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Traffic congestion in Greater Melbourne

My work on the economics of traffic congestion in Melbourne, with Andrew Hawkins, is published online at the VCEC website here . I think its not a bad study. It proposes a cordon pricing scheme for Melbourne’s inner city, pricing of the major arterials and the two big (current and proposed) cross-town roads. It is generally a bit weak on measures to deal with cross-town traffic but this is a tough issue that I really don’t think many people have got a good grip on.

I have been revising this paper for an academic journal and generally, am happy with the points we made.

One area where I do have doubts is in the area of designing city boundaries to reduce urban sprawl. Referees made a number of comments on our proposals to enforce strict greenbelt areas that leave me doubting some of my earlier confident views.

One argument is that you might not necessarily want such boundaries to work anyway. Are not such policies ‘tail-wagging the-dog’ efforts? Want we ultimately seek is efficient travel. The idea is to get the road pricing right and the city should shape up well. The difficulty is that in these outlying areas, where travel demands are low and there are numerous cross-town jouneys, efficient conjestion tolls are unlikely for transaction cost reasons. There are externalities associated with the underpricing of infrastructure but presumably these can be resolved. Boundary policies involving greenbelts seem to be sensible ‘second-best’ compromises with potentially good environmental and amenity effects.

Another argument is that strict policies on boundaries might not work. Politicians are likely to cave into the demands of local interest groups. This has already been happening in Melbourne’s west. The answer is to set boundaries that give room for current land-owners to realise expected capital gains on long-term land holdings or provide financial compensation for lost property values as a result of enforcing greenbelt-type policies.

A basic reason I go for strong boundaries is my preference for greenbelts about cities and the impetus such belts give to developing new regional cities. This might be a ‘greenie romanticism’ infection I picked up as a callow youth and I will rethink these issues over the next few days as I revise this paper.

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