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; 8 - Orono Weekly Times, Wednesday, January 29,2003 As I see it by Peter Jaworski The 407 Costs Part 2 of 2 The 407 is the second most expensive toll highway in North America. People are understandably upset about it. The trouble is, we have no idea what a road 'should' cost under our particular circumstances. circumstances. The United States, for instance, has had many years of experience. The toll companies there have a good sense of how much it costs to run their roads, given the number of people who use them, and the things that go into paying for a road. Like asphalt, tar and so on. And they communicate that information information to users of the roads through the tolls. In Canada, the 407 is a recent experiment in tolling drivers. An experiment that is beginning to cost quite a bit. "Well of course it's costing costing us more money," I can hear you say, "the companies running the 407 have to make profits. When the government government runs things like roads, they run them on a cost recovery basis. Thus roads would be cheaper." Last week, I said that indirect indirect payments are equal to indirect incentives. Then I said that indirect incentives result in a miscommunication of costs, and a resultant mis- allocation of goods, labour, and so on. In other words, folks don't buy what they really want, fussing with the price signals, making everyone everyone worse off in the long run. This week I say that the 407 may be reflecting the actual costs of the roads, plus some hoped-for profit. It may be counter-intuitive, but this latter bit about profit does not always result in higher costs. In fact, the quest after profit usually results in things becoming cheaper. "How, exactly, is that possible?" possible?" you might wonder. "What a ton of nonsense," you might exclaim, "take costs, add profit, and you get a price tag that's greater than costs alone. Simple, basic, arithmetic." Well, yes, of course that is the case. The only trouble is that 'costs' are never given, and never static. Costs are 'given' at any point in time- take a snapshot of today's economy and you'll get the costs-but over time they change. Pens used to be very expensive. But in their quest for profit, companies managed managed to lower the cost of their inputs--lowered the cost of the processes involved, and the materials-and then, through competition and available alternatives (like pencils), lowered their prices. There are two ways to make greater profits-one is the knuckle-headed way of doing everything like you've always done it and raising the price a bit. The other is to lower your costs and keep prices the same, or lowering them to increase sales. You may be stunned to learn that companies who do the former do not stay in the game too long. With good enough reasons to do so, companies will struggle to find newer and better ways to make this or that so that we will buy their wares. As I see it costs, insofar as MORRIS FUNERAL CHAPEL LTD. SERVING DURHAM REGION SINCE 1841 all funeral services PREARRANGED AND/OR PREPAID BURIAL - CREMATION - TRANSFERS "WHERE PROFESSIONAL ETIQUETTE IS IMPORTANT' FUNERAL DIRECTORS PAUL R. MORRIS DOUG R. RUTHERFORD GARY M. CONWAY DEBRA D. KELLEHBR 623-5480 4 DIVISION ST.. BOWMANVILLE - AT QUEEN SI. iiiiiiiill!: iilii il i iiiii: ill! ill |[ |||!| ill The gate at McLean's Cemetery north of Kendal on the 8th Concession. : :**««•»>* >x+: i» they are open to feedback processes, and have the proper proper incentives, are part of a process, and never just given. When you and I are made to pay directly for roads, that puts some pressure on the road people to do something to lower the costs. In the meantime, however, we may change our behaviour and better reflect our actual preferences, preferences, given constraints and costs. You may not like driving on the 407 with the tolls as expensive as they are, but at least we get a better sense of what you are willing to pay for. And in a world of limited resources, this is all for the better. MS lives here. Canada has one of the highest rates of multiple sclerosis in the world. SJMI Multiple Sclerosis rlv Society of Canada 1-800-268-7582 www.mssociety.ca Learn how to talk to others about their smoking. j&smokers'HELRUNE ** CANADIAN CANCIIt SOCIETY TOLL-FREE 1-877-5 I 3-5333 January book picks from the Clarington Public Library Legacies by L.E. Modesitt Fantasy lovers take note! This is the first novel in an exciting new series called 'The Corean Chronicles'. Alucius is a young herder serving in the militia, who is captured by the Matrites and forced to serve in their army. As the story develops, Alucius slowly becomes aware that his 'Talent' may be the key to overthrowing his captors. Prey by Michael Crichton Scientists use "Nanotechnology" to further explore the human body, but is it as safe as we are told? Do we really know enough about it? Hold on to the edge of your seat and find out just how 'safe' it really is. Another zinger from Crichton! Daddy's Little Girl by Mary Higgins Clark When her sister was murdered, Ellie Cavanaugh's testimony was instrumental in getting the murderer sent to jail. Now he is up for parole and his family is insisting that he is innocent and deserves a new trial. Was Ellie wrong from the start? Another great novel from the 'Queen of Suspense'! Whispers and Lies by Joy Fielding This is an excellent character driven novel, which takes place in the quiet town of Delray in Florida. Terry Painter, a single middle-aged nurse rents a cottage to a mysterious young woman, named Alison Simmus. We focus on Terry's suspicion and unease about Alison and her friends. As we learn more about Terry and Alison and their friendship we also start to understand how vulnerable and psychotic they really are. With a surprising finale this book is a great page-turner and a must read. Three Junes by Julia Glass Follow these memorable characters from a Scottish family, the McLeods, through three summers. Paul runs a newspaper and hopes that one of his three sons will take over, but the three McLeod sons decide to take different paths in the world. Fenno, the oldest, is a gay man who runs a bookstore in New York City. David is a successful veterinarian, and Dennis is a chef with an imperious French wife named Véronique. Will Fenno learn to share his life with his brothers? Will he even find a love all his own? The story is full of revelations and symbolism, and due to Glass' attention to small detail her characters become full of depth and detail in the telling of the story. « • » i t • i i i i i