PRICING AND CONGESTION: ECONOMIC PRINCIPLES RELEVANT TO PRICING ROADS

Abstract

U.K. expenditures on roads or "road costs" average L4.34 billion per year. From the 24.6 million vehicles registered, road taxes of L12.7 billion were collected -2.9 times "road costs." From 1978-88, the average daily traffic on each km of road rose by 34 percent with a consequent serious increase in congestion. Road space is a valuable and scarce resource, and road users should logically pay the marginal social cost if they are to make efficient transport and location decisions. The paper estimates these costs and the appropriate charges for Britain, and identifies the major policy issues. Total road charges, ignoring hard-to-quantify accident costs, should yield L13.8 billion, of which congestion charges would be L12.8 billion. Though close to road taxes in total amount, replacing current taxes by road pricing would reduce congestion, improve public transport, and avoid perverse consequences from road expansion. Copyright 1990 by Oxford University Press.