QUESTION

1.Identify an infrastructure you would like to explore for this assignment.
2.Research how externalities impacted the development of your infrastructure – both positively and negatively.

Write a 2- to 3-page paper that includes the following sections. format your paper using the Academic Paper Guidelines. Include 1 to 2 resources besides your textbook.

1.Definition of externalities.
2.Provide an example of a positive externality associated with development of the infrastructure. Explain why.
3.Provide an example of a negative externality associated with development of the infrastructure. Explain why.
4.Discuss how the postive and negative externalities relate to the willingness to pay (WTP) analysis.

                                                                   SAMPLE SOLUTION

Externalities are factors whose costs and benefits are not reflected in the market price of commodities (goods and services). The benefits are referred to as external economies while the costs are referred to as diseconomies (Meade, 1999). Externalities can affect different aspects of production, distribution and consumption of goods and services and can either be negative or positive.  This paper will explore the influences of externalities on a transport infrastructure.

An infrastructure is defined as the basic organizational and physical structures and facilities required for the operation of an enterprise or society. Externalities, as aforementioned, have both positive and negative effects on transport infrastructure.

One way by which externalities affect transportation is congestion. Congestion can be considered as an external influence that travellers inflict on each other. This is so because a traveller takes not into consideration the effect he or she has on the travel times of other travellers (Cornes & Sandler, 1999). This can be well understood when the following factors are exhaustively examined: the computation of travel times on transport networks and the transformation of the time losses (in minutes) to financial units, by the use of a value of time. Congestion causes delays, leads to a higher rate of fuel consumption leading to greater air pollution, leads to increased cases of road rages and may force a country to come up with emergency vehicles (Gramlich, 2004). These have a direct effect on economic development. For instance, a delay in delivery of gods and services or workforce has the implication of delayed manufacturing process by an organization or a company. This leads to reduced economic growth. Additionally, with high rate of fuel consumption, there is increased rate of air pollution that leads to adverse health problems (Blum, 2002). Contrarily, with congestion, there is reduced speed for automobiles. This has the capability of reducing accidents.

The second effect is air and noise pollutions. The release of air pollutants by traffic majorly consists of exhaust emissions, however there are additional influences of fuel that vaporizes from the fuel systems and emanations that result from the interaction between the road surface and tires (Rohr & Williams, 2004). Some of these emanations have direct local impacts whereas others contribute to impacts working on a global or regional scale. Generally, the effects on larger geographic scales also takes extra time than those at smaller geographic scales. Emissions vary by vehicle type and fuel used by automobiles.  According to Hunt and Simmonds (2003), there are two types of noise are distinguishable: low and high frequency of noise. Low frequency of noise is caused by the exhaust, engine and transmission systems, especially by heavy vehicles while high frequency noise is caused by the contact between tires and the road surface. A number of risks are associated with air pollution. Some of the effects are acidification of the hydrological system thereby affecting both buildings and vegetation, global warming, heart and respiratory problems, eutrophication, effect on wildlife and depletion of the ozone layer (Jara-Díaz, 1998). These have a negative connotation on lives.

The third effect is cost of accidents. Prizing the economic loss of traffic accidents is dependent on two main cost elements: cost to the injured individuals that encompasses the cost of cure and treatment, insurance, hospitalization, judgement and administration and accident cost encompassing damage to the involved car and other properties, congestion cost, time cost, among other costs (Roberts & Simmonds, 2007). Lastly is the land use effects. Blum (2002) states that land use effects include the visible effect of transport change, additional direct local impacts like severance, property right and land values and impacts that are wholly or partly induced via the alterations in accessibility resulting from the transport project, which is a major positive effect of transport projects on economic growth.

In conclusion, there are several influences of externalities on a transport infrastructure. Some of them include travellers, transport networks, machines and machineries, among others. It is evident that their effects can either positive or negative. For instance, while congestion leads to delay in transportation thereby retarding economic development, it also has the ability to reduce accident rates.