Traffic Congestion As Market Failure Essay, Research Paper
??????????? Congestion
comes about when the actual journey times taken by transport users are in
excess of their normal expectations. Congestion can have many consequences other
than increased journey time, the stress caused by it can be the cause of road
rage, as well as the increase in harmful emissions having detrimental effects
to the areas buildings, air quality and quality of life of all involved. ??????????? Congestion more simply is caused by too many cars
chasing too little road space. The demand for this mode of transport has far
exceeded the supply. The increase in incomes and relative fall in the price for
cars has led to the higher number of cars on the road. The supply for road use
is fixed in the short run as it cannot be transferred; the roads are not
constantly congested, it is only during peak times, the empty roads of the
night and day cannot be transferred to the busy periods of morning and
tea-time. In the long run another road could be built. In more economic terms congestion is a mixture of
externalities, information failure and transaction cost. Negative externalities
exist as the car produces emissions, which are harmful to the environment, the
wear and tear of the roads, and the opportunity costs are not included in the
monetary costs of motoring. They are also mutual externalities as the drivers
are both the cause of the congestion; the victim of those in fronts decision to
drive and the cause to those behind. Information failure is apparent as if
information of delays and congestion could be relayed, alternative routes could
be taken and congestion reduced. However the market does not give such signals,
this could never be a perfect solution, as the congestion would eventually
transfer to the alternative route, an alternative may not always be available
anyway.? The transaction cost can not be
possible in road use as a market solution of using price to allocate road space
is not practical because you can not pay the person in front of you in a
traffic queue for their space. The administrative solution of first come first
served is used. Transaction costs could be done in the form of tolls, but these
have impracticalities. Congestion in urban areas can be seen as a form of market
failure because the socially efficient output is not produced. The social optimum
amount of vehicles on the road must be exceeded if congestion results. The
marginal cost to the consumer is the only cost really considered when a driver
makes the decision to use the car. What is not taken into account are the costs
to other road users, the cost to society collectively; the social cost or
themselves to some extent. The marginal cost to other road users is the added
congestion caused by the extra car on the road. The marginal costs to society
collectively are the increase in emissions produced by the extra journey made,
the follow on effects from this are large, rising asthma levels in the local
area, decaying buildings and collapsing roads could be caused because of the
high congestion rates. The marginal cost to the individual could be the
opportunity cost of the time spent in congestion. If the more space efficient
bus made the journey, the traveller would be able to read the newspaper, play
on a hand held computer or even do some work, this is not possible if the car
is chosen to make the journey. The marginal utility of existing users of the
congested roads would decrease with the addition of an extra motorist, an extra
10 or even 100 motorists would lower the marginal utility levels dramatically.
But each individuals marginal cost wouldn?t be effected, which explains why the
marginal cost and marginal social cost diverge. This can be shown by the graph
that shows the social optimum level of vehicles; where the marginal social cost
equals the marginal social benefit. Journey Costs
& benefits ??????????????????????????????????????????????? Number
of vehicles on roadThe dashed line represents the socially optimum level of
vehicles on the road and the marginal utility of the user. ?A higher level of vehicles on the road, shown
by the dotted line, shows a larger marginal social cost, marginal social
benefit and lower marginal utility gained.In order to reduce or eliminate the market failure of
congestion, it is necessary for attempts to be made at reducing the number of
cars on the road, so the number is nearer the social optimum. ?There are problems involved with identifying the
social optimum number of cars, mainly due to the lack of information concerning
the outputs of each car, the monetary cost of damage done, and whether the car
is definitely to blame for such damage. This is the reason the externality
cannot simply be taxed or charge to the producer, it is too hard to know which
car contributed to most of the damage and harder to prove so in order to
receive the necessary charge. This is why the general number of cars on the road
has to fall. b). Discuss the economic arguments for using revenue from road pricing
schemes to support passenger transport systems in congested urban areas. (12) ??????????????? ?Inorder to reduce the number of cars,
which use the roads in congested areas, there have been many options for the government
of the day to introduce. The most commonly used is to simply increase the costs
of motoring in general. This can be done through the increase in the amount of
which a tax disc cost levies on fuel, the initial purchase on a car and other
general ways to increase the cost of motoring, have failed. They often punish
those who may not deserve to be as much as others. The increase in fuel may
have little effect in reducing the congestion in urban areas whilst it
infuriates the motorist in the country where it is not congested but also not
possible to travel by other means at times. The increasing of the initial
motoring costs is unlikely to deter people to make an extra journey; it may have
the opposite effect whereby people make more journeys to get? ?value? for the large outlay of the car. The
problem of congestion lies in busy cities, town centres and the surrounding
roads. The discouraging of people to make the additional journey could ease the
problem of congestion by car, especially the short journeys of in and around
the town or city. The negative externalities produced by cars are worsened when
the car is in traffic, not when driving at a normal motorway speed. As the main
problem of car use is caused by slow moving traffic in built up areas, it would
be wise to address that as the problem and attempt to combat it. Road pricing would basically involve the charging of motorists to use the
roads in and around the congested urban areas. It is hoped that by charging
motorists to use the road space, they would make alternative arrangements to
travel; walk, cycle, share a car or use public modes of transport such as
buses. ?The reduction of cars on the
road would inevitably lead to a reduction in congestion and therefore the
problems it causes. Road pricing can be done in a number of ways, and technology advances
have allowed these ways to be varied and efficient. In Oslo road pricing was
introduced by placing a toll ring around the city centre, 19 toll stations were
placed in Oslo located on every access road to the city centre. 8 of the toll
stations are on main roads and the remaining 11 are on minor roads. The stations
have lanes for conventional payment to gain access to the road, they also have
lanes for electronic payment, done through a chip placed in the subscribers car
which is automatically registered and charged the relevant amount, this saves
queues at the toll stations and congestion once more. The success of the scheme
can be seen through the increased number of electronic subscribers. Other positive
outcomes of the scheme include the increasing use of public transport, of which
quality has improved as well as the journey time that has been increased due
for the both public and private transport users. The increase in public
transport has occurred through the increased marginal cost of motoring in Oslo.
There have been environmental advantages as a result of the reduction of cars
and congestion around the city. Bergen implemented a road-pricing scheme with the specific aim of
decreasing private car usage alongside the aim of increased public transport
use. This was done so through the use of toll rings. They since doubled the
initial cost as well as differentiating the charges in accordance with the time
of day. It did not have the impact so required as the price charged may have
been too low, seeing how price inelastic the demand for motoring is, also the
public transport system may not have been an attractive alternative. The Oslo example shows how road pricing can be very effective if done correctly
and if viable alternative methods are available. The Bergen example shows it is
not an overnight remedy for congestion. The question remains of how the government should use the revenue created
from road pricing. The revenue could be used to build more roads or to cover
the cost of a new road, such as the A1 in France where road-pricing revenue
helped to redeem the initial expenditure. ?If road pricing schemes are introduced in order to promote the use
of public transport whilst discouraging the private motorist, it is surely only
natural that the revenue received should be used to boost the public transport available.
How the money would be used to boost public transport would be a point
for discussion. As the majority of bus operators are private, and thus profit
making firms, government subsidies for them to improve service may just end up
subsidising the supernormal profits of the bus operator. This would be done, as
the costs would be lowered, as the government would have subsidised them to
ensure service is provided. Whether the service would be of a high enough
quality is questionable if the firm?s sole aim is profitability. The bus operator only operates the profitable routes, with government subsidies,
the unprofitable routes from the rural areas etc. whereby car essential is seen
as a must could be run. This would have social benefits because of the reduction
in pollution and more people travelling by bus achieve a more efficient use of
road space. The revenue earned by the transport system could be ploughed back into
the transport system, known as hypothecation, in other ways than simply
subsidies. The revenue could be used to set up and provide better regulations
by which the bus companies must adhere to, quality of vehicles, promptness, and
access for disabled/children all high on the objectives that the firms must
meet. This should ensure the quality of the buses is of such a standard that it
is a genuine alternative to private motoring. The revenue could be used to subsidise the cost of public transport by
the government distributing vouchers directly to motorists to use the public
transport system, this would be done in return for not using private transport.
There are equality arguments in road pricing and hypothecation. It has
been argued that road pricing discriminates against the poor whilst the well
off motorist is seemingly unaffected by it. The reverse is that it ignores those
who cannot afford a car in the first place, they may be the ones who suffer the
most from the negative externalities of the car whilst not being able to enjoy
the benefits. Those people have been said to benefit disproportionately by the
improvements made to the passenger transport systems, done so through
hypothecation. In conclusion, if there were substantial evidence that using public
transport will become not only more comfortable and pleasurable but also
cheaper as a result of road pricing and that it was to become a serious
alternative to private motoring, then it would be seen as a more popular
introduction. Until then, governments may continue to put off the passing of
legislation that would allow road pricing, as it may put them in an
unfavourable position with the electorate.
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