"Does transportation cost too much?"

[Anonymous]

QUOTE: Originally posted by Hugh Jampton

I still disagree.
You're using a consumer definition of value, which is not the same as that of a shipper/manufacturer (which is what this thread is about). So, by your premis that a thing has no value until it's in the hands of the consumer, then if I put the widget on a train and it is destroyed in a derailment then the insurance company won't pay out because the widget has no value?

I sure do not see how your second statement follows from the first. Any item only has value if it is of some use to someone, and part of the manufacturing process is delivering the product to that right someone. Any product, no matter how good, is worthless to someone who has no use for it. Likewise if some product costs $10 to produce but is only worth $2 to the consumer then the product is only worth $2. If that item would happen to be in a derailment and is a total loss then the insurance would pay $2, because that is all the manufacturer could expect to get on the market.

If, as you say, transportation adds no value, then why is a can of Coke over $2 in Jamaca? Why is nearly everything so expensive in Alaska? It is because people are willing to pay the higher prices for the VALUE of having the product available locally.

Yes I understand that the Wikipedia article states that according to economic theory transportation adds no value. But that is the opinion of the person who wrote the article fow Wikipedia. Economics has many conflicting theories, so any "hard and fast rule" must be taken with more than a grain of salt.

My question back to you is, if transportation adds no value why does the US Government include domestic transportation in the GDP?

[Kevin C. Smith]

Before we get too far into this-help, please.

I never got much past basic Econ at school (so please make allowances for terminology) but are we talking about an item's cost value vs it's price value? I can see that transportation adds nothing to the cost of making an item (making, not moving). A widget with $100.00 in labor & materials still has the same L&M in it no matter where it falls off the train. But the price that can be had for it will vary depending where it ends up. So, could we say that transportation doesn't add to the value of the item but to the consumer?

It looks like a lot of esoteric (to the layman) economic theories may develop on this thread and before my head starts to hurt any more (like it did in the advanced Econ. classes) I just want to be sure I'm understanding the basics.

Thanks again!

[Anonymous]

It's just like anything else.

If you're buying it, it costs too much.

If you're selling it, it doesn't cost enough.

Old Timer

[Tulyar15]

At the present time, despite high fuel prices, I think it can be shown that transportation costs are low in relation to other costs. A friend who works in the milk industry told me of how a processing plant was closed in Hereford (England) with the result that all milk produced by farmers in the county of Hereford has to be trucked to another plant 60 miles away to be processed, and then trucked back. So this suggests that transport costs were cheaper than the other costs associated with keeping the now closed plant running.

[daveklepper]

It seems to be this is a syllogistic argument. " Value" CAN have MANY meanings. My old shoes that I use as slippers around the apartment are very valuable to me because they are comfortable and keep the cold of the tile bathroom floor from bothering the soals of my feet. But if they were out on the sidewalk and a passerby wanted to keep the neighborhood need they would be thrown into a public garbage can, and I certainly would not show up at any important meeting or event wearing them.

[Anonymous]

Some more historical perspective:

Discussion of farmers and railroads is a popular topic here. Read the following passage that describes the situation in the 1870's and 1880's. Doesn't it aptly describe the situation today?

"The same objections which the farmers advanced to the railroads in the seventies were even more applicable in the eighties. Railroads were large foreign corporations, controlled either by eastern or alien captial. Rates were made according to what the traffic would bear and not to the needs of the users. Personal, place, and commodity descriminations were in operation on an increased scale.

"The underlying cause of the trouble between the railroads and the farmers was a lack of sympathy and understandying. The farmers talked about watered stock, excessive reates, and monopoly control, while the railroads feared governmental action and hard times. Neither made any study of the difficulties and consequent viewpoint of the other, and so they continued to work at cross purposes." [The Story of The Western Railroads, Riegel, Robert, 1926]

Indeed, it seems to me that the farmers and the railroads of today (2006) are not "making a study of the difficulties of the other", much like in 1870.

[spbed]

How many widgets do you think there are in a 45X9'6"X8 container? Then divide that by say $4,000.00 to move that container from Bangkok to NY (9,000 miles) then divide that per widget in the container & you have the cost per unit inside the container. I think you would find the cost per widget is very, very low. [:D]

QUOTE: Originally posted by tiskilwa

In the early 60's there was a Chicago television program entitled, "Does Transportation Cost Too Much?", which featured a panel discussion that included a railroad president, the VP of Quaker Oats, and the NY Herald Tribune business editor. (Source: trade magazine from 1963.)

"Transportation costs too much" was a complaint of rail shippers in the 1960's; it was a complaint of rail shippers 100 years ago; and It is a complaint of rail shippers today.

No doubt as long as there are railroads, it will be the perennial complaint of the rail customer.

[StillGrande]

I'm starting to think that someone could start a topic about the color of ballast and it would turn into an open access, evil railroad argument. The last four topics I have read set off in that direction, with the same 4-5 players.