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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.
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