ROAD PRICING

Road Pricing

Road Pricing

Introduction

A new kind of charge or fees is imposed in London that is termed as 'congestion charge'. It is actually a fee that is charged on the vehicles operating within a specified zone, termed as 'Congestion Charge Zone'. There are different views regarding this charge. Some are in favor, while others are against of this charge. However, this fee is used to control road congestion and the city may lead to progressive development. If the charge seems to be working in an effective manner, there is a possibility that it will be imposed in other towns and cities as well who face the problem of congestion.

Explain why traffic congestion is a classic example of the problem of externalities?

'Internalizing' is a negative externality that may be corrected by using the method of congestion charging. An externality may be defined as an impact of a decision on a third party. In this case, the decision is by the general public who have opted to use their vehicles in the central London as a means of transportation. This causes congestion, having a direct impact on a large group of other people including police, emergency services, hospitals, individuals, businesses and so on. It turns out to be a huge cost of the effects of such decision, when calculated collectively. Calculating and computing the costs of such decisions is considered as a major problem. Congestion brings along several problems:

Pollution - atmospheric pollution gets intense due to the pollutant emission by the cars.

Waste - wastage of resources like petrol and energy consumption by engine when the cars are at stationary position.

Time loss - people heading towards their workplaces reach late at work due to the loss of time.

Freight transporters find it difficult to deliver and collect the stuff timely. This include the cost of fuel, driver's wages, etc.

The damages caused to roads by excessive usage of vehicles on them.

Medical costs for treating diseases and accidents caused due to the congestion.

Cost to the employers whose employees miss work due to the late arrivals at office.

The cost attached to the patrolling by the police around the roads for safety and security.

In several cases, it is tough to find the actual costs and we have to make the estimates of the costs of the decisions. For instance, in 1977, Friends of the Earth came up with the report that the estimated cost of traffic congestion in London was over £2bn per year or £37mn per week.

It is a fact that the decision makers are not essentially the ones who incur the decision costs which is a major part of the issue with the externalities. We do not realize the fact that we are the real cause of the problem of traffic jams and still we are the ones who complain about it. In order to resolve the issue, economists propose that the people must bear the responsibility for the cost being incident upon others because of them - in short to internalize the ...