Social costs are almost never included in government analysis of projects. Blinded by the revenue potential of a project, most governments either, ignore, or, underplay social costs. This is best seen in the Badgery’s Creek project and is most blatantly. The people living next to that airport will not like the predictions implied by John Quiggin’s analysis. A 24 hour a day, 7 day a week, airport wil be a noise factory par excellent. The nearby resident may need to soundproof their homes but can forget about backyard activities like BBQs. The economics of freight transport means that the only winner will be the company that runs the new airport.
In the past a firmer large Australian transport company, TNT, tried to use airfreight to give it a competitive advantage. They flew lobsters over from Perth to eastern markets. So impressed with their own genius were the board of TNT back then, they took this marketing method into the US markets. But this upset some very large IS transport companies. One company retaliated and entered the Australian air freight market. They all but wiped out TNTs profit margins. It was the beginning of the end for a transport company that had its WORLD HEADQUARTERS at Redfern. I actually met Ken Thomas back in the 1970s, he told me that the secret of his success was to keep it local. Those who took over his company forgot this golden rule. They took on the big boys and got squashed.
Australian businesses try to upsize at some point in their business lifecycle. But the Australian markets are not large by international standards. The east coast has a consumer market of about sixteen million people scattered over the coastal land from just north of Brisbane to the west of Melbourne. But outside that part of Australia, there is some eight million people scattered far and wide. Markets in the centre are very small. Parts of Western Australia have the smallest markets in Australia. Even in Tasmania, markets are small. For airports to be highly profitable they must have high volumes of traffic most of the year with very few slow periods. But if they upsize their capacity to cover peak periods only, their fixed costs will pull down their profits margins.
Australia’s air freight market must compete with passenger markets for terminal space. Only at Badgery’s Creek will they get preferential treatment. To expect anything else is to face squeezed margins.
Least cost analysis suggests that only by minimising airfreight costs can Australian companies meet profit expectations of stakeholders. But when social costs are added in to the mix, the likelihood of any net benefit to social welfare from increased air freight usage is most likely minimal.
So why do politicians jump on board to any airport development project?
My Mum lived among politicians. She said that they can never think small but must always have big budget projects to feed their ego. They rarely, if ever, consider the social consequences of big budget projects. Only in election periods do they even give social costs any sort of consideration.
We are having this debate in Melbourne about the third runway. I say debate but it isn’t really a debate because it’s just going to happen. I am less concerned about noise pollution and more about what additional air traffic that supposedly necessitates these new runways means for CO2 emissions. We need to be flying less, not more. Aviation will be the most hard to abate sectors of the economy so we really need to think about flying less.
Of course, there aren't any larger electric passenger planes yet, but 20-seater ones are under development. A reasonable accounting of noise nuisance would speed things up, adding to the guaranteed reduction in operating costs.
I think the new runway was approved in 1996 so my comment is not moot although I am uncertain of how much turnover in housing occurred over the quarter century to 2020 when expectations about likely noise issues would have been borne by property vendors and buyers. If you live near an airport and extensions are envisaged over a quarter of a century it is reasonable to suppose effects on house price saleability of forecast externalities. Losers would have been distributed over this period but current owners would seem to have few reasonable claims for being disadvantaged and I assume irt is the latter impacts that you are focusing on.
My comment was methodological and is sound. I agree I don't have detailed information about the planning process and patterns of property ownership over this period for Brisbane's airport although it was a large infrastructure project.
If you are just focusing on the costs borne by current property owners you are exaggerating the costs.
While aircraft noise effects are capitalised into property values those who purchase properties benefit from the lower costs of their purchase that compensates for the costs of the noise. Thus the main costs of aircraft noise is imposed on those residents who bought before any aircraft noise problem was anticipated and who suffer capital losses on the sale of their properties as a consequence of noise. I don't know how you got your property value effects but not allowing for such differential effects will grossly exaggerate the scale of the external costs. To put it another way: Those who move into an area with pre-existing aircraft noise and who then ask for compensation are asking for an unwarranted handout.
Would not a time of day charge (or, better, a measured decibel charge) make the other recommendations unnecessary?
Social costs are almost never included in government analysis of projects. Blinded by the revenue potential of a project, most governments either, ignore, or, underplay social costs. This is best seen in the Badgery’s Creek project and is most blatantly. The people living next to that airport will not like the predictions implied by John Quiggin’s analysis. A 24 hour a day, 7 day a week, airport wil be a noise factory par excellent. The nearby resident may need to soundproof their homes but can forget about backyard activities like BBQs. The economics of freight transport means that the only winner will be the company that runs the new airport.
In the past a firmer large Australian transport company, TNT, tried to use airfreight to give it a competitive advantage. They flew lobsters over from Perth to eastern markets. So impressed with their own genius were the board of TNT back then, they took this marketing method into the US markets. But this upset some very large IS transport companies. One company retaliated and entered the Australian air freight market. They all but wiped out TNTs profit margins. It was the beginning of the end for a transport company that had its WORLD HEADQUARTERS at Redfern. I actually met Ken Thomas back in the 1970s, he told me that the secret of his success was to keep it local. Those who took over his company forgot this golden rule. They took on the big boys and got squashed.
Australian businesses try to upsize at some point in their business lifecycle. But the Australian markets are not large by international standards. The east coast has a consumer market of about sixteen million people scattered over the coastal land from just north of Brisbane to the west of Melbourne. But outside that part of Australia, there is some eight million people scattered far and wide. Markets in the centre are very small. Parts of Western Australia have the smallest markets in Australia. Even in Tasmania, markets are small. For airports to be highly profitable they must have high volumes of traffic most of the year with very few slow periods. But if they upsize their capacity to cover peak periods only, their fixed costs will pull down their profits margins.
Australia’s air freight market must compete with passenger markets for terminal space. Only at Badgery’s Creek will they get preferential treatment. To expect anything else is to face squeezed margins.
Least cost analysis suggests that only by minimising airfreight costs can Australian companies meet profit expectations of stakeholders. But when social costs are added in to the mix, the likelihood of any net benefit to social welfare from increased air freight usage is most likely minimal.
So why do politicians jump on board to any airport development project?
My Mum lived among politicians. She said that they can never think small but must always have big budget projects to feed their ego. They rarely, if ever, consider the social consequences of big budget projects. Only in election periods do they even give social costs any sort of consideration.
As others have pointed out, time-varying noise charges would discourage noisy planes and flight paths. They would make a curfew inappropriate.
We are having this debate in Melbourne about the third runway. I say debate but it isn’t really a debate because it’s just going to happen. I am less concerned about noise pollution and more about what additional air traffic that supposedly necessitates these new runways means for CO2 emissions. We need to be flying less, not more. Aviation will be the most hard to abate sectors of the economy so we really need to think about flying less.
Real-life comparative tests of electric and gasoline light aircraft have shown a staggering 30 dB reduction in noise, essentially eliminating nuisance: https://uwaterloo.ca/sustainable-aeronautics/blog/noisy-neighbours-do-electric-aircraft-reduce-airport-noise
Of course, there aren't any larger electric passenger planes yet, but 20-seater ones are under development. A reasonable accounting of noise nuisance would speed things up, adding to the guaranteed reduction in operating costs.
I think the new runway was approved in 1996 so my comment is not moot although I am uncertain of how much turnover in housing occurred over the quarter century to 2020 when expectations about likely noise issues would have been borne by property vendors and buyers. If you live near an airport and extensions are envisaged over a quarter of a century it is reasonable to suppose effects on house price saleability of forecast externalities. Losers would have been distributed over this period but current owners would seem to have few reasonable claims for being disadvantaged and I assume irt is the latter impacts that you are focusing on.
My comment was methodological and is sound. I agree I don't have detailed information about the planning process and patterns of property ownership over this period for Brisbane's airport although it was a large infrastructure project.
If you are just focusing on the costs borne by current property owners you are exaggerating the costs.
https://www.bne.com.au/corporate/projects/completed-projects/brisbanes-new-runway/planning-and-approvals
While aircraft noise effects are capitalised into property values those who purchase properties benefit from the lower costs of their purchase that compensates for the costs of the noise. Thus the main costs of aircraft noise is imposed on those residents who bought before any aircraft noise problem was anticipated and who suffer capital losses on the sale of their properties as a consequence of noise. I don't know how you got your property value effects but not allowing for such differential effects will grossly exaggerate the scale of the external costs. To put it another way: Those who move into an area with pre-existing aircraft noise and who then ask for compensation are asking for an unwarranted handout.