Negative Externalities
Internalizing externalities and public goods
Discussion Question: Externalities
The most obvious negative externalities of traffic congestion, even for non-drivers who take public transportation, include the noise and air pollution caused by traffic. Pedestrians may also run the risk of being hit by a passing driver who is trying to maneuver his or her way in rush hour traffic. There are significant opportunity costs to living in a large city where many people drive. Large commercial parking lots take up space that otherwise could be allocated for use for retail stores that all residents could patronize. Public parking areas take up space that could otherwise be devoted to public parks. Cyclists and pedestrians often have notably decreased quality of life and freedom of movement, thanks to the fact that they must compete for space with cars on city streets. While even drivers bear some of these costs when they become pedestrians and cyclists, they receive benefits from their cars while riders who exclusively use the subway receive none. Additionally, subway riders have added costs that regular drivers...
In fact, the federal government has occasionally offered incentives to use cars on a national level, to support the automobile industry. However, in some areas there has been a lobbying effort to increase the negative externalities of traffic congestion, such as imposing a commuter tax upon all incoming cars or increasing tolls in general for all drivers. The revenue is then used to improve the roads for pedestrians and cyclists and the general environment.
Increasing the opportunity costs to car drivers for the use of their vehicles can also help increase the negative incentives that they personally experience when driving cars. For example, blocking off certain lanes for the sole use of pedestrian traffic, placing limits on when cars can be on certain roads, or…
