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6Foundational Research: Social Welfare and Market Economics The analytical foundation for identifying the potential policy and planning strate- gies reviewed in this document involved an examination of mechanisms by which AVs and CVs could create desirable outcomes for society. These mechanisms could either encourage positive effects or reduce negative ones. For example, if safe AVs and CVs are developed and marketed by producers and then used widely and re- sponsibly by consumers, the current traffic safety crisis could be mitigated. However in this example, many of the benefits accrue to society rather than to producers or consumers of AV or CV technology. Consumers may be unwilling to pay for expen- sive technology if much of the benefit goes to others, and consequently, producers may be less willing to develop and market CVs and AVs. This is an example of an ex- ternality. An externality is an effect produced by either a consumer or producer that affects others, yet is not accounted for in the market price (i.e., occurs external to the market). Externalities have important implications for realizing the benefits of AVs and CVs. AVs and CVs may also result in a range of economic disruptions to groups such as professional drivers, insurance companies, medical facilities, trauma centers, collision repair shops, and other industries. Some of these effects are internal to the market, while others are pecuniary externalities (i.e., operating through market prices) and not real externalities. Because these costs are internal to market decision making, the research excluded pecuniary externalities from the analysis. Society as a whole could benefit if state, regional, and local governments were to implement policy (e.g., regulations or taxes) or planning strategies (e.g., public education) to internalize these externalities in decision making by consumers or producers. Such instruments or activities could force the market to account for costs that would otherwise not be included. Consumers may be unwilling to pay for expen sive technology if much of the benefit goes to others, and consequently, producers may be less willing to develop and market CVs and AVs. Zapp2Photo/Shutterstock.com
7With social welfare economics as the foundation, researchers identified categories of policy levers. The groups of policy strategies presented below are most com- mon in internalizing externalities within the traditional roles of state, regional and local government: Economic Instruments: These are policy strategies that provide an explicit price signal by applying a tax, fee, or subsidy to effect a specific outcome. Examples of Price-Based Economic Policy Instruments Fuel Taxes Value Added Taxes Vehicle Age Taxes â¢ Carbon taxes â¢ Distance-based taxes (VMT fees) â¢ Fully differentiated VMT fees â¢ Registration fees â¢ Tolls â¢ Insurance taxes â¢ Circulation taxes â¢ Vehicle sales taxes â¢ Parking fees â¢ Transit subsidies â¢ Vehicle value taxes â¢ Vehicle size and weight taxes â¢ Vehicle engine size taxes Examples of Regulatory Policy Instruments Require Establish or Update â¢ Collision insurance â¢ Pay-as-you-drive insurance â¢ Safety equipment use â¢ Training or certification â¢ Vehicle inspections â¢ Rules of the road â¢ License requirements Regulatory Instruments: With these tools, governing bodies are able to affect behaviors or processes by establishing or changing regulations directly, rather than relying on price signals to encourage socially optimal choices. Structure of private rights: Agencies may, if they have the authority, restructure civil and criminal liabilities to shift risk and alter producer and/or consumer behavior. Service provision: This family of policy instruments generally refers to changes in how a transportation agency provides its current range of transportation services. Information/education: Transportation agencies may, through any number of mediums and strategies, provide information to consumers to encourage desired behavior. Financing/contracting/collaboration: In some cases, a private-sector market for a good or service may not exist or cannot exist absent government intervention. In these cases, a transportation agency may need to establish the market itself or work in partnership with the private sector to establish the necessary environ- ment for the market to flourish.