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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