Markets? Systems? Engineering?

U Penn has a job call for a professor of market systems engineering. I’ve never heard of this “fast growing field”, but isn’t that what transportation engineering is all about (at least the way I do it)? We’ve got demand, which is intrinsically a phenomenon of microeconomics, supply, which is largely engineering based, and we’ve got the interaction of those to, which is a market, with serious deficiencies due to the fact that transportation is a congestible good in most cases, and people pay only the average cost, not the marginal cost, etc etc.

So a market systems engineering approach to transportation perhaps is the practice of recognizing that there is a market for transportation, there are market forces that influence transportation, and there are systems engineering aspects that define the technologies in use and their interrelations.

As an example, consider sustainable transportation. If we want a green transportation system, then we have to push a green system down people’s throats. The market, however, has other ideas. People own cars and want to use them (and drive as fast as humanly possible in them, but that is another rant). People have chosen to live and work in urban environments which depend intimately upon the integrated transportation system. Further, as travel is a daily choice and expense, people have made choices about their environments based on their expectation of how the transportation market will evolve, as well as how it appears now. Similarly, developers, land owners, businesses, etc have all aligned themselves to optimize their use of the current transportation land use system, again with an expectation of future developments in the system (suitably discounted, of course).

A green, sustainable system will most likely be rejected out of hand by this market because it is such a radical departure from the norm, and from the expectation of the future of the system. People expect congestion will get worse, and freeways will periodically be expanded to accommodate congestion (without ever solving the problem, of course). People do not expect that gasoline will go away, that private automobiles will be taxed out of existence, that public transit will become mandatory, and so on. Radical measures, while perhaps quite sound and having multiple examples throughout the world, are not going to fly unless the market will allow those measure to be taken.

So for sustainable transportation, how do we manipulate the market forces such that the shift to greener modes is more palatable. One approach, taken by our colleagues at APEP, is to make the sustainable alternatives transparent to the public—to make hydrogen, electric, or plug-in hybrids remarkable by how “normal” they are. This means vehicles with largely the same characteristics as current vehicles (range, price, refueling options, crash-worthiness, usage limitations, and so on). Another approach, exemplified by Portland, Oregon, is to provide infrastructure for green travel modes (bicycles, trams, light rail, pedestrians), and provide incentives for compatible residential and commercial development. Rather than changing the existing market, modify the ground rules for new and emerging markets.

The Portland example is interesting in that it recognizes that the market for transportation and the built environment is always local. There is no universal market for travel. You can’t go buy a trip to work online, and if you live in Topeka, the traffic on California SR-91 to Riverside on a Friday afternoon is completely irrelevant. Further, the market is always changing, as the built environment has a natural life cycle. Although that life cycle is long (decades, not years (or months in the market for clothing)), engineered systems become obsolete—roads crack, cars rust out, engines die, buildings crumble, and thriving warehouse districts become abandoned.

While it is safe to assume that applying the usual and dominant market system to a new development (typical zoning rules, wide streets, lots of free parking, high speed limits, detatched housing units, etc) will result in a successful development, it is also safe to assume that such a development will not win any awards for sustainability. Taking a risk with green development, as Portland has done repeatedly over the years, carries the risk of failure. The cost of such a risk must be borne by somebody (politicians, I suppose). The cost of development is also likely to be higher, as these are new systems, new technologies, and so on. Even the bonds are likely to be higher priced, as the lenders are not going to be as confident that the project will make enough money to succeed. So what is the payoff? A better, more livable city? Can that be quantified? Less pollution? But global warming is a global problem, and bike-friendly policies in Portland are going to be swamped by the damage that might be caused if, say, Beijing bicyclists all switch to cars. Increased tax base? That could be it, as Portland likely has a hard time competing with Seattle to the north, and SF and LA to the south—a green environment is a way to differentiate themselves from their competitors.

All in all, I find the concept of market systems engineering to be nothing new, and yet a very interesting way to wrap up the usual approach I (and my colleagues) have to transportation engineering. Perhaps I will apply for the job. But will Brooke go for Philadelphia?

I wonder what their Waldorf School is like.


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