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BITRE | Working paper 74

ways and means to determine the congestion level before embarking on the journey.

(See page 71 for a discussion of dynamic pricing.)

All vehicles should be charged without exception

Vickrey was clear on this point: to maintain the integrity of the market pricing

principles and to avoid the wasteful lobbying for exemptions, a blanket rule of no

exemptions must be adopted. This includes trucks, doctors’ cars, press cars, and cars

of public officials and diplomats, among others.

While Vickrey allowed a case for charges above the marginal cost of congestion (when

applying an economy-wide tax), he was less tolerant of exemptions, concluding that

‘there is no excuse for charges below marginal social cost’ as there will always be

more efficient and equitable ways of achieving the goals of such concessions.

Vickrey maintained that charging public vehicles, such as emergency vehicles, is

important even if it is only an accounting transfer. Facing such charges would give a

true picture of the cost of these operations and provide an incentive for performing

their functions more efficiently, and possibly induce a better budgeting of public

funds with due regard for true costs.

This point can be taken one step further. There is due merit in Vickrey’s position.

The principle of not having exemptions is sound, for efficiency and budgetary

reasons. Possibly more important is the fact that exemptions can undermine the

objectives of congestion charging

Exempting any vehicle from congestion

charges undermines scheme objectives.

106

schemes. For instance, the introduction

of congestion charging in the Seoul

Namsan tunnels in 1996 resulted in a

significant decrease in traffic levels and

an increase in average daytime speed

from 21.6 kilometres per hour to 37.6 kilometres per hour (Yoon 2003, p. 4). However,

traffic levels have increased again beyond the 1996 level, with ‘the greater proportion

of this traffic volume increase consisted of toll-free vehicles such as taxies, trucks,

and private vehicles occupied by three or more persons’. Similarly, in the London

congestion-charging zone, while there has been an overall reduction in traffic, usage

by exempted taxicabs has grown.

On-street parking should be charged on the basis of clearing

the market

Vickrey advocated that the system be dynamic, but with the charging rules being

posted. For example if:

… over a suitable number of weeks, fewer than, say 5% of the spaces are typically

vacant during a particular time slot, the charge should be increased, and if vacancies

are consistently more than, say 20%, the charge should be reduced, or eventually

eliminated. Charges may appropriately be made to vary with the size of the vehicle

(Vickrey 1992).

This is probably the most commonly infringed rule: parking charges are very popular

among urban authorities as ‘proxy road charges’, because the community is more

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