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Road pricing yet again, & again & again….

The Harper Competition Review has again raised the case for road pricing.  It is frustrating to me that after 20 years of working in this area many economists don’t get the economic basis for road pricing right.  The article in The Australian today is a case in point.  Roads are not priced for user pays equity reasons but because congestion externalities arise on them.  A road is a fixed asset with substantial fixed and low marginal costs. If a road is not congested (and undamaged by heavy vehicle use) there is no sensible efficiency reason for pricing it. Why would you price in this situation since adding an extra vehicle using the road leaves social costs unchanged?  Ignoring heavy vehicle charging the case for road pricing stems from possible congestion externalities.  Now adding an extra vehicle increases the travel costs of other users and this is unpriced.

Again too I am weary of arguments for congestion pricing given the lack of political will in this area.  Even the much easier issue of pricing heavy vehicle road usage seems to have been put on the back-burner despite support for it in COAG.  The last thing our free enterprise Coalition parties want are some efficiency-promoting reforms in the transport sector. They will duck the road pricing issue and avoid too real reforms in the taxi sector which the Harper review also discusses, yet again and again……

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