Discuss about the Tolerance Bridge for Railways and Transport Authorities.
The Tolerance Bridge (Pedestrian Bridge 2) was designed as a pedestrian bridge under the Dubai Canal Project. (Khaleej Times 2016) The Railway and Transport Authority (RTA) of UAE contracted Ae7 for the construction of the bridge. The rationale behind the construction of the bridge was two pronged: aesthetics and encouragement for the reduction of the use of private transport. The bridge will provide a clear path and a safe space to those who do not use transport such as cars. As much as it is intuitively understood that the bridge may have net positive externalities, it is difficult to understand the actual benefits versus costs of the bridge. This paper attempts to do the same.
The Tolerance Bridge is a part of the ambitious Dubai Canal project. This is not the first pedestrian bridge in the UAE or the world. The benefit of using such means of transport is that the walking and cycling, generally, utilize less space on the road and cause fewer blocks due to traffic. Additionally, these modes have little to no carbon footprint since the green house gas emissions from the use of these modes of transport are negligible. These are “low Impact” means of transport. The per capita space taken up by these modes of transport is low or negligible. In addition, to causing less traffic, these modes of transport utilize less little or no parking space. Hence, one of the motives to build the bridge was to incentivize the use of such low impact transportation mean by rewarding the users with exclusive community space with no tolls or traffic. There is no inherent and explicit demand for such a construction but such constructions are necessary for the society. Hence, the reward of such a project is in the benefits enjoyed by the public. (Bastina and Ihiro 2005)
The Water Canal Project of Dubai is an important project from the point of view of creating a modern community space, one that combines a souq and the banks of La Seine of France. The project is important from the point of view of commerce, urban transportation as well as tourism. (Khaleej Times 2016) This is bridge is a part of the urban infrastructure that Dubai is hoping to develop to grow as a cosmopolitan business hub of the world. (Khaleej Times 2016) It is also hoped that the presence of water in the middle of the city will help keep the temperature of the city low. (Khaleej Times, 2016) It is the strategic significance of the bridge, apart from cost and longevity concerns, that drove the engineering design. The metal construction of the bridge was designed keeping in mind longevity and emissions concerns. The engineering design kept in view that the bridge could be a potential tourist attraction. Thus, the bridge was designed to be beautiful and give this idea of weightlessness and spectacular view, apart from meandering path. There are separate paths for cyclists and pedestrians (ae7 2018) . The mandate of environment friendly bridge was driven into the construction of the bridge which led to the consideration Solar powered LED lights. These LED lights are expected to save the cost of electricity by 50% (Barakat 2016)
Generally speaking, the approval of such a project would have to go through a cost-benefit analysis with a time discounted Net Present Value to determine whether an investment in such a project would be worth the benefits that would be derived in the future (Arrow et al. 2011). For example, for a normal bridge, the toll revenue accrued in the future would be used a parameter to make decisions regarding the construction of such a bridge. However, the cost-benefits, in the traditional sense cannot be quantified in this case. Firstly, this bridge has a strategic significance as a part of a larger commercial project and because most of the benefits of the bridge are social in nature. (Bastina and Ihiro 2005) In budgetary allocations, projects that have a direct impact or are a direct source of revenue take priority over such projects. For example, a highway from Dubai to Sharjah would be a rival for public funds to such a project. Within the project, another row of street lighting or another bridge for motorists would be a rival to such a project and would take priority. This creates plenty of uncertainty.
A good way to understand if the budgetary allocations were justified and in order to account for uncertainty, the positives and negative externalities of the construction of the bridge could be considered. Positive externalities refer to the positive spillovers that the construction of the bridge might have, while negative externalities refer to the negative spillover effects on the society that the construction of the bridge might have. (Lipsey and Chrystal 2011)
The bridge is not expected to have any direct revenues. Some direct revenue, though, can be expected. The Tolerance Bridge will host various events that will have entertainment, cultural and community programmes which could be direct sources of revenue, in cases where the space on the bridge is leased out (WAM 2017) . The revenue from these events and the promotion of commerce due these events is expected to be a pay off for the investments in the form of funds and community space that were sacrificed for this project. In general, under tourist spots such as the Tolerance Bridge a variety of small businesses crop up in the periphery. This may give a boost to the small businesses around the area.
Generally speaking, the short run demand and supply curve of public goods is somewhat inelastic. This is because they are not demanded by individuals but by the society as a whole. (Bastina and Ihiro 2005)
The demand for public goods depends on the collective ability to pay of the local government and willingness to pay. The funds for such projects, generally, come out of public funds are, usually, decided by the willingness to pay of public representatives. The willingness to pay may relate to whether the public demands such a good and approves of the construction of such a project through its representatives. Elasticity of demand for the short run such cases can be determined by the public’s willingness to pay. (Bastina and Ihiro 2005) For example, the public may be willing to pay a greater amount for a bridge that provides access by motor vehicles because it may help reduce the traffic in the city. Hence, the demand for such a bridge would be quite price elastic.
It is not possible to quantify the social benefits of the bridge using a ‘quantitative’ parameter to analyse the demand and supply of public good does not yield useful results and that the demand for public goods could be better captured by understanding by using ‘qualitative’ measures. One of these measures is the benefit analysis or the marginal benefit analysis while another one in the “willingness to pay”. (Bastina and Ihiro 2005)
In the following diagram, we have used the “Marginal Benefit” or the “benefit to the additional consumer who used the bridge” as a measure. This forms the demand curve. The Supply curve is the “Marginal Cost” Curve or the cost of maintaining the bridge for an additional year. The Aggregate Marginal Benefit derived depends is different for every individual. (Samuelson and Nordhaus 2006)
The third is the Marginal Commercial Benefit of each event. The bridge can provide space for several commercial activities. For every commercial and community event, there will be a benefit to the local economy.
The supply market for a public good does not exist since public goods are ‘non excludable’ and ‘non rival’ Non Excludable implies that there are no particular classes of people that should be excluded from the supply of public good. (Ott and Turnovsky 2006) It is possible to exclude motor vehicles drivers from using the bridge but not from using bridges. They are also, no alternatives to bridges as a public good. Hence, they are ‘non rival”. Any public good comes out of the need to improve the productivity and efficiency of the society as a whole, not out of an entrepreneurs need for profit. Public good such as the Tolerance Bridge are welfare and not competitive goods. Hence, the commission for such a good did not arise from expectations of individual profit but social profit. There may be private contractors that help in the construction and maintenance of the bridge but it was commissioned by the local government.
Within the demand and supply analysis, an understanding of the social costs and benefits would help us understand whether the bridge is providing benefits to the citizens that are comparable to the costs incurred to maintain it. The demand for a bridge is, however, an aggregate of the individual demand curves. The demand for the bridge would be generated by:
Source: (Bastina and Ihiro 2005).
In the picture, the demand curve is denoted by the marginal benefit curve. The MC curve represents supply. The point where the MC curve meets the demand curve, the total demand of the bridge can be plotted.
In general, the positive externalities related to the bridge may include the following:
The negative externalities of the bridge may include the following
The Bridge is provided by the local government for public benefit without expectations of monetary profits but an analysis of cost and the marginal benefit of the bridge helps consumers understand the benefits versus the costs of maintaining it. Generally, the marginal costs of public goods such as the Tolerance Bridge are close to zero since the marginal cost for an additional another commuter on the bridge is near zero. Price elasticity analysis helps understand the willingness of the consumers to pay for such a bridge, which in turn helps determine the social costs of the bridge. In the short run, the demand for the bridge can be estimate from the public’s willingness to pay while in the long run, it can be estimated from the monetary value of the positive externalities of the bridge. An analysis of the positive and negative externalities helps understand the social cost of the bridge. If the total positive externalities are greater than the negative externalities, then the bridge will have positive social cost or will be profitable and vice versa. If the externalities could be measured in monetary terms, then the bridge would have been profitable only if the returns from the bridge or Net Present Value would be greater than the investments made in the present. However, the bridge is expected to provide some monetary benefits, if space on the bridge were to be leased out for commercial investments.
The effects of taxation such as carbon taxes on the use of motor vehicles and other such levies can alter the analysis completely (Ott and Turnovsky 2006). Additionally, if the bridge could be turned into a viable carbon finance project, then the analysis would be altered completely. (World Bank 2017)
Conclusion
The Tolerance Bridge is a public good that was meant to provide an efficient mode of transportation for the general public as well as encourage the use of non gas-guzzling modes of transportation such as bicycles and walking. It is, therefore, important, to understand the social benefit of the bridge. The social benefit of the bridge could be analyzed by a demand and supply analysis of the bridge as well as by analyzing the positive and negative externalities of the bridge. These social benefits are to be weighed against the opportunity costs of the funds and the public space that would be provided by the project. The social benefits of this project include the benefits to tourism, benefits in the form of greenhouse gas emissions and benefits in the form of a public space free from traffic and noise.
References
AE7 (2018). DUBAI WATER CANAL – THE BRIDGE OF TOLERANCE (PEDESTRIAN BRIDGE 2). [online]. https://www.ae7.com/project/dubai-water-canal-pedestrian-bridge-2/#
ARROW, Kenneth J., et al. (2011). How Should Benefits and Costs Be Discounted in an Intergenerational Context? The Views of an Expert Panel. Washington, DC, US Environmental Protection Agency.
BASTINA, Raymond G. and IHIRO, Toshihiro (2005). Public Goods: Theories and Evidence. Springer.
BRADFORD, David F (1970). Benefit – Cost Analysis and Demand curves for Public Goods. Kyklos, 775-791.
BRISBANE CITY COUNCIL (2014). Brisbane City Council. [online]. https://www.brisbane.qld.gov.au/traffic-transport/roads-infrastructure-bikeways/tunnels-bridges-transport-links/eleanor-schonell-bridge/construction-facts
KHALEEJ TIMES (2016). Dubai Water Canal: All that you need to know. [online]. Last updated 9 November. https://whatson.ae/dubai/2016/11/dubai-canal/
LIPSEY, Richard and CHRYSTAL, Alec (2011). Economics. Oxford, Oxford University Press.
OTT, Ingrid and TURNOVSKY, Stephen J (2006). Excludable and Non- Excludable Public Inputs: Consequences for Economic Growth. Economica, 725-748.
SAMUELSON, Paul A. and NORDHAUS, William D. (2006). Economics (18th International Edition). New delhi, Tata McGraw Hill.
WAM (2017). Sheikh Nahyan unveils Tolerance Bridge over Dubai Canal – in pictures. [online]. Last updated 17 November. https://www.thenational.ae/uae/government/sheikh-nahyan-unveils-tolerance-bridge-over-dubai-canal-in-pictures-1.676496
WORLD BANK (2017). Partnership for Market Readines: Carbon tax Guide – A Handbook for Policy Makers. Washington DC, World Bank Group.
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