What is a road for?

How do you make it useful and cheap? Who finances?
Who pays in fine?
Vincent Piron PIRON Consulting
Map of the presentation
 Evolution of the economic knowledge of transport  State action in the field of transport

 Regulatory state,
 State actor multiple
 State corporatist,
 State “rigid and impoverished grocer”

 Quantified economic and political variables  Recent reintroduction of the private sector in Europe  Areas of policy relevance

 the areas of relevance of private action
Three centuries to understand: 6 steps
 Adam Smith
 Jules Dupuit
 1750  1850

 1950  2000

 2025  2050
 Maurice Allais and then the RCB
 Communication, choice and bitterness
 Sustainable transport “Beyond Petroleum”
 Understanding and acceptance by the public and decision-makers
(1) Adam Smith: roles of
the State and Cost Effectiveness
 National Defense Duty

 Duty of protection of each member of society against the injustice and oppression of other members
 Development of public goods (institutions, buildings and public works) that the profit of a single individual or a small group of citizens is not enough to build
 Effectiveness of costs: “The maxim of every prudent head of the family is never to try to do at home the thing that will cost him less to buy than to produce. ”
(2) Jules Dupuit: notion of surplus
 The consumption curve
 Consumer surplus
 The strategy of the private monopolist
 Counter-strategy: public management in the social interest:  The public monopolist can achieve a better solution from the point of view of social interest by having a policy of price discrimination
 Little interest in costs, supposedly minimal or optimal
 Little interest in the question of the availability of capital
(3) Maurice Allais: public management
 In the 6 approaches to the notion of surplus, Maurice Allais retains in particular:  Approach III: the surplus is the sum of consumer surplus  Approach V: the surplus is defined from the possible choices
 Lost utility: share of the utility that could be provided to users if the service was sold cheaper  There is therefore a gap between the optimum for the monopolist and the social optimum, which minimizes the lost utility </s> the case of public management: marginal cost pricing
Bitterness and Political Decision
 Increased dissemination of information to citizens, but is the information correct?
 Appearance of freedom of choice in supply and flexibility of demand </s> Modal choice,
 Choice of time, choice of destination  toll or apparent gratuity
 Bitterness of the excluded, nuisances on and of the local residents
 Political decision based on what criteria: the political weight of local complainers is not counterbalanced by any more global or more rational process
Sustainable Transportation
 Progressive awareness over 30 years and formalization through the Rio and Kyoto Protocols

 John Rawls, Amartya Sen and the consideration of bitterness at the international level
 Stay practical and improve knowledge
: The cost of running cities (urban toll,
parking, urban policies): unquantified subjects
 The full cost of rail, road and air, which are now prohibited to the public.
 Transport GDP to be reassessed (positive and negative): to be defined
 traffic patterns during periods of congestion and time value
 Today, the population knows nothing but protest and
n ‘intervenes only exceptionally with a positive contribution
The Regulatory State: its primary role
 The road is a service: the optimal exploitation of the already built network (maintenance, security, availability)
 Land use planning
Definition of the links to be made, modal choice iron-air-
road
Definition of priorities for achievements
 Interfaces with cities and other local and regional authorities which have become technically competent
 Financing: who pays what in the French and European constitutional framework
 Establishing effective procedures for launching projects, executing contracts and minimizing costs
The state actor: do or do
 Let’s go back to Adam Smith: do it if it’s cheaper than doing
 But doing is easier than doing, and gives more direct and tangible satisfactions, but the tasks of execution are not, however, part of the role of the State
 Most so-called “services to the public” tasks may be outsourced because they are not governance tasks (such as equipment leased by contractors).
 In the motorway sector, the State is regulator, licensor, designer, concessionaire, operator, shareholder, lender.
 The limit: to do well, one must know how to do
Doing or doing, the answer evolves

 The growth of the critical mass of private or assimilated companies (Airbus, Alstom, Bouygues, Vinci, BNP, Crédit Agricole, etc.) gives them technical and financial possibilities and skills that did not exist 20 years ago of the public sphere
 The international expansion of these groups gives them a broader experience than can be produced by France alone, whether from a technical or organizational point of view
 Increasing the standard of living and culture of the population gives it a better judgment on public actions
The corporatist state: I exist, therefore I will exist
 In urban areas, the provision of services goes to the communities, technical competence to the private sector, but the DDE structures do not evolve, or too little.
 The interest of the State or certain state or collective corporations ends up being against the interests of the citizens (air traffic controllers or dockers at a certain time)
 Public sector workers against private contracting in the areas of relevance of the private sector
 No (or no) penalties for errors
 Choice of leaders in a small pool
States are rigid and impoverished
 Poor state financial manager
 The mediocre state calculating the surplus that an infrastructure (road, iron) generates (transport and urbanism: see Lyon bypass North)
 Poor state optimizing spending
 Finance (Short T) against Equipment (Long T)
 In the field of investment, the discount rate of the State is that of the developing countries. On the road, it makes profits with the VAT on the back of the local authorities
 Bad State Staff Manager
The mediocre state manager

 For Himself:

 no balance sheet account

 Tips for teeth removal to meet the Maastricht criteria

Report of the debt on RFF, EDF, …
 For companies: bad accounting standards

adapted to investment operations

 Very few ex post economic reports of transport operations

 Methods of award of contracts:
 No optimization over time (construction-operation)  Little solicitation of private innovation
The Mediocre State Economist

Corridor Capacity and Traffic Demand

 

the mediocre state investor
“Physical” (1)

 The State focuses on service tasks (police, education, justice, army, etc.)

 There is no “project” reasoning: revenues and costs are not identifiable or calibrated against a measurable outcome
 Investment choices are made on financial profitability instead of economic profitability, because the instantaneous financial constraint is too great,
 It is the negation of the specific role of the State, which loses its role of
The mediocre state “physical” investor (2)
 The creation of surplus requires a capital investment.  With the constraints on the public debt, the cost of public capital becomes infinite. Conversely, the increase in the financial base of private companies reduces their cost of capital.
 The additional cost of private borrowing compared to
public borrowing is negligible in the face of the additional cost of public capital in relation to private capital. All European countries seek to develop road investment funds to raise the debt of the initial construction of the minimal structuring network
Political-economic reflections on the concessions of Vinci
The actors
The political acceptability of the toll
The surplus for the community
Economic profitability
Financial profitability
The 7 actors of a concession, the 2 tacit contracts, the contract

 

Surplus and bitterness in Canada

 

Surplus and bitterness in Marseille

 

Tariff contract in Marseille

 

Amount paid to the city of Marseille

 

Economic and financial surplus of the grantor

 

Areas of policy relevance
 Definition of the functionalities of the works and definition of the pricing policy
 Adequate assessment of surpluses and negative externalities for correct balance sheets Traffic model establishments
 Behavioral Model Establishments
 Upstream regulation of transport demand: “sustainability”
 Establishment of favorable administrative and legal procedures to do what needs to be done
 Establishment of appropriate financing procedures
 Explanation to the public: who pays and how much
Areas of relevance of private action
 Design: maximum efficiency, no overinvestment
 Economical and easy maintenance in conjunction
with design
 Commercial exploitation under the tariff contract
 Personnel management (flexibility, advancement)
 Financing of the “profitable” part of the investment
 Permanent cooperation with the public authorities in a common reflection on the aims to be attained and the structures to establish
 Appropriate definition of the sharing of risks and profits with the public