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MAO Yushi: Fees Can Be Collected from Drivers to Solve Traffic Congestion
 
 Author:Unirule  
Time:2014-07-06 17:19:58   Clicks:


 

Resource allocation refers to: electricity is generated for the society, and to generate electricity, coals are needed, and the electricity is distributed according to certain standards among people; crops are grown for the society, and to grow these crops, fertilizers are spread; tooth paste is a common commodity, and to produce tooth paste, various materials and process, such as ingredients, paper boxes, printing, and transportation are called for. The production of such commodities is highly complicated. How, then, to undertake the production of such commodities? There are two answers to this question. The first answer is planned economy where plans are made by planning departments of the government to cover the production of commodities. Even though it’s impossible for such plans to entail every detail of the production of every commodity in the society, major commodities are listed on the national plan, and the productivity and consumption are balanced by the central government. The other answer is market economy. To put it simply, market economy is free economy without intervention from any controlling parties. Choices are made by every single producer and consumer in the market, they are able to produce and purchase according to their free will. .

 

Some would think the market economy does not make much sense. Important things such as production cannot be left to individual choices at their free will. The Great Recession in the 1930s proved problems did exist for market economies. Therefore, some one third of the population in the world chose planned economy and carried out this economic experiment for more than half a century. We know how this experiment ended. It failed to such an extent that even basic food supply could not be guaranteed and people starved. As of today, there are still a small number of countries which continues to adopt the planned economy with their counterparts switching to market economy, among which China is quite a successful one.

 

However, the unsustainability of planned economies is not widely acknowledged. Many even greeted the planned economy in disguise with rejoice. For example, some believe that it is necessary to set a minimum amount of fertile lands to guarantee food security. In a market economy scenario, the amount of crops needed to feed the people, the amount of lands to grow these crops, and the amount of fertilizers used are all determined by the market without intervention. Indeed, major countries in the world do not set “redlines” for the quantity of land to secure food supply because they are convinced that the market will best allocate resources while interventions will distort the market. We are sorry to see this simple idea is still debated in China and in many of China’s policy the ghost of planned economy is still seen.

 

The mystery of market economy is easily put into words, that is, fluctuation of prices will balance supply and demand. If there is any short of supply of a certain commodity, the price of the commodity will go up as a result. As the price goes up, supply goes up and demand decreases, where supply and demand come to balance. On the other hand, when supply overtakes demand, the price goes down. Therefore, all commodities can be sold and bought, and there will not be any imbalance of supply and demand in the long term. From this perspective, traffic congestion can be understood as an insufficient supply of roads. The cause of this phenomenon is that the use of roads is for free, or to say, the price for using roads is zero. At such a low price, everyone can use roads for free, which further exacerbates the traffic congestion. Therefore, the utmost solution to the traffic congestion is to charge for the use of the roads.

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The real question is how to charge. In crowded cities, if every car stops to pay, how can the traffic situation be mitigated? But there are ways to charge for a road with only one entrance and only one exit without cars stopping to pay the bill. We have to admit that there are no methods to accurately record the distance data of each and every vehicle running in a network of roads.

 

        Thanks to the rapid advances in modern electronic technology and computational capacities of digital devices, there will be new methods developed to carry out the aforesaid tasks. One way to do this is to set road cameras in all the crossings of a road network to record cars, a particular car shall be recorded at the starting point and tracked until it exits the network. The distance can be recorded and calculated and the tracking data can be read thanks to computing and storage technologies. And this data can be used to charge the drivers for the use of the roads, this method causes no congestion nor waste of road resources. And the fluctuation of prices can then step in.

 

When the use of roads can be accurately recorded, fees paid by road users will cover the total cost of road construction. This works the same way as how the prices of general commodities are determined. In the long run, the price will approach the cost. As long as road users are paying, new roads can be constructed by the municipal governments. There will not be any short supply or over-demand. In this way, traffic congestion is solved once and for all. Wherever you’d like to go, as long as you pay, there is simply no stopping. Lost due to traffic congestion will also be lowered to zero. And you can always get to your destination be it a meeting or your office punctually without worries for traffic.

 

Those who use the roads pay, which is the most fair way to distribute the burden of building roads. In China, most drivers belong to the high-income group. The system we use now is unfair as the cost of the road construction is shouldered by all the tax-payers. It should be alternated to the policy of “those who use the road pay for it.” It is just like buying and selling of general commodities, everybody is satisfied.

 

The free use of roads will disturb the market equilibrium which leads to more serious problems. Firstly, free use of roads will encourage more people to drive to only find themselves stuck in the heavy traffic. For example, when you don’t have to pay electricity bills to supply your fridge, more people will buy fridges. In global trade, when many cars are imported in a country, more roads will be built for these cars. Compared to the scenario where people pay to use the roads, imported cars will be increasing, and the government has to use tax payers’ money to subsidize the free use of roads for those who buy imported cars. As a result, tax payers’ burden increases, while those who purchase cars benefit.

 

There is one more advantage of charging drivers for the use of roads, i.e., the quantity of land used to construct roads in a city will be, then, best determined. To take a look at major cities in the world, the ratio of land used to construct roads vary largely. In LA, USA, roads occupy large pieces of land and residences are scattered with few tall buildings. On the contrary, population density is very high in New York City where there are a lot of skyscrapers, and the ratio of land occupation to roads is very low. Which one makes more sense? Is it better to have more or less roads in a certain piece of land? Without the method I proposed above, it is hard to estimate. Now with road as a general commodity, the area for roads is not determined by any person, but the market that run according to supply and demand. Every road then has a price, a price that customers are willing pay. If the cost of building a road is too high for the consumers, then the road will not be constructed.

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The proposal to charge for the use of roads has been put forward long ago, but it was hard to implement due to the fact that it was hard to record and calculate the distance of a vehicle in a road network. However, now that data processing capacities of computers are remarkable, task aforesaid can be done in a blink of an eye. We can see the last technical barrier to charge for the use of roads is already surpassed. Now it’s time to charge.

 

                                                                                                                                     MAO Yushi  Honorary President of Unirule Institute of Economics

                                                                                                     (Translated by: MA Junjie,  Assistant to the Director of Unirule International Cooperation Center)




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