The Edinburgh Academy

The basic principle of rationing by price is that of allocative efficiency. Those to whom a resource is most valuable will pay most for it. Those who cannot or will not pay the price will be excluded from the market; they become extra-marginal consumers. This presents an immediate problem for commuting. Many people become commuters because they cannot afford the inflated house prices of the cities. Essential workers in public services such as the NHS or education are often poorly paid; their work is necessarily located where people are concentrated, but they cannot afford to live there and so they become commuters. If you prevent them from commuting you will deprive the urban centres of essential services.

But, it is argued, your objective is not to prevent them from commuting but to prevent them commuting by car; they can use public transport. This argument ignores a number of points:

• In June 2005 it was announced that railway capacity on commuter routes was saturated and that rationing by price might be introduced there too to force travellers to re-time their journeys. Sadly of course the poorest commuters tend also to be those with least control over their working hours and therefore over their journey times.
  
• In the UK public transport is not integrated. A journey requiring a combination of buses or buses and trains will usually involve difficult or unreliable connections and a good deal of wasteful waiting. In effect the problem of delay has simply been shifted away from the traffic jam to the bus stop; it has not been overcome.
  
• Public transport is frequently not an option in the rural areas in which commuters live. They must therefore drive to railway stations or park and ride car parks. This frequently shifts congestion on to minor roads less able to handle it.

The problem of pollution is different. Larger vehicles pollute more than do smaller vehicles. However larger vehicles are more expensive to buy than smaller vehicles and therefore are often driven by richer people. To ration road mileage by price is likely to drive off the roads the poor owners of small cars and leave behind the rich owners of large cars. To this extent mileage pricing is counter productive. By contrast fuel taxation, as at present, penalises the large vehicle that uses more fuel than the small vehicle. Thus we can see that road pricing would be a negligible deterrent to a rich mother undertaking a very short school run in a large 4X4, but a serious obstacle to a nurse commuting twenty five miles in a mini.

The lack of knowledge

The greatest flaw in the proposed satellite system is probably its obscurity. Rationing by price works best in conditions of perfect knowledge; that is, where the prospective customers know in advance what they will have to pay for a product. To the extent that the M6 relief road and the London congestion charge work, they do so for this reason; there is a known area affected and a known price to pay. If you want to avoid paying you avoid that area. What is proposed is that all areas will be affected and a multiplicity of charges will be involved. It will be impossible to provide physical signage of the boundaries of the various prices; only a very small number of carefully planned long distance journeys, such as holiday expeditions, are therefore likely to be routed in accordance with conscious awareness of the pricing implications.

The experience of the break up of directory enquiries shows clearly the ineffectiveness of price competition of which the consumer is unaware. Not all the new directory enquiry services charge the same price, but there is no way to find out which is cheapest without spending more on research than you would be likely to save. Accordingly the consumer takes pot luck and waits for his phone bill to enlighten him on whether he did in fact make a rational economic choice. If a similar principle is applied to road pricing a similar effect will result, except that a large number of people will have to be brought before the courts for incurring road use charges that they find impossible to pay. There will also be a huge incentive to drive unregistered vehicles that cannot effectively be tracked by the system, hence increasing the danger of accidents caused by reckless drivers of unroadworthy cars.

To conclude, it seems that the government’s idea of creating a pseudo-market is unlikely to solve the traffic congestion problem. A number of advantages of the present system, such as the incentive towards fuel efficiency, would be lost. Traffic jams would be moved from the centre of cities to the outskirts, but not eliminated. To be stuck in a traffic jam emitting pollutants would, perversely, be cheaper than to move quickly on an open and empty road. To use your car unnecessarily for a short city journey could would attract a negligible charge; to travel a long distance for an essential purpose would be costly.

Ironically of course the actual market will solve the problem if left alone. When rationing by price is not practical the market tends to substitute rationing by waiting list, or in other words by delay. Road congestion produces delay and delay is expensive. Those who cannot afford the delay will eventually be forced to seek alternative means of transport. Gridlock, in short, is not the problem but the solution.

2005