Traffic Congestion As Market Failure Essay Research

Traffic Congestion As Market Failure Essay, Research Paper

........... Congestion

comes about when the actual journey times taken by transport users are in

excess of their normal expectations. Congestion can have many consequences other

than increased journey time, the stress caused by it can be the cause of road

rage, as well as the increase in harmful emissions having detrimental effects

to the areas buildings, air quality and quality of life of all involved. ........... Congestion more simply is caused by too many cars

chasing too little road space. The demand for this mode of transport has far

exceeded the supply. The increase in incomes and relative fall in the price for

cars has led to the higher number of cars on the road. The supply for road use

is fixed in the short run as it cannot be transferred; the roads are not

constantly congested, it is only during peak times, the empty roads of the

night and day cannot be transferred to the busy periods of morning and

tea-time. In the long run another road could be built. In more economic terms congestion is a mixture of

externalities, information failure and transaction cost. Negative externalities

exist as the car produces emissions, which are harmful to the environment, the

wear and tear of the roads, and the opportunity costs are not included in the

monetary costs of motoring. They are also mutual externalities as the drivers

are both the cause of the congestion; the victim of those in fronts decision to

drive and the cause to those behind. Information failure is apparent as if

information of delays and congestion could be relayed, alternative routes could

be taken and congestion reduced. However the market does not give such signals,

this could never be a perfect solution, as the congestion would eventually

transfer to the alternative route, an alternative may not always be available

anyway.. The transaction cost can not be

possible in road use as a market solution of using price to allocate road space

is not practical because you can not pay the person in front of you in a

traffic queue for their space. The administrative solution of first come first

served is used. Transaction costs could be done in the form of tolls, but these

have impracticalities. Congestion in urban areas can be seen as a form of market

failure because the socially efficient output is not produced. The social optimum

amount of vehicles on the road must be exceeded if congestion results. The

marginal cost to the consumer is the only cost really considered when a driver

makes the decision to use the car. What is not taken into account are the costs

to other road users, the cost to society collectively; the social cost or

themselves to some extent. The marginal cost to other road users is the added

congestion caused by the extra car on the road. The marginal costs to society

collectively are the increase in emissions produced by the extra journey made,

the follow on effects from this are large, rising asthma levels in the local

area, decaying buildings and collapsing roads could be caused because of the

high congestion rates. The marginal cost to the individual could be the

opportunity cost of the time spent in congestion. If the more space efficient

bus made the journey, the traveller would be able to read the newspaper, play

on a hand held computer or even do some work, this is not possible if the car

is chosen to make the journey. The marginal utility of existing users of the

congested roads would decrease with the addition of an extra motorist, an extra

10 or even 100 motorists would lower the marginal utility levels dramatically.

But each individuals marginal cost wouldn.t be effected, which explains why the

marginal cost and marginal social cost diverge. This can be shown by the graph

that shows the social optimum level of vehicles; where the marginal social cost

equals the marginal social benefit. Journey Costs

& benefits ............................................... Number

of vehicles on roadThe dashed line represents the socially optimum level of

vehicles on the road and the marginal utility of the user. .A higher level of vehicles on the road, shown

by the dotted line, shows a larger marginal social cost, marginal social

benefit and lower marginal utility gained.In order to reduce or eliminate the market failure of

congestion, it is necessary for attempts to be made at reducing the number of

cars on the road, so the number is nearer the social optimum. .There are problems involved with identifying the

social optimum number of cars, mainly due to the lack of information concerning

the outputs of each car, the monetary cost of damage done, and whether the car

is definitely to blame for such damage. This is the reason the externality

cannot simply be taxed or charge to the producer, it is too hard to know which

car contributed to most of the damage

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