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FHWA > Policy > Economic Returns From Transportation Investment

Preface

From the time of the nation's first transportation plan — the Gallatin Report at the beginning of the nineteenth century — U.S. political leaders have recognized the developmental and economic benefit of investment in transportation. As different ports competed to be the supplier of the original colonies, as different routes competed to be the gateway to the west, as the first national system of post roads was designated, and as the Interstate Highway System was designed, states and regions have competed for access. Transportation facilities are more than magnets that draw growth to one point instead of another: they also create economic growth that is shared by the nation as a whole.

This national economic benefit has been measured in a recent study by M. Ishaq Nadiri, an economist at New York University. He found that there is a strong relationship between the capital stock of highways and the net social rate of return. During the 1950s and the 1960s, the net social rate of return of the nation's highway network was very high, while in the 1970s and 1980s the returns on highway investment were lower – roughly the same as that realized on private capital in those decades. What led to the extremely high returns in the 1950-1970 period, and what future public investments in transportation infrastructure might have similarly massive impacts? Can public policy be targeted to produce such high returns in the future, and continue to benefit the nation's economic health, its international competitiveness, and its quality of life?

The Eno Foundation held a public policy forum on July 25, 1996 to explore these important questions. Leaders in government and industry, specialists on economic development, investment analysts, and other experts came together to examine recent research on this subject, to discuss its possible policy implications, and to identify ways to make such analysis more useful to policy makers.

We are deeply indebted to all the thoughtful leaders, listed at the start of this report, who contributed to these discussions. We are especially thankful to Professor M. Ishaq Nadiri for his stimulating analysis and his willingness to defend this work before a diverse community of interested professionals; to Professor Jose A. Gomez-Ibanez who chaired the forum; to Jeffrey Madrick, who prepared the forum report; and to Jennifer Clinger, who organized the forum and oversaw all the arrangements. We are also grateful to the Federal Highway Administration, the National Cooperative Highway Research Program, and the American Association of State Highway and Transportation Officials for their financial and professional support. Thanks are also due to the forum participants who reviewed the draft report and made useful corrections.

The message that came through loud and clear at the forum is that the economic impacts of transportation are important, and that new findings bearing on them deserves serious attention. The Eno Foundation is pleased that the insights contributed by participants at our forum are now publicly available, and that this report will help to give the economic consequences of transportation the consideration that they deserve.

Damian Kulash
President and CEO
Eno Transportation Foundation


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