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BITRE | Working paper 74

Assume for a moment that each of the separate areas that interact to create

congestion is optimally managed. In other words, public transport policy is sound,

with levels of service and subsidies following a carefully designed plan to achieve

the stated objectives. Road management is efficient with advanced technology being

implemented where the returns justify the cost. Urban expansion follows clear

guidelines involving appropriate cost recovery of the infrastructure and so on.

Under this scenario, even with the separate policy areas operating at their optimum,

an inefficient level of congestion prevails. This, as most would observe, is due to

the absence of a pricing signal reflecting the cost imposed on others by the entry

of an extra vehicle: the congestion externality. The ideal solution in this situation is

a congestion charge equal to the difference between the marginal private cost and

the marginal social cost. This would ensure that the interests of the road user were

aligned with the interests of the wider community.

The key question becomes ‘is it necessary that the congestion charge is designed

as an element in a wider, coordinated package The problem with the ‘coordinated,

integrated ideal’ is just that: it is an ideal. The first hurdle in the pursuit of such an

ideal is compiling the data required to ensure that the coordination can come about.

The second is ensuring the goodwill amongst different agencies as they sublimate

their best interest for that of the ‘greater good’. The third is compiling the carefully

structured package. Each step along the way is extremely demanding.

The alternative is to introduce the appropriate congestion charge, then allow the

other policy areas to adapt. In the real world, there would be scope for decision

makers in related policy areas to exchange information and hence to anticipate the

impact of the congestion charge. For instance, the public transport operators would

factor in higher demand for their services and plan accordingly. Housing developers

would anticipate an increased demand in those areas that provided more options to

car use. Roads that substituted for the charged roads would need to consider options

for dealing with ‘rat-running’ such as speed humps and lower speed limits.

In other words, while ‘integrated, coordinated policy making’ sounds like an obvious

option, it is not clear that an iterative approach (as outlined above) would not work

as effectively; possibly more so in that it would be less likely to be become bogged

down in reaching agreement among potentially conflicting parties, where efficiency

is often the casualty of compromise.

Furthermore, there is a major downside to the multifaceted approach that it is important

for policymakers to come to grips with. This is the temptation to justify a wide range

of measures because they may help to reduce congestion, without subjecting each

measure to separate scrutiny. This ‘bundling’ of measures tends to result in policy

options being adopted on the basis of their aims (rather than on their performance).

Measures aimed generally at ‘reducing the current and future need to travel’ invariably

play key roles in any package to tackle congestion. Generally unacknowledged is the

simple fact that travel per se is not inherently ‘bad’ and that the optimal level of travel

is not always a lower level. If the benefit of extra travel exceed the social cost of that

travel, then the community will be better off if that travel takes place. Hence, more

travel might be better than less, although it may take place at different times and in

different places than currently.

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