7.6 Allocation of a Scarce Resource Space for Cars
As discussed in para. 7.4, government is often faced by the conflicts between
efficiency and populism when it attempts to distribute goods under its control. The
problem is particularly severe when there is widespread demand for scarce goods.
For example, street space is limited, while car drivers’ demand for such space on
main streets and arteries greatly exceeds the availability of such space. In most cases,
it is nearly impossible to expand such space significantly, and thus the discrepancy is
likely to continue indefinitely. There are at least three ways how this scarce resource
can be allocated:
1. congestion pricing
2. rationing
3. money pricing
7.6.1 By Congestion Pricing
Car drivers are permitted to use the amenities for free in any way they prefer. The
only price the individual car driver pays is the time that he takes to move in a
congested environment. When the demand for street space outstrips the supply, an
equilibrium is attained when traffic becomes so sluggish that additional car drivers
are dissuaded by the amount of time they require to participate.
7.6.2 By Rationing
Some car drivers are allowed to use the facilities by being granted licenses. Others
are prevented by the lack of such licenses. The photographs of Chap. 3 give some
examples.
7.6.3 By Money Pricing
The user pays a fee, proportional to the distance or time of his use. The fee is usually
assessed high enough such that an adequate fraction of potential users is frightened
(or discouraged) by the magnitude of the fee to be paid. Duties on petrol, road tolls
also try to apply these principles.
Congestion pricing is, nowadays, a commonly used, space allocation mechanism.
In some places, the use of the rationing approach is limited, where only some buses,
special users and commercial vehicles are allowed on certain streets during specific
periods of maximum congestion. Accessing London by car requires the payment of a
7.6 Allocation of a Scarce Resource Space for Cars
199
As discussed in para. 7.4, government is often faced by the conflicts between
efficiency and populism when it attempts to distribute goods under its control. The
problem is particularly severe when there is widespread demand for scarce goods.
For example, street space is limited, while car drivers’ demand for such space on
main streets and arteries greatly exceeds the availability of such space. In most cases,
it is nearly impossible to expand such space significantly, and thus the discrepancy is
likely to continue indefinitely. There are at least three ways how this scarce resource
can be allocated:
1. congestion pricing
2. rationing
3. money pricing
7.6.1 By Congestion Pricing
Car drivers are permitted to use the amenities for free in any way they prefer. The
only price the individual car driver pays is the time that he takes to move in a
congested environment. When the demand for street space outstrips the supply, an
equilibrium is attained when traffic becomes so sluggish that additional car drivers
are dissuaded by the amount of time they require to participate.
7.6.2 By Rationing
Some car drivers are allowed to use the facilities by being granted licenses. Others
are prevented by the lack of such licenses. The photographs of Chap. 3 give some
examples.
7.6.3 By Money Pricing
The user pays a fee, proportional to the distance or time of his use. The fee is usually
assessed high enough such that an adequate fraction of potential users is frightened
(or discouraged) by the magnitude of the fee to be paid. Duties on petrol, road tolls
also try to apply these principles.
Congestion pricing is, nowadays, a commonly used, space allocation mechanism.
In some places, the use of the rationing approach is limited, where only some buses,
special users and commercial vehicles are allowed on certain streets during specific
periods of maximum congestion. Accessing London by car requires the payment of a
7.6 Allocation of a Scarce Resource Space for Cars
199