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RESOURCE PAPER Finance and the Visible Hand of Technology Joseph M. Giglio and Daniel J. McCarthy, Northeastern University F inance is about more than just money. This is not This sounds a lot like what a successful private-sec- an easy sentence to say with a straight face, nor tor business does--simply provide a useful service, one that many people necessarily will believe. control costs, and generate enough money to cover Obviously, money is important, since how much we capital and operating costs as well as a return for have determines how much we can build and how well future investment. Finance is really about prices. In the we can manage the assets we have. private sector, prices reflect the quality of the product The consensus is that money will be harder to find sold or the value of the service provided. That is, the for TEA-3 than for TEA-21, a result of improving fuel amount of revenue a firm books relates directly to the economy, slower economic growth, higher oil prices, a quality of the service that it provides relative to that of tighter federal budget, and perhaps some resentment its competition. over the success achieved 6 years ago. This implies that Feedback between quality and the amount of busi- we need ideas that involve more than changes to our ness a firm receives can be rapid, particularly in busi- current financial toolbox. Such changes, in turn, may nesses that deal directly with the retail customer. This is open the door to approaches that go beyond the tradi- often very personal. We all have been asked by our tional broad-based user fees, with or without some waiter or waitress about the quality of our meal--and leveraging. My discussion today will not solve any may even have had an entrée dropped from the bill if immediate problem, but it could help with the next big we expressed dissatisfaction. How often has the state piece of legislation--TEA-4? secretary of transportation or the district engineer asked us if we were satisfied with our daily commute, let alone offer a refund as a sign of a commitment to BACKGROUND improve? This process is part of what Adam Smith termed "the How we raise money affects what we do and how well invisible hand" that balances supply and demand and we do it. I am not just talking about Transportation thus shapes the economy. While highway finance has Infrastructure Finance and Innovation Act versus federal long relied on a set of broad user fees or benefit taxes, apportionments or one flavor of Grant Anticipation these reflect long-term values rather than near-term ser- Revenue Vehicle bonds versus another. Rather, the issue vice quality. As long as the level of highway revenues relates to the fundamental economic linkages between bears at best an indirect linkage to the quality of service prices and service quality. Put another way, in the best of received by the public, we will be forced to work with all worlds we should be able to generate funds in ways a very "visible hand." Intelligent transportation system that encourage better service and operating efficiency as (ITS) and telematics technologies may offer a way to well as ways that provide an adequate level of funds. make the idea of a visible hand practical. 80