Pricing versus Controls in the Transport Sector
The previous two chapters have stressed the importance of external effects, and the consequent inappropriateness of market prices based on the money costs of providing different systems in choosing between public and private transport. In such a situation, the solution traditionally put forward by the economist is that the government should intervene with taxes and subsidies designed to bring prices in line with the marginal social costs of using the resources in question. This having been done, the allocation of traffic between different modes would then be left to the individual decision-taker. The government would have no interest in the nature of this final allocation, except for the need to forecast it in determining investment policy.
KeywordsPublic Transport Demand Curve Price Policy Transport Sector Administrative Cost
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