5. Summary and Next Steps
To recapitulate, the approach to estimating benefits of freight-transportation improvements depends on determining the value of those improvements to the businesses that buy freight-transport services, businesses engaged in the production, distribution, and/or retail sale of physical goods. The earlier work of Herbert Mohring has demonstrated, to the satisfaction of the economics profession, that the full benefit to society from improved freight movement can be estimated on the basis of the reduced costs to these businesses and their responses to those cost reductions. This is because the benefits that businesses get from better freight transportation reflect the benefits to their customers as well as to themselves.
Setting aside the technical jargon of economics, we see that the gains to shippers and their customers are what we need to measure to estimate the benefits from freight improvement. These gains take the form of immediate cost reductions from the freight improvement and subsequent gains from logistics reorganization. Some of the cost reductions achieved in this manner are passed through to the shippers' customers with some resulting increase in output. These are the sources of benefits.
Much of this discussion of our approach to estimating benefits has centered on the economic concept of elasticity. Again, however, we can set economic jargon aside and say that the key to measuring gains from freight improvement is in measuring the degree or the intensity of shippers' responses to freight improvements, particularly their responses to time saving and enhanced reliability. The technical economic arguments make this point with mathematics, but it is intuitively clear—the degree of businesses' response to freight improvements shows how much those improvements mean to shippers and their customers.
What this tells us is that the approach we have developed is both intuitively satisfying and supported by mathematical reasoning. The task now before us is to learn enough about businesses' responses to freight improvements so that we can develop accurate estimates of benefits. This task is challenging but certainly achievable. Two large pieces of the work will be: (1) establishing the necessary contacts; and (2) designing the interviews and developing the related stated-preference techniques that will elicit the information required for the study.
Establishing the necessary contacts is not just a matter of finding a sufficient number of firms that are willing to participate in the study. It will also be necessary to identify "key informants," managers and analysts who are closely acquainted with their firms' logistics operations and strategic thinking about improving logistics.
The required stated-preference tools—interview designs, focus-group structures, and the like—will have to be developed in a way that keeps the whole process focused on the key parameters necessary to estimate benefits in dollar terms.
In carrying out these tasks, we remain mindful that others have conducted investigations in this area, and we will use their work to supplement and support our efforts to the maximum feasible extent. In particular, this means gleaning the literature for quantitative work that is directly relevant to this inquiry and developing, where feasible, numbers that reflect the consensus of previous work. In technical terms, this is called "meta analysis": a process of surveying individual quantitative studies and combining their independent estimates into a single estimate that is a useful synthesis of the various studies.
By assiduously working along all of these paths, we expect to develop an analytical apparatus that will yield useful, albeit approximate, estimates of the benefits of freight transportation.
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