Environmental Engineering Reference
In-Depth Information
If it cannot (i.e. if the State would ultimately intervene to 'save' a company so that
the relevant facility continued to operate) then it is effectively discriminating in
favour of them (since the commercial risk would be less than in smaller but otherwise
comparable investments). This issue has assumed very much greater significance in
recent years because of government policy favouring public-private partnerships as the
basis of financing many transport projects which previously would have been wholly
publicly funded (12.4).
9.5 The treatment of equity
In a market situation the ability of individuals to obtain goods and services of benefit
to them depends on the resources at their disposal. Accepting market processes
(even if they work perfectly) or the results of policy analyses based on welfare
economics therefore begs questions about whether the initial distribution of wealth
and other resources amongst the population (knowledge, physical mobility, economic
opportunities etc.) is considered to be fair. Similarly there are questions about how
far an overall increase in welfare is acceptable if this leads to adverse outcomes for
particular sections of the population, or if it widens the gap between those who are well
off and those who are not. These issues of distributional equity are not ones which any
amount of economic analysis can answer - they are essentially matters of personal or
political value judgement.
For the State to intervene to alter the distribution of benefits depends on either
or both of two arguments. The first is the ethical argument that limits ought to be
placed on the ability of the certain groups within the population to benefit from a
course of action if this implies worsening the conditions of others in either an absolute
or relative sense. The second is the political argument that inequalities need to be
limited in order to retain social cohesion and reduce the likelihood of civil disorder.
Irrespective of any ethical considerations commercial firms may in fact be willing to
engage in welfare policies themselves (or to support redistributive action by the State
with similar objectives) on the basis that it provides the stable conditions necessary to
continued capital accumulation.
Ethical and political arguments have been brought together in the concept of the
'social contract' (Rawls 1999). This holds that the rules governing distribution should
be those which, in a hypothetical 'original position' all members of society would agree
to, not knowing what status they would occupy in practice.
Intervention on distributional grounds is of two main kinds. The first is to reduce
differences of income between sections of the population; the second is to constrain the
differences in outcome which then arise from the interplay of these (adjusted) incomes.
As far as personal incomes are concerned many elements of the country's tax and
benefits system are 'progressive' in that they are designed to lessen the more extreme
disparities. As a result people who would otherwise be the poorest have more money to
spend on transport (or anything else) than they would without such State intervention
- and vice versa amongst more affluent groups.
It also follows that where general taxation is used to fund transport investments
and services then its (partly) progressive nature can mean that a positive redistribution
of welfare results from transport expenditures by the State as well. However a very
important proviso is the amount of use - hence benefit - which different groups derive
from these expenditures. For example public payments in support of the country's rail
system (funded from national taxation) may appear to be progressive when viewed
 
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