Download full thesis"A major benefit of road pricing is that, from an economic point of view, it is a better way of raising money for transit investments than through ordinary taxation (Eliason and Lundberg 2003). Tax on merchandise and incomes cause losses in a social economy due to reduced efficiency. Revenues from road pricing, when used to replace taxes, will have greater potential for improved efficiency in the social economy (Eliason and Lundberg 2003).
In order for congestion charging to effectively improve social benefit, charges must be obtained where the traffic is causing external costs, in this instance traffic congestion. Only then are charges legitimate from a socio-economic perspective (Eliason and Lundberg 2003). If charges are made on roads with no congestion, this represents a pure socio economic loss (Small and Yan 1999). This is the case when charges are administered to maximize revenue. Even if there is congestion on a road prior to the charges, Small and Yan conclude that charges designed to maximize benefits will be so high that they generate socio-economic losses (1999). From the perspective of socio-economic effectiveness, it would thus be better not to have any charges at all, rather than to arrange them to maximize revenue (Eliason and Lundberg (2003), Small and Yan (1999)).
From this information I will generate an assumption on the socio-economic “effectiveness” of a congestion charging scheme. In order for congestion charging to be effective it must maximize social benefit while minimizing regressive impacts to individual actors. The former, maximizing social benefit, is accomplished when traffic congestion is relieved. The latter, minimizing regressivity to individuals, is dependent upon reinvestment of congestion charge revenues back into the transportation sector. Basing my assumptions on Hau, Goodwin, Small, and Eliasson’s four main groups of road users affected by road pricing, as summarized in section 5.4 of this study. There are two groups that are clear losers, and two groups that are clear winners in the face of a congestion charge:
Losers- 1. Motorists who pay a high fee and continue on the same route, but do not think the time gain is worth the charge paid.
- 2. Motorists who alter their route or mode of travel when road pricing is introduced because the fee is too high.
- 1. Those who use public transport.
- 2. Motorists that think the time gain is worth the charge paid (professional traffic)
The only way to achieve socio-economic efficiency then, is to shift as many motorists from a Loser group to a Winner group. If this can be accomplished, it has been proven that the facilitation of a congestion charge scheme will be both socially beneficial and distributively equitable."