Fiscal 2005 ITS Info-communications System Symposium Report


3."ITS from an Economic Viewpoint"
Prof. Hirotaka Yamauchi, Dean, Faculty of Commerce and Management, Graduate School, Hitotsubashi University

<Lecture Summary>
In today's speech, I would like to discuss ITS technology as seen from an economic viewpoint.

Technological innovation in terms of economics is often described from the perspectives of "technological innovation and its economy of scale," "abundant achievements through an economy of relative scale," and "incentives for pursuing material prosperity" as claimed by Yasusuke Murakami, a famous economist in Japan. These viewpoints are also described by J. Steiglitz as "market dynamism," "inefficiency due to the seeming equality" and "the need for dynamic economics." Furthermore, in terms of technology, old J. Schumpeter describes technical innovation as a source of profit and a source of economic progress. The innovation that Schumpeter refers to is not an extension of existing technology, but rather a "new combination" established by new products and new markets.

ITS (Intelligent Transport Systems) is a technology with high prospects for the future when viewed in terms of expanding markets and market scale. Since there seem to exist market failures in the ITS industry, government interventions and regulations may be justified for the purpose of achieving and increasing the social benefits. When there exists a scale of economy where large-scale facilities or a social infrastructure is involved, a public policy that enables marginal pricing by the sharing the costs of such facilities will be accepted in term of economic theory. In addition, when there are external effects, government intervention will be approved in order to correct price signals.
ITS technology is considered to have a positive external effect on consumption. Collaboration between central and local governments and businesses is required in order to disseminate, entrench and expand ITS technologies. The following four problems are thought to be impeding the dissemination of ITS: 1) Suppliers' attitudes are too technology-oriented, but they are not serious about meeting users' needs; 2) lack of information regarding system usage and its effects; 3) inadequate recognition of the diversified needs in the ITS field; and 4) basic rules regarding the cost burden are vague and ill-defined.

Broadly establishing ITS requires that countermeasures be taken to deal with these problems. In other words, dealing with problem (1) requires public and private sectors to hold the view that suppliers provide ITS as a kind of "Intellectual Transportation Service", not a system. It should be recognized that what is provided should be a useful service not a technology itself. Dealing with problem (2) requires recognizing that collaboration is needed for ITS consisting of both public and private sectors as suppliers. Dealing with problem (3) requires that central and local governments make use of ITS for optimizing inter-modal transportation, and/or use ETC to achieve TDM (transportation demand management). Dealing with problem (4) requires that central and local governments bear the cost of ITS services related to safety.

Further expanding ITS requires that interested organizations take the following measures. First, the ITS suppliers both public and private must focus their energies on developing systems for public applications such as DSRC (Dedicated Short Range Communications), and use ITS to upgrade the environmental awareness of the average car owner. Second, the government must contribute by establishing legal measures for ITS as well as take various measures to improve the appeal of ETC, and assist in the management of companies involved in expressway management after the system is privatized. Third, local governments must utilize ITS to help develop their regions; for example, by providing detailed information on each region. Fourth, ITS-related industries must provide information consisting of activity-oriented information, traffic information, etc.

My speech was based on a personal viewpoint as an economist, which is somewhat outside of the ITS field. Yet, it is my hope that it will prove useful information, or as background material for those of you here today.