Abstract:
In July 2004, Ken Livingstone, the Mayor of Greater London, had to decide whether or not to expand the system of congestion charging he had implemented 17 months earlier. Skeptics had predicted fierce popular opposition or chaos from the original scheme, which required that cars and trucks pay a charge of £5 (US$7.95) to enter an 8-square-mile area of Central London between the hours of 7:00 am and 6:30 pm, Monday through Friday. The critics were confounded, however, when the £5 charge resulted in a substantial reduction in Central London congestion and the payment and enforcement mechanisms proved to be remarkably convenient and fair. The Mayor's proposal to extend the £5 charge to a congested area immediately to the west seemed risky, however, since the technical and political problems of charging might grow disproportionately with the size of the charging zone.
Learning Objective:
This case is designed for courses in transportation policy or economics to stimulate a discussion of the rationale and limitations of using special road charges to control congestion externalities. The (B) case (1788.0) is a technical note that explains the economics of congestion charges.
