JANUARY, 1966] PUBLIC INTERVENTION 75 ing agencies, to identify the barriers to improved performance, and to address the problem of organizing a capability consonant with the requirements of the present and future. In such an evaluation and assessment of alternative institutional arrangements, the centrality of reimbursement policy for improvement in efficiency would need to be faced squarely with a recognition of the powerful influence which cost bearing by beneficiaries would have on the discriminating use of the entire range of cost reducing technological alternatives. Not a little could be learned from the pioneering work in water quality management by the cooperative water quality management associations in the Ruhr, or the integration of investment planning, design criteria and pricing policy of Electricité de France. Doubtless a similar spirit of innovation in the water resources field in the United States would add a considerable measure of assurance that public intervention would be sufficient as well as necessary to improvement of efficiency in water resource development programs. THE RFF REPRINT SERIES Titles still in print 10. METHODS of Measuring the Demand for and Value of Outdoor RecrEATION, by Marion Clawson. Paper presented at a meeting of the Taylor-Hibbard Club, University of Wisconsin, 1959; 50 cents. 35. ENERGY AND ECONOMIC GROWTH IN THE UNITED STATES, by Sam H. Schurr and Vera F. Eliasburg. Presented by Sam H. Schurr at the Faculty Seminar in Economics and Business Administration, West Virginia University, March 15, 1962; 25 cents. 36. MINERAL IMPORT AND STABILIZATION POLICIES, by Orris C. Herfindahl. Presented at the American Institute of Mining and Metallurgical Engineers Meeting, Society of Mining Engineers Minerals Economics Program, New York, February 19, 1962; 25 cenets. 46. ATTAINMENT OF EFFICIENCY IN SATISFYING Demands FOR WATER Resources, by Irving K. Fox and Orris C. Herfindahl. Reprinted from American Economic Review, May 1964; 25 cents. 47. PROPERTY, PROPRIETORSHIP, AND POLITICS, by Vincent Ostrom. Reprinted from Papers of the Regional Science Association, Western Section, University of Oregon, June 14-15, 1963; 25 cents. 48. A MUNICIPAL SERVICES Market Model of METROPOLITAN ORGANIZATION, by Robert Warren. Reprinted from the Journal of the American Institute of Planners, August 1964, Vol. XXX, No. 3; 25 cents. 49. EFFICIENCY IN THE USE OF MARINE RESOURCES, by Francis T. Christy, Jr. Reprinted from California and the World Ocean (Papers presented at the Governor's Conference on California and the World Ocean, January 31 and February 1, 1964); 25 cents. 50. ECONOMICS OF INCLUDING RECREATION AS A PURPOSE of Water Resources PROJECTS, by Jack L. Knetsch. Reprinted from Journal of Farm Economics, December 1964; 25 cents. 51. NEW HORIZONS IN WATER RESOURCES ADMINISTRATION, by Irving K. Fox, Reprinted from Public Administration Review, March, 1965; 25 cents. 52. WATER QUality Management by Regional AUTHORITIES in the Ruhr ArEA WITH SPECIAL EMPHASIS ON THE ROLE OF COST ASSESSMENT, by Allen V. Kneese. Reprinted from Papers and Proceedings of the Regional Science Association, Volume 11, 1963; 25 cents. 53. 1964: WESTERN WATER INSTITUTIONS IN A CONTEMPORARY Perspective, by Vincent Ostrom. Reprinted by permission from Proceedings: Western Interstate Water Conference, September 16-17, 1964 (issued by The University of California Water Resources Center); 25 cents. 54. FACTORS IN THE LONG-RANGE COMPETITIve Setting of SHALE OIL, by Hans H. Landsberg. Reprinted from New Horizons for Resources Research (Papers of the 1964 Western Resources Conference), University of Colorado Press, 1965; 25 cents. 55. ECONOMIC AND RELATED PROBLEMS IN CONTEMPORARY WATER RESOURCES MANAGEMENT, by Allen V. Kneese. Reprinted from Natural Resources Journal, October 1965; 25 cents. 56. IS PUBLIC Intervention in Water Resources Development Conducive to ECONOMIC EFFICIENCY, by John V. Krutilla. Reprinted from Natural Resources Journal, January 1966; 25 cents. Single copies available free, direct from Resources for the Future, Inc. Additional copies may be ordered at the prices specified above. Comments on S. 790 and S. 712 Dr. Elizabeth A. Wilman I heartily applaud the position taken by S. 790 and S. 712 with respect to the establishment of a system of user charges for the nation's inland waterways. User fees need to be introduced in order to introduce both efficiency and equity in the allocation of water resources for transportation. Marginal cost pricing is typically the rule for efficient resource allocation. Although for a large capacity project where initial demands are small, this would at first only cover operation and maintenance costs; as demands increase over time and capacity becomes more and more fully utilized the resultant congestion costs would push marginal costs upward. If the user fee corresponds to these increased marginal costs, then at some point it will be equally costly to incur these increased congestion costs as to expand capacity. What you want to have is a practical approximation to this system, having a fee which incorporates operation and maintenance costs, plus congestion costs imposed on others as they occur, and allowing additions to capacity to be made when and where the cost of expanding capacity is less than or equal to the congestion cost associated with more fully utilizing the capacity. Lock-use fees or segment fees are an appropriate method of implementing such fees. The above discussion indicates that it is totally appropriate to consider full recovery of the costs of a project such as the improvements on Locks and Dam 26 proposed in S. 712. However the fee should reflect operation and maintenance costs plus some component for congestion costs imposed on others. The latter will be reflected in such things as increased waiting time. Το get at this the fee might be varied according to volume of traffic at a given time, or the length of cue at a given time. Tonnage or value of cargo would only be appropriate inasmuch as they affect operation and maintenance, or congestion costs. Also there is no reason to have the 90 plus percent of the Federal costs, remaining after construction has been completed, recovered in equal installments. Using the operation and maintenance plus congestion cost criterion the recovery might well be quite unequal with initial years recovering little and final years (prior to expansion) recovering much. With respect to the user charges proposed in S. 790, if they are to be based on operation and maintenance costs and congestion costs as recommended here, and as sections 5(c) and (d) seem to indicate there is some intent to do, then why limit recovery to 50 percent of Federal operation and maintenance expenditures and 50 percent of Federal capital expenditures; when it might well be possible to recover a good deal more than that, perhaps 100 percent. The proposal in section 5(f) to establish the Waterway improvement Fund is, I think, a very good idea. I would only add that, especially if full cost recovery were to be the case, that incremental improvements or additions to capacity requiring disbursements from the fund ought to be made on the basis of when and where the increment would be less costly than increased use of existing capacity. It could be viewed as each waterway segment, which has a fee system administered for it, having an account within the fund where its fees would be deposited and from which it could draw to make payments to cover Borrowing and lending could be allowed but each segment's account should be distinct, in that over the long run each should be a self sustaining segment financially. its costs. Finally, let me reiterate that user fees for navigation do need to be introduced. My above comments speak primarily to the form and level of such fees. However there is no question but that economic efficiency and equity would be promoted by putting an end to the free provision of these facilities. Competing forms of transportation are not free, and overuse and costly (though not to the user) overbuilding of the free facilities occurs due to this subsidy. |