Over in New Zealanad, there’s heavy discussion over whether the Government should promote rail use, or stick with roads as the primary traffic medium. But when Mayor Les Probert of Wairoa was asked about the issue, he responded that the whole problem boils down to plain economics. What did he mean?

Well, in the A-Level syllabus, two main concepts are relevant. The first describes why rail use is desirable over road traffic: Negative externalities. Heavy road traffic is generally deemed as less desirable if compared to rail traffic - cost or environment-wise - as it generates negative externalities, i.e. costs related to road traffic that spillover to others besides road users (e.g. air pollution, sound pollution, etc.). This is why most governments would like to transfer heavy road traffic onto rail.

The second directly answers our question: Cost-Benefit Analysis. But even though rail traffic is desirable over road traffic, the government has to analyse the cost and benefits from any action taken. If the cost of promoting rail use is greater than its benefits, then it wouldn’t make economic sense to do so. This is exactly what was meant when Mayor Probert said the issue “…will come down to a matter of economics.”

Yep, it’s as simple as that.