Economics and Traffic Congestion

Posted by on May 24, 2013 in News, Urban and Regional Economics | No Comments

I came across an interesting article this morning, questioning whether plans to further expand the Beijing Subway would have much affect on the city’s heavy traffic congestion.

The guts of the article was some comments from an economics professor at Beijing Jiaotong University, who didn’t think that expanding the subway would make much difference, and instead fingered the low cost of owning and running a car as the underlying cause of the city’s traffic problems. The article made a comparison with Shanghai, which has a larger population than Beijing, and much higher population density (according to Wikipedia), but considerably less severe congestion. The difference is that licensing costs are considerably higher in Shanghai, pushing up the cost of keeping a car and limiting the number of vehicles on the road. I understand that a similar system keeps Singapore’s roads fairly clear. The theory is that people will make their transport decisions based on the relative costs and benefits to them of their different options.

While an interesting fact in itself, the difference in the traffic situation in Beijing and Shanghai does raise questions about transport policy here in Australia as well. Peak time traffic is an increasingly severe problem in our major cities, despite the efforts of governments to alleviate the problem with new infrastructure. Would increasing the cost of taking to the road be a simpler and more effective method of reducing congestion?

Anecdotally, here in Perth it is mostly people working in the CBD who take public transport to work. If you ask them why, the answer is generally the high cost of parking (is it $15 a day now? I don’t work in the City anymore, so am not sure). Some of our most robust transport corridors tend to also be the most congested, e.g. the north-south freeway plus railway line. While continued infrastructure investment is critical, will simply building more allow us to reach the policy goals in the Government’s Directions 2031 and Beyond of reduced traffic congestion, reduced vehicle use and dispersed employment?

The original article can be found here: