1. Transport Issues

2. Is congestion new? NO! In ancient Rome, chariots were prevented from entering the city at certain times to stop congestion In London, before cars were invented, there was congestion from horse and carriages So congestion is not a new problem – but has got worse

3. The link between congestion and incomes There is a link between incomes and congestion As people’s incomes increase, they move away from public transport and purchase cars Road travel has a significant positive income elasticity of demand There are benefits to road travel – what would these be?

4. Benefits Reduced journey times Increased productivity More leisure time – could link (analysis) to increased productivity? Less waiting time for goods/services More travel opportunities

5. Tackling congestion The government could tackle congestion in a variety of ways such as Building more roads Improve public transport Raise the cost of motoring Introduce road pricing

6. Socially efficient private motoring A socially efficient level of road usage would be at the point where MSB = MSC MSB = MPB + positive externalities MSC = MPC + negative externalities

7. Benefits Satisfaction (MPB) Importance of journey Comfort Convenience Are there any external benefits?

8. Costs Private costs – fuel, depreciation, road charges External costs – congestion (which leads to an increase in private costs e.g. fuel costs), pollution, global warming

9. MSC Marginal social costs and benefits MB = MSB Road usage

10. Socially efficient level In order to achieve an equilibrium between MSB and MSC there is a need to ensure that car users pay the true cost of their usage This means that the government use strategies which ensure motorists internalise the full costs of road usage Is there a link here to alcohol?

11. Socially efficient level If the private costs of road use are lower than the full social costs, cars and roads will be overconsumed – a socially efficient situation requires that prices for road use should rise That would lead to the price mechanism rationing road use between competing users and ensure that costs and benefits are in equilibrium

12. Public transport An alternative is to subsidise less socially costly methods of transport so they can compete more with roads However, government failure needs to be taken into account when thinking about transport policies Some decisions have unintended consequences which make them less optimal

13. Building new roads Have high opportunity costs Controversial Use up land Environmental consequences Encourages overconsumption rather than bringing consumption into line with the full social costs More road use means less use of public transport – which leads to less public transport being used and therefore cutbacks in public transport. This will affect those who do not have access to private transport which tends to be the poorest Solves congestion in the short run but encourages traffic volumes to increase in the long run

14. Improving transport Encourage substitutes Subsidise bus and train fares Bus and cycle lanes Trams Substitution depends on the quality of the substitute – needs to be frequent, cheap and reliable Perception of social status?

15. Raise cost of motoring Change market signals by increasing cost of motoring Road tax changes – but the fixed cost element is not a discouragement Fuel tax – fuel duty escalator – fuel duty rise needs to be substantial to have an effect and is inflationary Fuel tax is unpopular

16. Road pricing Tend to be unpopular Price needs to be high enough to discourage use If the charge is high enough then the charge can cover the full marginal social cost and achieve a socially optimum level of road use

17. Alcohol strategy Based on the strategies used for road use, what could be a strategy that would be useful for alcohol? Can you encourage users of alcohol to take full account of the marginal social costs?