1. The value of time paradox Kees van GoeverdenDelft University of Technology BIVEC-GIBET Research Day 2009

2. Value of time Applications: Modelling travel choices. Appraising benefits/costs of time savings/losses. Consequences for policy decisions. Paradox in development at increasing prosperity for the second application: Observed (practice): increase Hypothesis (theory): decrease

3. Practice: estimation of VOT Productive activities (business travel) Leisure activities (private travel) Earnings/Wage rate1 to 1<1 to 1 Willingness to payProducersTravellers

4. Practice: development of VOT Positive relation with prosperity is observed; assumed income elasticities range from 0.5 to 1.0 Explanation is simple: Wage rates are directly related to prosperity. Willingness to pay is influenced by the ability to pay which is related to prosperity.

5. Practice: relation with prosperity

6. Theory: hypothetical relation Starting point: Value of saved time equals the marginal utility that is gained from alternative spending Two types of spending: -Productive (working time) -Leisure (non-working time)

7. Productive: the value of working time versus prosperity Assuming rational consumer behaviour, people will spend money to satisfy their most urgent unsatisfied needs. This implies a law of diminishing returns in consumer behaviour. Then the value of working time decreases when prosperity increases.

8. Production-utility curve

9. Empirical support for the curve Findings in happiness science, assuming happiness as a proxy for utility: Decreasing positive impact of prosperity on happiness. Probably no impact in the prosperous first world countries (curve would be here horizontally). Indications of a negative impact in most wealthy countries (curve would have a maximum).

10. Leisure: the value of non-working time versus prosperity Prosperity provides more and better opportunities for spending leisure time. VOT might be related to the actual amount of free time; relation with prosperity; -‘technical’: positive -observed: slightly negative. TTB: Saved travel time is fully used for lengthening trips. Utility of saved time equals the excess utility of the more distant destination. Relation with prosperity?

11. Theoretical relation: conclusion If saved time is used for production, VOT decreases at increasing prosperity If saved time is used for leisure, the relation between VOT and prosperity is unclear. A negative relation seems more probable than a positive relation. The overall relation is likely to be negative.

12. Theory: relation with prosperity

13. Synthesis: paradox

14. Discussion Is the paradox a real conflict or just an ostensible conflict? Is the argumentation behind the theoretical curve valid? Which curve represents the ‘real’ value of time? Have we to worry about using current values of time in assessing time savings or losses?