Internalizing externalities and the provision of public goods

INTERNALIZING EXTERNALIES & PUBLIC GOODS

INTERNALIZING EXTERNALITIES & PUBLIC GOODS

Traffic congestions in cities are a major problem the government is trying to solve so as to fight the constant interference of economic activities and provide efficient public goods. Whichever strategies chosen the positive and negative externalities affect the efficiency of the outcome. The well offs in society are only comfortable travelling in their own cars and this results to negative externalities because the beneficiaries are minimal. The use of a subway is beneficial to a large group of people referring to the service as a public good and is best provided by government institutions as opposed to individuals to ensure the service is available in a no rival and nonexclusive manner. In this discussion, we look at the negative externalities of traffic congestion and the use of the subway as a public goods as a strategy of solving the market failure of individual cars.

Discussion

Traffic congestion is characterised by increased vehicle queuing extending up to several meters or even kilometres, slow speeds as the distance moved is minimal and consumption of a lot of time that would otherwise be used in other economic activities. While stuck in traffic the working population is delayed to arrive in workplaces or they arrive while tired implying that business is slowed or lost all in all. Travelling time cannot really be forecasted as one cannot predict how traffic is going to be experienced meaning that more time is allocated to travelling instead of income generating activity. A lot of time is wasted.

While in traffic, the slow speed leads to regular braking and increased acceleration leading to fuel consumption which in turn causes pollution through exhaust emissions. Those experiencing respiratory problems suffer the most with doctor visits increasing. Costs are also incurred to the motorist for regular maintenance because of the wear and tear of the vehicle.

The motorists in traffic feel stressed up and this may lead to minor or major accidents on the roads. The overall health of the motorists is also affected leading to diseases such as ulcers. The vehicle snarl-up can also lead to blocking of important vehicles such as ambulances that if do not reach their destinations urgently lead to loss of people or other important resources.

The motorists especially of passenger vehicles will always try to find alternative ways or routes to reach their destinations leading to them using pedestrian footpaths and side streets and this affects the neighbouring structures. When a footpath turns out to be used as a road the effects to the residents is increased real estate prices due to the proximity to means of transport. The dwellers therefore experience increased living standards.

In trying to solve the problem of traffic congestion, governments have tried to come up with a market-based solution which involves expansion of roads and building of fly overs that can be used by all citizens. Private companies have been contracted to facilitate efficient construction of the roads. This strategy is efficient in that vehicles that have no business in cities but have to pass through would have an express way while the carrying capacity of a road would have increased lane. In certain cases, the subway vehicles would have their designated roads to increase their efficiency and avoid congestion with the small cars. The use of public transport is beneficial to a large number of people when more consumers are accommodated though can become partially rivalry when the consumers exceed a certain point. The strategy is efficient in that the negative externalities would be greatly reduced though the application of fees excludes other people from enjoying the benefits.