May 26, 2024 

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KEYNESIAN CROSS: The standard diagram used in Keynesian economics to identify the equilibrium level of aggregate output (that is, gross domestic product), with aggregate expenditures measured on the vertical axis, and aggregate output measured on the horizontal axis. This diagram contains two key lines, the aggregate expenditure line and the 45-degree line. Intersection between these lines indicates equilibrium aggregate output. This intersection, or cross, is what gives rise to the name.

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Our pedestrian excursion gives us a ground-level view of the economy, but it's certainly slow and time-consuming. If you're like me, you've probably thought once or twice about jumping into an Omni Motors XL GT 9000 sports coupe to speed us along the way. Or perhaps an Omni Airlines 30-day tourist excursion would make our trip faster and less exhausting. That's one nice thing about modern transportation, it's pretty quick and not too expensive. It also helps us get a whole lot closer to solving the unsolvable problem of scarcity. However, for a really good pedestrian view of transportation and how it helps us along, we'd better remain on foot.

Distance is a Four-Letter Word

There is little doubt that many people enjoy traveling. I don't like it that much, but you might. Perhaps you like a Sunday drive into the country-side, a cruise around the Caribbean, or a cross-Atlantic flight. A certain exhilarating excitement, not unlike that from the Monster Loop Death Plunge roller coaster, can be had from traveling.

There is, however, a major cost to travelling that tends to get in the way of solving our age-old scarcity problem. Recall that scarcity occurs because we have limited resources and unlimited wants. The more wants we can satisfy with our limited resources, the better off we are. The problem with travelling is that it uses up resources that we can't use for something else.

For example, the Neat Street Fleet Transport, Inc., makes use of truck drivers, trucks, buildings, gasoline, and all sorts of resources to do nothing more than move stuff from one place to another. If this stuff didn't need to be moved around by Neat Street Fleet Transport, Inc., then those resources could be used to make other stuff, like Frosted Honey-Coated Super Sugar Junks breakfast cereal, Master Sprocket's Universal do-it-yourself all-purpose spark plug tool and ice cream scoop, or some other valued consumer-satisfying product.

Nothing is Ever Where You Need It

But transportation is needed because we have to use some of our scarce resources to move stuff around. The reason, as we noted in Fact 3, Our Unfair Lives, is that our resources and the stuff we make from those resources tend to be unequally distributed around the planet.

You might, for example, find one place like Farmington with a lot of sunshine, rainfall, and flat fertile farmland, while another place like Factory City has a bunch of oil, coal, iron ore, and other assorted mineral deposits just a few feet beneath the surface of the rocky ground. These differences, of course tend to give Farmington a comparative advantage in farming and Factory City a comparative advantage in manufacturing. It also means that if you live in Farmington, you need to have your tractors shipped in from Factory City. And if you work in Factory City, then you need you food transported from Farmington.

Perhaps even more important, Factory City will need to use some of its resources to make trucks, railroad cars, or whatever else is used to ship tractors and food between Farmington and Factory City. Some of the Farmington food will also be used to feed the truck drivers, railroad engineers, and other labor that does the hauling back and forth. The farther apart are Farmington and Factory City, then the more resources we need for the moving.

Planes, Trains, and Automobiles

Humans are a pretty ingenious bunch of primates. We've invented things like light bulbs and calculus and made tons of important scientific discoveries. While there aren't enough pages in this book to list, let alone discuss, all of the stuff that we've invented and discovered over the last five or six thousand years, we can make a brief mention of those that relate to transportation. In fact, most of the really, really big inventions and discoveries over the years have had transportation in mind, or soon applied to the task of improving transportation.

Of course we can start with the wheel. Fire also has played a big part in transportation in recent years. Then there's that bit about the Earth being round and what that did for ocean travelling.

Our modern transportation systems -- planes, trains, and automobiles -- owe their existence to inventions such as the jet engine, steam engine, and internal combustion engine. Then we have vulcanized rubber, plastics, and assorted metallurgical processes that have helped make transportation cheaper and more efficient.

We you get right down to the nitty-gritty, one reason that a lot of our inventiveness improves transportation is that it is one thing that can always stand improvement. The fewer resources we use to move stuff, the better off we are. While it might cost $50 and take us only an hour to get from Farmington to Factory City, we'd be much happier if it took only 30 minutes and cost no more than $25. That extra 30 minutes and $25 can be used for other satisfying activities.

Every Car Needs A Road

We usually think about transportation in terms of vehicles -- like cars, trucks, trains, airplanes, and boats. Vehicles, however, are only part of any transportation system. You usually need depots, roadbeds, and other such capital goods that we refer to as infrastructure. Cars need streets and highways, trains need tracks, airplanes need airports, and boats need docks and ports.

There are two important things to note about transportation infrastructure:

  • First, infrastructure has many features of a public good, meaning it's very difficult to keep nonpayers from using them and there's often little reason to do so because there's no opportunity cost for extra users.

  • Second, infrastructure includes a whole bunch of capital that often takes years if not decades to produce. While a factory that makes the Master Sprocket's Universal do-it-yourself all-purpose spark plug tool and ice cream scoop might require a year to construct, the interstate highway system used to ship these fine utensils around the country takes several decades to complete.
Another Job for Our Evil Necessity

These two features mean that the best place to go for infrastructure is our imperfect and inefficient government. Taking the public good feature first, if the government doesn't get involved in constructing infrastructure, it just won't get done. Sure you might see a private company build a road here or an airport there, but you won't get the economy-wide system of infrastructure needed to move stuff around cheaply.

Now, let's jump to the second feature of capital investment. The enormous amount of capital needed to construct something like the intercontinental railroad system of the 1800s or the interstate highway system of the 1900s sets in motion a really big multiplicative, cumulatively reinforcing interaction (whew!) that expands the size of our economic pie for several decades. Any politician who wants to create jobs and win the hearts, and votes, of the public can do so by spending taxpayer dollars on infrastructure.

When we lump the multiplier effect of capital investment and public goods nature of infrastructure together with the benefits of moving stuff around more efficiently, it's very difficult to find much fault with transportation. The only trick is finding a good transportation system worthy of developing. A politician will receive little praise if billions of tax dollars are spent on transportation infrastructure that is slow, inefficient, and incredibly expensive to operate. Any worthy transportation system needs to be better and cheaper than what we currently have.

This suggests a few tips to consider whenever members of the first and second estates begin a discourse on the topic of transportation infrastructure:

Tips for the Infrastructurally Literate

  • Our economy seems ripe for a new and better form of transportation. The steam engine railroad became prominent in the 1800s and the automobile and airplane were a major force in the 1900s. Keep an eye out for candidates like high-speed trains, air cars, or something that hasn't even been invented. We're due.

  • Many aspire, but few are chosen. Over the centuries, many, many, MANY different types of transportation systems have been proposed, but only a few have been worthy enough to attain world domination like planes, trains, and automobiles.

  • Keep in mind that transportation infrastructure is one of the best investments our economy can make. But it can only result with government support. With a choice between two political candidates, give the one who at least acknowledges the importance of infrastructure a very close look.

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Today, you are likely to spend a great deal of time wandering around the shopping mall seeking to buy either a solid oak entertainment center or a remote controlled ceiling fan. Be on the lookout for door-to-door salesmen.
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