Editing Transport economics (section)

== Externalities ==
In addition to providing benefits to their users, transport networks impose both [[positive externalities|positive]] and [[negative externalities]] on non-users. The consideration of these externalities – particularly the negative ones – is a part of transport economics.

Positive externalities of transport networks may include the ability to provide [[emergency services]], increases in land value, and [[economies of agglomeration|agglomeration benefits]]. Negative externalities are wide-ranging and may include local air pollution, [[noise pollution]], [[light pollution]], [[traffic safety|safety hazards]], [[:wikt:severance|community severance]] and [[traffic congestion|congestion]]. The contribution of transport systems to potentially hazardous [[climate change]] is a significant negative externality which is difficult to evaluate quantitatively, making it difficult (but not impossible) to include in transport economics-based research and analysis.

Congestion is considered a negative [[externality]] by economists.<ref>{{Cite book | last1 = Small | first1 = Kenneth A. | last2 = José A. Gomez-Ibañez | year = 1998 | title = Road Pricing for Congestion Management: The Transition from Theory to Policy| publisher = The University of California Transportation Center, University of California at Berkeley| pages = 213 }}</ref> An externality occurs when a transaction causes costs or benefits to third party, often, although not necessarily, from the use of a [[Public good (economics)|public good]]. For example, manufacturing or transportation cause air pollution imposing costs on others when making use of public air.

=== Traffic congestion ===
{{main|Traffic congestion}}
[[File:I-80 Eastshore Fwy.jpg|thumb|right|200px|Typical traffic congestion in an urban freeway. Shown here is [[Interstate 80|I-80]] [[Eastshore Freeway]] in [[Berkeley, California|Berkeley]], California.]]

Traffic congestion is a negative externality caused by various factors. A 2005 American study stated that there are seven root causes of congestion, and gives the following summary of their contributions: bottlenecks 40%, traffic incidents 25%, bad weather 15%, work zones 10%, poor signal timing 5%, and special events/other 5%.<ref>{{cite web|title=Traffic Congestion and Reliability: Trends and Advanced Strategies for Congestion Mitigation|date=1 September 2005|url=http://www.ops.fhwa.dot.gov/congestion_report/congestion_report_05.pdf|publisher=U.S. Federal Highway Administration|access-date=2008-02-28|archive-date=29 June 2019|archive-url=https://web.archive.org/web/20190629125056/https://ops.fhwa.dot.gov/congestion_report/congestion_report_05.pdf|url-status=dead}}</ref> Within the transport economics community, [[congestion pricing]] is considered to be an appropriate mechanism to deal with this problem (i.e. to internalise the externality) by allocating scarce roadway capacity to users. Capacity expansion is also a potential mechanism to deal with traffic congestion, but is often undesirable (particularly in urban areas) and sometimes has questionable benefits (see [[induced demand]]). [[William Vickrey]], winner of the 1996 [[Nobel Memorial Prize in Economic Sciences|Nobel Prize]] for his work on "[[moral hazard]]", is considered one of the fathers of congestion pricing, as he first proposed it for the [[New York City Subway]] in 1952.<ref>{{Cite web|author= Vickrey, William | year=1992|url=http://www.vtpi.org/vickrey.htm|title= Principles of Efficient Congestion Pricing|access-date=2008-02-26|publisher = Victoria Transport Policy Institute}}</ref>
In the road transportation arena these theories were extended by [[Maurice Allais]], a fellow Nobel prize winner "for his pioneering contributions to the theory of markets and efficient utilization of resources", [[Gabriel Roth (economist)|Gabriel Roth]] who was instrumental in the first designs and upon whose [[World Bank]] recommendation<ref>{{Cite book | last = Walters | first = A. A. | year = 1968 | title = The Economics of Road User Charges| publisher = World Bank Staff Occasional Papers Number Five, Chapter VII, Washington, D.C. pp. 191–217| isbn = 978-0-8018-0653-7}}</ref> the first system was put in place in Singapore. [[Reuben Smeed]], the deputy director of the [[Transport Research Laboratory|Transport and Road Research Laboratory]] was also a pioneer in this field, and his ideas were presented to the British government in what is known as the [[Smeed Report]].<ref>{{cite book |last=Smeed |first=R.J. |year=1964 |title=Road pricing: the economic and technical possibilities |url=https://archive.org/details/op1265810-1001 |publisher=HMSO}}</ref>

Congestion is not limited to road networks; the negative externality imposed by congestion is also important in busy public transport networks as well as crowded pedestrian areas, e.g. on the London Underground on a weekday or any urban train station, at peak times. There is the classical excess in demand compared to supply. This is because at peak times there is a large demand for trains, since people want to go home (i.e., a derived demand). However, space on the platforms and on the trains is limited and small compared to the demand for it. As a result, there are crowds of people outside the train doors and in the train station corridors. This increases delays for commuters, which can often cause a rise in stress or other problems.

==== Congestion pricing ====
{{main|Congestion pricing|Road pricing}}
[[Image:ERPBugis.JPG|thumb|right|200px|[[Electronic Road Pricing]] Gantry at North Bridge Road, Singapore]]

Congestion pricing is an [[Pareto efficiency|efficiency pricing]] strategy that requires the users to pay more for that public good, thus increasing the welfare gain or net benefit for society.<ref>{{Cite journal | last = Button | first = Kenneth J. | year = 1993 | title = op. cit| pages = 153}}</ref><ref>{{Cite journal|author1=Small, Kenneth A. |author2=Verhoef, Erik T. | title = op. cit| year = 2007| pages = 120}}</ref> Congestion pricing is one of a number of alternative [[Supply and demand|demand side]] (as opposed to [[supply side]]) strategies offered by economists to address congestion.<ref name="prm_winter_1995">{{cite journal |title=Congestion Control and Demand Management |author1=Sheldon G. Strickland |author2=Wayne Ber |name-list-style=amp |date=Winter 1995 |volume=58 |issue=3 |journal=Public Roads Magazine |publisher=U.S. Federal Highway Administration |url=http://www.tfhrc.gov/pubrds/winter95/p95wi1.htm |access-date=2008-02-28 |archive-url=https://web.archive.org/web/20080317165147/http://www.tfhrc.gov/pubrds/winter95/p95wi1.htm |archive-date=17 March 2008 |url-status=dead |df=dmy-all }}</ref> Congestion pricing was first implemented in [[Area Licensing Scheme|Singapore]] in 1975, together with a comprehensive package of [[road pricing]] measures, stringent car ownership rules and improvements in mass transit.<ref>{{Cite book |author1=Small, Kenneth A. |author2=Verhoef, Erik T. | year = 2007 | title = The Economics of Urban Transportation |url=https://archive.org/details/economicsurbantr00smal |url-access=limited | publisher = Routledge, England| isbn = 978-0-415-28515-5 | pages = [https://archive.org/details/economicsurbantr00smal/page/n164 148] }}</ref><ref>{{cite web | url=http://www.move-forum.net/documenti/B_06032003170931.pdf | title=Road pricing Singapore's experience | author = Chin Kian Keong | date=23 October 2002 | publisher = Third Seminar of the IMPRINT-EUROPE Thematic Network: “Implementing Reform on Transport Pricing: Constraints and solutions: learning from best practice” | access-date=2008-04-16|archive-url = https://web.archive.org/web/20080410123530/http://www.move-forum.net/documenti/B_06032003170931.pdf <!-- Bot retrieved archive --> |archive-date = 10 April 2008}}</ref> Thanks to technological advances in [[electronic toll collection]], Singapore upgraded its system in 1998<ref>{{cite web  | url=http://www.lta.gov.sg/motoring_matters/index_motoring_erp.htm  | title=Electronic Road Pricing  | publisher=Land Transport Authority (Singapore). Website oficial  | access-date=2008-04-16  | archive-url=https://web.archive.org/web/20080410143342/http://www.lta.gov.sg/motoring_matters/index_motoring_erp.htm  | archive-date=10 April 2008  | url-status=dead  }}</ref> (see [[Electronic Road Pricing|Singapore's Electronic Road Pricing]]). Similar pricing schemes were implemented in [[Rome#Motor Traffic Limited Zone (ZTL)|Rome]] in 2001, as an upgrade to the manual zone control system implemented in 1998;<ref>{{cite web| url=http://www.cfit.gov.uk/map/europe-italy-rome.htm| title=Road Charging Scheme: Europe – Italy, Rome| publisher=UK Commission for Integrated Transport| access-date=2008-04-16| url-status=dead| archive-url=https://web.archive.org/web/20080411181654/http://www.cfit.gov.uk/map/europe-italy-rome.htm| archive-date=11 April 2008| df=dmy-all}}</ref><ref>{{cite web| url=http://www.progress-project.org/Progress/rome.html| title=The history of Limited Access Zones in Rome| publisher=PRoGR€SS Project| access-date=2008-04-16| url-status=dead| archive-url=https://web.archive.org/web/20080309210332/http://www.progress-project.org/Progress/rome.html| archive-date=9 March 2008| df=dmy-all}}</ref>
London in 2003 and extended in 2007 (see [[London congestion charge]]); [[Stockholm]] in 2006, as seven-month trial, and then on a permanent basis since August 2007<ref>{{cite web | url=http://www.vv.se/templates/page3____17154.aspx | title=Congestion tax in Stockholm | date=21 August 2007 | publisher=Swedish Road Administration | access-date=2008-04-16 | url-status=dead | archive-url=https://web.archive.org/web/20070302045327/http://www.vv.se/templates/page3____17154.aspx | archive-date=2 March 2007 | df=dmy-all }}</ref> (see [[Stockholm congestion tax]]).

=== Pollution pricing ===
{{main|Pollution pricing}}
[[File:Energy Efficiency of different Transport Modes.png|thumb|Energy Efficiency of different Transport Modes]]
From 2008 to 2011, [[Milan]] had a traffic charge scheme, [[Ecopass]], that exempted higher emission standard vehicles ([[Euro IV]]) and other [[alternative fuel vehicle]]s<ref>{{cite news | url=https://www.nytimes.com/2008/01/27/automobiles/27GREEN.html  | title=Toll Discounts for Going Green  | author = Ken Belson | date=27 January 2008 | newspaper =The New York Times  | access-date=2008-01-27}}</ref><ref>.{{cite news | url=http://news.bbc.co.uk/2/hi/europe/7167992.stm  | title=Milan introduces traffic charge  | date=2 March 2008 | work = BBC News | access-date=2008-01-17}}</ref><ref>{{cite news | url = http://www.nysun.com/article/68854 | title = Milan Introduces Congestion Charge To Cut Pollution | author = Marco Bertacche | date = 3 January 2008 | newspaper = The New York Sun | access-date = 2008-01-17 | archive-date = 31 August 2020 | archive-url = https://web.archive.org/web/20200831015107/https://www.nysun.com/foreign/milan-introduces-congestion-charge-to-cut/68854/ | url-status = dead }}</ref> This was later replaced by a more conventional [[congestion pricing]] scheme, [[Milan Area C|Area C]].

Even the transport economists who advocate congestion pricing have anticipated several practical limitations, concerns and controversial issues regarding the actual implementation of this policy. As summarized by noted regional planner [[Robert Cervero]]:<ref>{{Cite book | last = Cervero | first = Robert | author-link=Robert Cervero|year = 1998 | title = The Transit Metropolis | publisher = Island Press, Washington, D.C. | isbn = 1-55963-591-6  <!--"Setting the prices right"-->| pages = 67–68}}</ref> "True social-cost pricing of metropolitan travel has proven to be a theoretical ideal that so far has eluded real-world implementation. The primary obstacle is that except for professors of transportation economics and a cadre of vocal environmentalists, few people are in favor of considerably higher charges for peak-period travel. Middle-class motorists often complain they already pay too much in gasoline taxes and registration fees to drive their cars, and that to pay more during congested periods would add insult to injury. In the United States, few politicians are willing to champion the cause of congestion pricing in fear of reprisal from their constituents... Critics also argue that charging more to drive is elitist policy, pricing the poor off of roads so that the wealthy can move about unencumbered. It is for all these reasons that peak-period pricing remains a pipe dream in the minds of many."

==== Road space rationing ====
{{main|Road space rationing}}
[[File:Traffic jam Sao Paulo 09 2006 30.JPG|thumb|right|200px|Traffic congestion persists in [[São Paulo]], [[Brazil]], despite no-drive days based on license numbers.]]

Transport economists consider [[road space rationing]] an alternative to congestion pricing, but road space rationing is considered more equitable, as the restrictions force all drivers to reduce auto travel, while congestion pricing restrains less those who can afford paying the congestion charge. Nevertheless, high-income users can avoid the restrictions by owning a second car.<ref>{{cite web |author= |title=Vehicle Restrictions. Limiting Automobile Travel at Certain Times and Places |url=http://www.vtpi.org/tdm/tdm33.htm |access-date=2008-04-09 |website=Victoria Transport Policy Institute |publisher=TDM Encyclopedia}} See Equity Impacts section</ref> Moreover, congestion pricing (unlike rationing) acts "to allocate a scarce resource to its most valuable use, as evinced by users' willingness to pay for the resource". While some "opponents of congestion pricing fear that tolled roads will be used only by people with high income. But preliminary evidence suggests that the new toll lanes in California are used by people of all income groups. The ability to get somewhere fast and reliably is valued in a variety of circumstances. Not everyone will need or want to incur a toll on a daily basis, but on occasions when getting somewhere quickly is necessary, the option of paying to save time is valuable to people at all income levels." Road space rationing based on license numbers has been implemented in cities such as [[Athens]] (1982),<ref>{{cite web|url=http://www.leda.ils.nrw.de/database/measures/meas0205.htm|title=LEDA Measure: License plate based traffic restrictions, Athens, Greece|publisher=LEDA database|access-date=2008-04-09|url-status=dead|archive-url=https://web.archive.org/web/20080227030125/http://www.leda.ils.nrw.de/database/measures/meas0205.htm|archive-date=27 February 2008|df=dmy-all}}</ref> [[México City]] (1989), [[São Paulo]] (1997), [[Santiago de Chile|Santiago]], [[Chile]], [[Bogotá]], [[Colombia]], La Paz (2003),<ref>{{cite news | url=http://www.boliviahoy.com/modules/news/article.php?storyid=3150 | title=Los choferes públicos acataron la restricción | date=7 January 2003 | newspaper=La Prensa | access-date=2008-04-09 | language=es | archive-url=https://web.archive.org/web/20061213053528/http://www.boliviahoy.com/modules/news/article.php?storyid=3150 | archive-date=13 December 2006 | url-status=dead | df=dmy-all }}</ref> [[Bolivia]], and [[San José de Costa Rica|San José]] (2005),<ref>{{cite news | url=http://www.nacion.com/ln_ee/2005/agosto/03/pais0.html | archive-url=http://arquivo.pt/wayback/20160515152117/http://www.nacion.com/ln_ee/2005/agosto/03/pais0.html | url-status=dead | archive-date=15 May 2016 | title=Hoy empieza restricción para autos en centro de San José | author=Ángela Ávalos | date=3 August 2005 | newspaper=La Nación | access-date=2008-04-08 | language=es }}</ref><ref>{{cite news | url=http://www.nacion.com/ln_ee/2006/abril/12/pais2.html | title=Evaluarán restricción vehicular en capital | author=Mercedes Agüero | date=12 April 2006 | newspaper=La Nación | access-date=2008-04-08 | language=es | url-status=dead | archive-url=https://web.archive.org/web/20080919101624/http://www.nacion.com/ln_ee/2006/abril/12/pais2.html | archive-date=19 September 2008 | df=dmy-all }}</ref> [[Costa Rica]].

==== Tradable mobility credits ====
A more acceptable policy on automobile travel restrictions, proposed by transport economists<ref>{{Cite web | author = Verhoef E, [[Peter Nijkamp|Nijkamp P]], Rietveld P | url = http://www.envplan.com/abstract.cgi?id=b240527 | year = 1997 | title = Tradeable permits: their potential in the regulation of road transport externalities | publisher = Environment and Planning B: Planning and Design 24(4) 527–548 |access-date=2008-04-11  }}</ref> to avoid inequality and revenue allocation issues, is to implement a [[rationing]] of peak period travel but through revenue-neutral credit-based congestion pricing. This concept is similar to the existing system of [[emissions trading]] of [[carbon credit]]s, proposed by the [[Kyoto Protocol]] to curb [[greenhouse emissions]]. Metropolitan area or city residents, or the taxpayers, will have the option to use the local government-issued mobility rights or congestion credits for themselves, or to trade or sell them to anyone willing to continue traveling by automobile beyond the personal quota. This trading system will allow direct benefits to be accrued by those users shifting to public transportation or by those reducing their peak-hour travel rather than the government.<ref>{{Cite journal|doi=10.1016/S0967-070X(01)00024-5     |title=Making urban road pricing acceptable and effective: Searching for quality and equity in urban mobility |year=2001 |last1=Viegas |first1=José M. |journal=Transport Policy |volume=8 |issue=4 |pages=289–294 }}</ref><ref>{{Cite journal|doi=10.1016/j.tra.2005.02.014     |title=Credit-based congestion pricing: A policy proposal and the public's response |year=2005 |last1=Kockelman |first1=Kara M. |last2=Kalmanje |first2=Sukumar |journal=Transportation Research Part A: Policy and Practice |volume=39 |issue=7–9 |pages=671–690 |bibcode=2005TRPA...39..671K }}</ref>