from transportation systems in at least two ways. First, transportation infrastructure can reduce pre-existing negative externalities, and the reduction of external cost must be considered an external benefit. Second, because transportation is essentially a derived demand its effects are broadly diffused throughout the primary markets that induce transportation demand. To the extent that changes in transportation infrastructure induce positive externalities in these primary markets, external benefits should be attributed to transportation.

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