ABSTRACT
This chapter considers the question of how far the existing legal and commercial conditions facing firms lead them to use the transport mode which minimises the social costs of transport; that is, the mode which minimises the sum of the private costs borne by the consigner plus the external costs borne by the rest of society. If one mode creates more external costs than another, then charges that only reflect private costs will lead consigners to choose the mode which minimises their own private costs, even though the alternative mode might lead to lower social costs. The chapter next considers the possibilities, costs, and environmental benefits of transferring traffic from road to rail. Finally, it examines whether decisions concerning the allocation of freight traffic are made on the basis of the price paid, or whether, for instance, habit and irrational motives play a part.
