Comments on: Taxes & the Australian transport sector

By: Wombats and Tolls at catallaxyfiles

Wombats and Tolls at catallaxyfiles — Wed, 21 Oct 2009 07:30:43 +0000

[...] Penberthy has some strong views on the Henry – Clarke road congestion proposal. It’s surprising that no-one in the Rudd Government has ruled out his [...]

By: Craig Rowley

Craig Rowley — Tue, 18 Aug 2009 22:38:48 +0000

Hello, HC. I’m not certain that it is true that when individuals act in their own self-interest it increases the social benefit. For example, many trips into the CBDs are made by company executives whom travel just a short distance that is otherwise well served by all modes of public transport, taxi cabs, cycle paths, and pedestrian access. Their vehicles sit garaged all day in a car park and then they make the short trip home at the end of the day. There is very low social benefit in these trips. If on the other hand we had lower level, lower income CBD-based workers accessing those parking spaces, then their trips could deliver greater social benefit. For example, a parent able to make trips in and out is probably then able to spend more time with their children. The increased connectedness with children opens potential supervisory and educational benefit, which in turn may foster a smarter, more ‘competitive’ future workforce.

By: hc

hc — Tue, 18 Aug 2009 01:35:38 +0000

Craig, What you want is travel to occur when the private benefits (whatever they are based on) of making a trip exceed all of the social costs created (including such things as congestion, road damages and traffic accident costs). Then society derives a benefit from the journey.

The user charges approach is to try to capture all these costs and to make the traveller aware of them. Then if an individual is rational – they only make a journey if the benefits from doing so exceed the private costs they face – individuals acting in their own self-interesrt should increase society’s benefit.

By: Craig Rowley

Craig Rowley — Sun, 16 Aug 2009 07:30:04 +0000

Whoops, that should be: However, other criteria by which value to the trip may be assigned include the value of time with the child, the perceived relative safety of the mode of transport, or a value placed on flexibility/responsiveness (e.g. those emergency pick-up requests that occur whenever a child becomes ill whilst attending daycare).

By: Craig Rowley

Craig Rowley — Sun, 16 Aug 2009 06:51:38 +0000

Thanks for that reply. I’d have thought that when an individual makes a decision to drive into a CBD the economics of it would be one factor, but other factors would also be considered. One example, which I note can be reduced to a time = money based criterion, is a working parent based in a CBD whom needs to drive his/her vehicle in and out to enable him/her to drop-off and pick-up children in daycare. In this example, the cost per hour of extra daycare would be added to the half real-wage. However, other criteria by which value to the trip may include the value of time with the child, the perceived relative safety of the mode of transport, or a value placed on flexibility/responsiveness (e.g. those emergency pick-up requests that occur whenever a child becomes ill whilst attending daycare).

By: hc

hc — Sat, 15 Aug 2009 13:05:35 +0000

Craig, Roughly economists value journeys to individuals as the value of their time – often, somewhat arbitrarily, this is set at half their real wage. The idea is that you can do some pleasurable things while4 driving – think and/or listen to CDs, view scenery – hence a fraction of your wage. People on high incomes are assumed to have a high value of time and, with tolling, will travel whenever this value exceeds the toll. Low paid workers will apply the same sort of criterion and hence be ‘tolled-off’ roads more frequently because their wage is lower.

By: Craig Rowley

Craig Rowley — Sat, 15 Aug 2009 12:56:20 +0000

Thank you, HC. I’m not an economist; I’m a psychologist and I’ve an interest in the nature of our cities and the life of communities that live within them. I’m very appreciative of your answers to my questions. I’m now keen to better understand the concept of a high or low-valued journey. I assume that the value of a journey is a subjective assessment, i.e. a value personally attributed to each journey by each individual traveler. I’m wondering, have you reduced the criteria by which individuals might attribute value to a journey to just one key criterion (i.e. time = money)?

By: hc

hc — Sat, 15 Aug 2009 10:23:30 +0000

That’s an interesting and important issue Craig. In the main we discuss the social impacts of congestion pricing via discussion of (a) equity effects of user charges and (b) the agglomeration benefits of living in large cities.

(a) The equity effects of user charges can be regressive if the effect of such charges is to favour high-valued journeys by the wealthy and to limit low-valued journeys by those who are less affluent. Generally it is a bad idea to limit the viability of a particular policy measure by looking at its regressiveness – it makes more sense to look at the overall regressivity/progressivity of the tax/transfer system – but if such concerns are relevant then income compensations should be made to low income commuters perhaps by providing tax relief but more plausibly by improving public transport options.

It is important to understand that fuel excises have a slightly regressive effect as do many current charges when talking about the equity effects of the new proposals.

(b) The agglomeration benefits of living in large cities are very important. We get many social benefits by being in contact with other people – quite apart from direct economic benefits. Congestion pricing in some respects has good social effects in reducing urban sprawl and in encouraging more compact cities since sprawl partly reflects the underpricing of journeys. In addition there are significant benefits in just reducing congestion and making it easier to get around.

I am an economist and this might not be a comprehensive enough way of thinking about social benefits but I think these issues are important.

By: Craig Rowley

Craig Rowley — Sat, 15 Aug 2009 08:53:03 +0000

In your report you state that there is a strong case for moving toward congestion pricing schema in Melbourne and Sydney, and you recommend comprehensive electronic pricing of congested major roads in these cities and cordon price the CBDs. When estimating the strength of the case, what weight did you give to the social impacts of the implementation of such schema?

I’m also keen to learn: What do you consider the key social impacts to be? And, did you consider issues such as a potential segregating effect (wherein the cost of road trips between dwellings, commercial and other premises in communities on opposite sides of a CBD adversely impacts on social connections between people in those communities)?

By: hc

hc — Sat, 15 Aug 2009 01:55:30 +0000

MAGB, Your claims that emissions cause no health problems are contradicted by the BITRE 2006 study. I quote:

“This study estimates that in 2000 motor vehicle-related ambient air pollution accounted for between 900 and 4500 morbidity cases—cardio-vascular and respiratory diseases and bronchitis—and between 900 and 2000 early deaths.
• The economic cost of morbidity ranges from $0.4 billion to $1.2 billion, while the economic cost of mortality ranges from $1.1 billion to $2.6 billion.
• The value of a statistical life used was $1.3 million—a discount of 30 per cent on the Bureau’s costing of transport accident fatalities. This reflects the older
age profile of air pollution-related early deaths”.

The international literature backs up my claims. I am not expert in this area and I would be very interested if you had other evidence.