Tuesday, February 07, 2006

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.


EcoStudent said...

It is interesting to hear your ideas on the relationship between transport pricing and land use.

I agree that the best policy would be to get the pricing right (preferably through an adaptive mechanism, such as a free market of some kind) and let land use follow laissez faire.

There are several intricacies to this argument which are fascinating. For instance, the constructed of untolled freeways often results in a large scale transfer of wealth from taxpayers to the owners of land adjacent to the new freeway. If the new freeway is to be tolled though, this transfer of wealth will be minimised as the NPV of the freeway to land users will be reduced by the tolls they will have to pay for use. Tolling "urban sprawl" freeways such as Eastlink would then appear to be an efficient way of limiting urban sprawl (as it shifts the costs of urban sprawl to those participating in it).

At the same time however, federal petrol excise constitutes a large transfer of wealth from those who rely on car transport more than others. So the net effect is a transfer of wealth from the residents of rural and outer suburban areas to the residents of the inner cities.

hc said...

Yes Ecostudent I agree with much that you say but I think a difficult feature in outlying areas is the combination of low traffic densities and lots of cross-town journeys. But generally you are right. If you price access to the city you will have some effect on sprawl. I just don't think it will be that great because of inevitably unpriced outer roads.

Even cross-town roads like Springvale Rd are hard to effectively manage. There are just many intersections and building flyovers and so on won't help things much -- just gets people to the next traffic light more quickly.

I'll try another post again on CityLink and Mitcham/Scoresby to try to clarify the issues about them. Look for it and please get back to me!

If you are an economics student who will get a chance to write a thesis in economics consider the simple economics of Springvale Rd.

At least 20 km from the city, it is always congested even though it is a cross-town road. Effective management is a great thesis topic obviously impacted on by Mitcham/Scoresby. Another interesting road is Stud Road - the middle of nowhere - but carries lots of traffic!

It is interesting thart even driving around Melbourne on a Sunday arvo that you get great insights into environmental economics issues and traffic planning.

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