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What is the value of additional trips?

6 June 2022
From our ‘Thinking outside the box’ series
John Stanley and David Hensher discuss how transport opportunities can be made more equitable by taking a more socially focussed approach when calculating additional trip values.

Traditional cost benefit analysis of transport improvements that generate additional travel assume that the benefit from such additional travel is worth half as much, per unit of travel, as the benefit to those who travelled both before and after the improvement. This is known as the ‘rule-of-a-half’. Research by ITLS and colleagues on connections between mobility and social inclusion questions the validity of this long-standing convention. 

The main paper in this research stream (Stanley, Hensher et al. 2011a) has been cited nearly 200 times, suggesting that it has considerable credibility with the academic community. However, the research has rarely been applied to project appraisal, a recent study by KPMG (2021) being a notable exception. Wider application would considerably enhance opportunities for greater transport equity.

The ITLS research in question extends back over a decade (see references) and was focussed on trying to monetise the benefits of additional trip making by people at risk of mobility-related social exclusion. Detailed travel survey information, together with information on a range of other factors thought likely to influence risk of social exclusion, was collected by in-depth personal interview, including information about various forms of social capital, connectedness to community, subjective wellbeing, psychological well-being, personality, demographics and household composition.

Risk of social exclusion was measured by five indicators, building on earlier work by London School of Economics (Burchardt et al. 2002). Those five indicators were:

  • Household income (less than $A500 gross per week, in 2008 prices) (this was the rate of aged pension in Australia at the time of the original research interviews)
  • Employment status (not employed, retired, in education or training, undertaking care duties or doing voluntary work)
  • Social support (not able to get needed help from close or extended family, friends or neighbours)
  • Participation (did not attend a library, sport [participant or spectator] hobby or arts event in the past month
  • Political activity (not contributing to, or participating in, a political party, campaign or action group to improve social/environmental conditions, or to a local community committee/group, in the past 12 months.

The first two are economic indicators and the other three are more about social capital and community connection, reflecting the idea that social exclusion is about capacity, or lack thereof, to participate in the opportunities available in your society. The more thresholds present, the greater the risk of social exclusion.

Various modelling analyses we have undertaken over the past decade, drawing on data from the 700+ respondents from Metro Melbourne or from the 200+ respondents from the regional Victoria survey, have consistently shown that an additional trip is worth between around $15-24 in 2008 prices, for someone from a household with mean sample household income. The value is modally agnostic: it applies to an additional trip by any mode by someone from a household with the same mean household income as our sample (in 2008 prices).

Our latest work (Stanley et al. 2022) enables estimation of the relevant trip value as a function of the number of risk thresholds confronting the trip maker, or as a function of their income level, as shown in the figure below. $20.40 was the value (2008 prices) for someone on average household income from the most recent analysis, very close to our initial estimates from 2011. For someone with no risks of exclusion, the value of an additional trip is just over $12, which is 2-3 times higher than what would be derived from the rule-of-a-half (around $4-5). For someone with 3 risk factors (high exclusion risk), our value for an additional trip is over $30, many times the value that would result from the rule-of-a-half. Why are our values for an additional trip so much higher than would result from application of the traditional ‘rule-of-a-half’? 

Click the image for a larger version.

In pondering this question, it should be remembered that people are typically making only 4 or so trips a day, so one additional trip is a 25 per cent (or so) increase. This is not a marginal change; it represents a significant increase in implied activity levels and the benefits associated therewith, which may play an important role in promoting social inclusion.

Societal arrangements and socio-economic structures influence individual opportunities and associated societal outcomes, as they relate to risk of exclusion, the dependent variable in our analysis. People who undertake additional trips are not necessarily consciously trading-off trips for inclusion (really disadvantaged people do not often have this luxury!), in the same way they might trade off travel time savings for money. Hence, we do not suggest that our work is estimating individual Willingness to Pay for additional trips by the trip maker(s).

If trips by people at risk of mobility-related social exclusion increase, our models consistently say that people will benefit in terms of lower exclusion risk, which means (for example) fewer people in poverty, fewer unemployed and higher levels of social capital and/or community involvement. A critical point is that fewer people socially excluded has societal value beyond the value to the at-risk person(s). We argue that our trip values are a measure of Societal Willingness to Pay (SWTP) for an additional trip by someone at risk of mobility-related social exclusion and that this exceeds the personal WTP of the trip maker. Why?

We suggest that this is because there are external costs associated with social exclusion, beyond the costs to the excluded person. For example, reduced exclusion often means better health outcomes and associated reductions in health system costs, lower crime rates with associated reductions in costs for the justice system, etc. There are thus both personal benefits to the at-risk person and wider societal benefits from more trips and the associated reduction in social exclusion risk. Our risk indicators reflect the idea that a rising tide (i.e., reduced exclusion of some people) lifts all (most) boats (better outcomes for society more broadly) on our 5 indicators, as demonstrated (for example) by Wilkinson and Pickett (2009), The Spirit Level: Why Equality is Better for Everyone. We believe that our trip values include some (unspecified) part of the wider societal flow-on external benefits of reduced exclusion (hence the apparently high value). This external component might be argued to be equal to the difference between the rule-of-a-half value for additional trips and our value.

Our values are an expression of the value to society, or to the common good, from increased trips and associated reduction in risk of social exclusion. We see this as a merit good, where the value to society exceeds that to the individual directly gaining the benefit. As noted, we interpret this benefit as Societal WTP: it is how society values the benefit from reducing mobility-related social exclusion risks. Professor Chris Nash from ITS Leeds first drew this interpretation to our attention.

In applying our benefits, we would use our values for every extra trip, as adjusted for number of risk factors or income levels of the various groups making additional trips, and then deduct the user benefits estimated by the rule-of-a-half. Counting them too would be double counting.

Application of these ITLS derived values for additional trips, as a function of the exclusion risk level or household income level of the trip maker, would lead to a step change in the merits of transport initiatives whose major purpose is to achieve a more equitable distribution of transport opportunities. This has become a major policy direction in cities such as London and Vancouver, as expressed in their most recent long term land use strategies. The values for additional trips discussed herein, when used, can make a significant contribution to more equitable cities and regions.

 

References

Burchardt, T., LeGrand, J., Piachaud, D (2002), ‘Degrees of exclusion: developing a dynamic, multidimensional measure’. In J. Hills, J. Le Grand, & D. Piachaud (Eds.), Understanding social exclusion (pp. 30-43). Oxford: Oxford University Press.

KPMG (2021), Appendix C2: Suburban Rail Loop Economic Appraisal Report 15 February 2021, Author: Melbourne. Available at https://suburbanrailloop.vic.gov.au/-/media/Project/VicRoads/SuburbanRailLoop/2021-Content/Library-2021/BIC/BIC-appendices-final/Appendix-C2---Economic-Appraisal-Report.pdf

Stanley, J.K., Hensher, D.A. and Stanley, J.R. (2022) Place-based disadvantage, social exclusion and the value of mobility, Transportation Research Part A, 160, 101-113.

Stanley, J., Hensher, D.A., Stanley, J. and Vella-Brodrick, D.  (2021) Valuing changes in wellbeing and its relevance for transport policy, Transport Policy, 110, 16-27.

Stanley, J., Stanley, J., Balbontin, C., Hensher, D.A. (2019) Social exclusion: the roles of mobility and bridging social capital in regional Australia. Transportation Research Part A, 125, 223-233. DOI: 10.1016/j.tra.2018.05.015.

Stanley, JK, Hensher D.A., Stanley, JR, Vella-Brodrick, D. (2011a), ‘Mobility, social exclusion and well-being: Exploring the links.’ Transportation Research, 45,8, 789-801.

Stanley, J, Hensher, D.A., Stanley, J, Currie, G, Greene, W, Vella-Brodrick, D (2011b), ‘Social exclusion and the value of mobility.’ Journal of Transport Economics and Policy, 45, 2, 197-222.

Wilkinson and Pickett Wilkinson, R. and Pickett, K. (2009), The Spirit Level: Why Equality is Better for Everyone, London: Penguin.