Congestion Pricing, Just Another Tax Scam

When London can get away with charging up to about $US16 per day for vehicle access to central London on weekdays, likely matching the $US4000 or so yearly cost of a typical individual commuter's vehicle financing and insurance, we can infer that there are likely powerful propaganda forces at work.

Sure enough, most academic economists consider congestion pricing to be the greatest thing since sliced bread, justifying their existence as if they had found the philosopher's stone, the golden fleece, the holy grail and the fountain of youth all in the same place.

Their delight in finding that congestion is indeed reduced when access to the roads is charged for seems to have no bounds. We can now look forward to multipage mathematical economic proofs that water is wet.

To try to sprinkle a little doubt onto the proposition that public goods in a condition of inelastic supply should be rationed by price, consider the following analogy :

Assume a public pedestrian bridge over the Thames which has a 10% probability of collapse if more than 1000 pedestrains try to use it at the same time. Does it make more sense to try to limit the number of pedestrians by charging a high price for a bridge trip pass, or by simply limiting the number of simultaneous bridge trip passes outstanding to less than 1000, providing them for free except for a small charge for marginal wear and tear and administration? The answer undoubtedly depends on who gets the proceeds.

In the case of central London congestion, consider what would happen if all charges were later secretly refunded to the motorists paying them. It should be clear that the reduction in congestion would be just as great even though the net charge would be zero. Congestion itself is tied to the number of vehicles allowed in, and the distribution of a set number of day licenses is a separate issue, with it being not at all clear that they should go to those who value money least or are re-imbursed in one manner or another.

It is of course claimed that the charges (taxes) will be applied to improvements in buses and the tube. But even assuming this to be true, does it make sense?

If such improvements are judged to both necessary and appropriate, then the funds to undertake them must come from some combination of taxes, borrowing and printing, and possibly user fees.

But why in the world would the primary tax come from non-users in the present? The benefits of the improvements will primarily flow to future users over time. Isn't it more appropriate to charge them user fees to help repay current infrastructure loans? Or at least broaden the tax base beyond those who will benefit the least?

Prices are what emerge from a market to balance supply and demand. They are not good tools to use to set a desired level of demand. They are at a distinct disadvantage if they cannot attract an increased supply and incentivize a profit-seeking entity.

Share this