Wednesday, July 19, 2006

A New Approach To Congestion Pricing

A new approach to congestion pricing has been proposed in Sydney, Australia.

London and Stockholm are already using central business district congestion pricing. They have reduced traffic congestion dramatically by charging drivers to come into the central business district during the most congested times of day. But this does have one disadvantage: some shoppers abandon the central business district and go to malls where they do not have to pay to drive.

Peter Stropher of the University of Sydney and Garry Glazebrook of the University of Technology, Sydney, have proposed city-wide congestion charging, making drivers pay to use all congested routes in the city.

Stopher says the technology top do this is "about 90 to 95 per cent there," and he has applied for a grant to test the concept.

This is a simple solution to traffic congestion, which has always seemed to be an intractable problem. It obviously better than widening freeways to deal with congestion: widening freeways does not work, since the new freeway capacity generates more traffic and worse congestion in the long run.

The Sydney Chamber of Commerce showed that it does not understand this issue at all by commenting: "A congestion tax ... would do nothing to address the underlying cause of congestion."

The underlying cause of congestion is the fact that you will create shortages if you give away a scarce and valuable commodity for free. If we gave away free gasoline or free caviar, we would create shortages of these products. Likewise, because we let people drive for free on scarce urban land, we create a shortage of land to drive on - which is commonly called congestion. The Chamber of Commerce should have learned this in Economics 101.

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