Queensland Fuel Rebate

Queenslanders are about to lose their fuel rebate, and the spin is in full gear.  The most blatant spin I’ve seen is from this news article titled, “Fuel raiders force subsidy scrapping“.  It’s wrong on multiple levels.

Firstly, the scheme is not a subsidy but a rebate (since the levy is a federal tax, the rates cannot vary by state as they used to.)

Secondly, not only is Bligh no doubt overstating the number of “border-hoppers”, but the rebate is only eight cents a litre – which doesn’t even cover what they get back in GST.  In other words, the Queensland government makes profit for every NSW resident who hops the border to buy their petrol.  So, either the Bligh government is lying about their reasons, or they are seriously incompetent.

But then, we had this pearler (emphasis mine):

“But it will also save taxpayers more than $2.4 billion over four years as part of our strong plan to regain our Triple A credit rating and restore the budget surplus.”

Got that?  Making taxpayers fork over an extra $2.4b is saving them money!

52 thoughts on “Queensland Fuel Rebate

  1. But taxpayers would only waste the money on selfish, personal, matters! This way, everyone sorta benefits, somehow, somewhere. Everyone’s a winner, but don’t expect prizes.

  2. Fleeced:

    At least she’s not calling it an investment, so think your lucky stars.

    the idea of course is to try and pay down the debt, right?

    Of course nothing said about cutting spending seeing the budget was based on boom times.

  3. I hate the convention that a tax increase is now referred to as a “saving”… but calling it a “taxpayer saving” is really absurd. War is peace. Weakness is strength. Paying tax saves you money. Orwell is alive…

  4. I guess it saves you the effort of thinking about what you’d like to spend your hard earned cash on. In that way it’s a saving.

    You could put all that extra thinking time to how you’re going to thank this government for helping you so much!

  5. As excises go it is one of the better ones. The demand for fuel is incredibly price inelastic (price elasticity around -0.2) and if you believe the Ramsey story on efficient revenue taxation and if you are going to raise taxes as excises the 38 cents a litre isn’t high.

    Even if you don’t believe the Ramsey efficient tax story and you believe that the myriad of externalities imposed by vehicles should be taxed you still get a case for a fuel excise as a proxy for these externalities which is somewhere north of 38 cents. Currently roads are not congestion priced (say 6 cents/litre), greenhouse gas emissions are not taxed (12 cents), traffic accident externalities are untaxed (12 cents/litre) local pollutants/noise are not taxed (10 cents)and heavy vehicles pay some but not all the road damages they cause (4 cents) so there are externalities everywhere.
    That comes to 44 cents a litre.

    If that is the case then for efficient road provision you would not want an 8 cent subsidy. You would internalise all the costs by if anything slightly increasing the excise.

    I agree Anna Bligh’s logic is lousy but governments all over the world levy taxes on liquid fuels for the two reasons I mention. Her move makes sense even if her logic does not.

  6. Harry,

    Congestion 6 c.p.l – where did you get that from?
    GHGs – I thought 8 c.p.l was more correct (So I assume you mean carbon is about $30/tonne).

    There’s enough fudge factor to bring this down to 34 c.p.l, arguably.

    The actual tax paid is 38.1 c.p.l plus GST, including GST on excise – thus rising to 41.91 c.p.l.

    It should be GST exempt and dropped to 34 cpl.

  7. 41.91 excludes GST on the non tax component, typically being about 6.19 c.p.l at present (assuming $1.10 final price at the pump). The taxes can add up to 48.2 c.p.l, but the “right” amount of tax is 34-44 c.p.l.

    The tax should be cut. There is possibly a 14.2 c.p.l differential that it should be cut by, but at least 4.2 c.p.l.

    Is there any point in an efficiency point of view in not exempting goods that are already specifically taxed at a higher rate from a lower rated broad based tax?

  8. Harry,

    Sorry my response is scattered.

    http://www.harryrclarke.com/2009/03/31/traffic-accident-externalities/

    Reading the following infers you wish to scrap registration taxes and compulsory third party insurance:

    “I have been examining proposals for introducing distance-based car insurance charges as a way of addressing traffic accident issues as well as environmental externalities associated with road use. There are arguments for utilising per kilometre (km) insurance charges rather than lump-sum annual fees. This is consistent with the principal that prices should reflect costs. Such charges more accurately reflect the risks of traffic accidents than do risk-adjusted fixed charges since they directly limit distances travelled. Spinoff benefits of such measures include reduced congestion and local pollution.”

  9. Mark, I think all these externalities should be internalised with appropriate charges. My point is that if they are not then a second-best policy is to attack these user costs through an excise on fuel. It is obviously not as good as direct charging.

    BITRE estimate congestion costs at around 6 cents/km in Australian capital cities. They are a bit lower in Brisbane but certainly per litre they are much more than 6 cents. I am being conservative. More likely to be about 12 cents/litre.

    Yes, the other estimates are rough – partly relying on US data but confident that the total unpriced cost is greater than 44 cents.

  10. “More likely to be about 12 cents/litre.”

    “BITRE estimate congestion costs at around 6 cents/km in Australian capital cities.”

    2km/litre?

    I’ve always wanted to own a Hummer. Are you happy with yours?

    My maths puts a performance V8 at 13 litres/100km – 7.69 km/litre. So that’s less than 1 c.p.l for a gas guzzler.

    Someone can show me how I’ve massively stuffed this up if I’m wrong.

    A fully costed tax could be as low as 31 c.p.l., plus the benefits of scrapping poorly priced lump sum taxes.

    How do you apply this congestion charge for non capital city areas anyway? Constitutionally, Federal taxation must be applied equally throughout the Commonwealth (AFAIK).

  11. Sorry, I did stuff something up – I mean a “fully costed” excise tax could be as a low as 29 c.p.l., plus other tax cutting benefits.

  12. Mark, Its a rough proxy averaged across regions.

    The details of the calculation are involved – need to account for fuel price elasticities and the effects of fuel prices on distances travelled.

  13. Mark, Harold won’t speak to me so perhaps you will clear this up. Harold throws around the world externality as commonly as the letter “e” is used in the English language.

    Leaving aside the cost of carbon for a moment…. Harold wants to price congestion, yet in my mind it’s not that simple to actually put a price on it. In fact I would argue that road congestion is actually a price in itself in that people are not stupid. They do make calculations and say driving to work in heavy traffic most of the way trumps a sometimes 2 1/2 hour public transport commute. The other issue of course is the way out cities are built and in the modern age work place is actually quite diffuse. Alan Moran did a public transport paper some while ago that concluded only 15% of people actually work in the CBD in Australian cities. In other words most of the traffic that looks like heading into the city may not be and is actually quite diffuse. For most of these people public transport could add two hours to their commuting time.

    For the most part roads are in some ways monopolistic, so pricing a road is extremely difficult and no matter how many calculations are performed it’s really no more an estimation in the same way that the command and control economies had difficulty with pricing.

    In conclusion isn’t this externality thing to do with roads basically a crock of shit and the real hidden motivation for most of these people that push for it basically a green agenda showing little concern for human welfare?

    For instance I’ve never read anything when there is a discussion on road pricing to count the benefits of driving.

    Furthermore Alan Moran made a very salient point which is that most (not all) public transport loses money; in fact it loses heaps of money and this began happening in the 50’s as cars began to out compete public transport.*(City Journal piece by Steve Malenga)

    Cars are comfortable door-to-door form transportation. Any attempt to fictitiously price this mode of transport through a dishonest pricing system would simply lower living standards.

    In short, simply adding up negative externalities without taking into account positive ones is basically nonsense.

    What do you think Mark.

  14. The other point that Alan Moran came up with in his piece is that people suggest we should use railways a lot more. However Morna argued that the geographically diffuse way we live and work makes this form of mass transport very difficult. Railways are terrific for straight line mass transport which is why the the NYC subways system is well used. Railways are not helpful for dispersed mass transport. Furthermore combining say rail with bus transport simply makes mass commuting an extremely unpleasant experience and lowers people living standards.

    Getting back to road pricing…… Roads are correctly priced at the moment in terms of people making the rational decision to either use a train or use the car. Adding to their costs would just be another “personal preference tax” that some try to use to change behavior they don’t like.

  15. jc,

    Even if Harry’s theory is right, on my maths, fuel taxes should be cut by 19.2 c.p.l, on top of scrapping poorly priced lump sum taxes.

    “In fact I would argue that road congestion is actually a price in itself in that people are not stupid. They do make calculations and say driving to work in heavy traffic most of the way trumps a sometimes 2 1/2 hour public transport commute.”

    That’s a good point, but likewise there are people who are basically inefficient and “low use value” users. A congestion charge would see them gone.

    But so would a toll road.

    “In other words most of the traffic that looks like heading into the city may not be and is actually quite diffuse.”

    Actually, it is quite common. The centre of Sydney is around Parramatta now. Commuting from the Central Coast or Wollongong to anywhere in the greater Sydney area is common.

    “For the most part roads are in some ways monopolistic, so pricing a road is extremely difficult and no matter how many calculations are performed it’s really no more an estimation in the same way that the command and control economies had difficulty with pricing.”

    I agree but BTRE has a lot of good estimates. Assuming the right science, pricing carbon or road use costs is probably very, very accurate.

    Again, toll roads are priced better. They have used a lot of market research to set prices. BTRE do a good job, but toll roads were/are using actual consumer data and historical prices.

    “In conclusion isn’t this externality thing to do with roads basically a crock of shit and the real hidden motivation for most of these people that push for it basically a green agenda showing little concern for human welfare?”

    Maybe not. I’ve shown you that if you take Harry’s approach, with certain assumptions, you can end up cutting taxes and abolishing any “road user charges” related to externalities.

    “For instance I’ve never read anything when there is a discussion on road pricing to count the benefits of driving.”

    The benefit is implied by willingness to pay. What is missing is accounting of external benefits.

    “Furthermore Alan Moran made a very salient point which is that most (not all) public transport loses money; in fact it loses heaps of money and this began happening in the 50’s as cars began to out compete public transport.*(City Journal piece by Steve Malenga)”

    This seems totally correct. Read NSW papers about buses and subsidies. Western suburbs operators can operate at a profit without subsidy. Others cannot. Those that lose money can be underpriced (in ticket prices) by a level one tenth of transfer/shadow marginal costs per passenger/user.

    “Cars are comfortable door-to-door form transportation. Any attempt to fictitiously price this mode of transport through a dishonest pricing system would simply lower living standards.”

    Seemingly so. You’re saying that we’re not counting the positive externalities. The negative externalities still exist though.

    Tollways do reduce a lot of externalities, without imposing higher taxes. Reduced noise, travel time, congestion (also a positive externality to publicly owned roads users) emissions, etc.

    But hey. With respect to externalities I think this might be more important than a busted State Government:

    http://en.wikipedia.org/wiki/Biochar

  16. Hi mark:

    I actually don’t think Harry has ever had it in mind to lower all the current taxes such as excise or registration etc. and price road traffic a different way. He wants to layer current government charges with other taxes to basically make it prohibitive or so expensive that the cattle are force herded into public transport.

    He doesn’t talk to me, so perhaps you could ask him as last time there was a discussion on this issue, Harry was of course against cutting the excise tax on fuel.

    I take your point on toll roads vs congestion taxes, however Harry has also talked against toll roads if congestion taxes could be implemented which in some ways lifts the veil of his intentions.

    There is a congestion tax of sorts in the Sydney and Melbourne. The Cities or state (I forget which) levy a tax on parking spaces in the CBD areas. As far as I know Harry has never mentioned this charge when wanting to price city based congestion. This further adds to the point I was making in that for a lot of these extremist Greens the agenda needs a jack hammer to pry open.

    Here’s the thing though offering subsidies to public transport while taxing the shit out of people that drive is an exercise in personal preferences and doesn’t in any way promote efficiencies. And personal preference taxes are a rotten way to run things.

  17. What is missing is accounting of external benefits.

    “Sactly” where is it and why isn’t ever accounted for?

  18. Mark,

    One thing that is true is that these computations are rough arithmetic. You are averaging across a country and that in itself means that using fuels as a base for addressing externalities is inefficient – you are levying the same congestion charge for a motorist in Wilcannia as one driving through Sydney’s CBD. That is why I have a strong preference for direct user charging of the specific costs.

    If you believe the Ramsey story then you will come up with an excise that is way bigger than 38 cents. Its a second-best sort of argument and many don’t like this story.

    My point was that – even with rough arithmetic and even with the averaging problem – there is a case for a substantial excise (assuming you cannot levy user charges) based on the imperfect role of fuels as a proxy.

    I don’t have space to spell out the argument but if you look at:

    I. Parry & K. Small, ‘Does Britain or the United States Have the Right Gasoline Tax?’, American Economic Review, 95, 4, 1276 – 1289,

    you will find the complete argument. Assuming Australia is a cross between US and UK experience you get to the conclusion I made. In unpublished work we have now done this directly using Australian data. I am happy to send this to you once it becomes public.

  19. If I understand this correctly congestion is of itself a cost but it is not correctly allocated because the value of different peoples times and of different journeys is not constant. So congestion does not self price effectively.

  20. That’s right – you are using fuel as a rough proxy for these externalities but fuel use is not always directly related to the external costs.

    It doesn’t matter if people have different values of time – this will be reflected in their demand for travel. But it makes a huge difference when and where they travel.

  21. Not an economist, so hope this isn’t too stupid a question, but how is congestion a negative externality?

    If a company dumps it’s pollution in the river, I can see how that’s a negative externality (and the same applies to pollution from cars, I guess). But congestion itself is caused by overuse of a common resource (roads)… isn’t this more like a “tragedy of commons” scenario?

    If so, isn’t the most efficient response to privatise roads in congested areas?

  22. The externality is created by the fact that you only consider your own costs when you take a journey. You don’t account for the fact that you will increase the travel times of other people.
    Privatisation would help but roads are often local monopolies so that you also need regulation.

  23. “The externality is created by the fact that you only consider your own costs when you take a journey. You don’t account for the fact that you will increase the travel times of other people.”

    Ok, well now you’re just saying that the tragedy of commons scenario is an externality… I guess I’d agree, but it’s an externality of socialised property, not of driving itself.

    “Privatisation would help but roads are often local monopolies so that you also need regulation.”

    I don’t think that’s quite right… Obviously, each road can only exist in one location, but declaring that it’s therefore a regional monopoly and so requires regulation is a bit of a specious argument.

    On a side note: With tollways already using electronic payment, we’re almost at the point where you need an electronic tag to drive… I can see micro-tolls becoming popular in the future (5 cents here, 10 cents there). It should be pretty easy to tweak the technology so that you don’t pay in your own neighbourhood.

  24. You don’t account for the fact that you will increase the travel times of other people.

    What sort of a nonsense argument is that? That’s a socialist argument if I’ve ever seen one.
    By the way Harry, in your congestion studies, can you point to where you have accounted for the benefits of driving? Anywhere?

    Yes, I know you’re not talking to me so perhaps you could direct your answer to Mark or someone else:-)

    Your silence on the matter will be taken that the entire exercise has been a fraud and is simply a personal preference argument. It’s not that you want to price roads in a more efficient way. You simply want people off the roads because it suits your personal preferences.

    Ok, well now you’re just saying that the tragedy of commons scenario is an externality… I guess I’d agree, but it’s an externality of socialised property, not of driving itself.

    Exactly. However like most environmental zealots Harry won’t fess up to this which in a sense makes it an externality in of itself… LOl

  25. I. Parry & K. Small, ‘Does Britain or the United States Have the Right Gasoline Tax?’, American Economic Review, 95, 4, 1276 – 1289,

    Which of course avoids the obvious in that nearly all American cities were planned on a socialist model which is a downtown centre and lots of freeways leading in with people living off the exits. In most cases there’s no choice other than to drive.

    So socialist planning forces people away for their work in terms of travel time and availability of public transport etc. and then Harry wants to sock these people with further costs.

    Here’s the thing, one of the most green city in the US is NYC because you simply don’t want to own or drive a car there as it’s more of an annoyance than anything else.

    But I bet, you would be the first person to rally against removal of height restrictions etc as you would define that as an “externaity”.

    (See City Journal piece on making all American cities like Manhattan).

  26. Congestion is its own cost. It is already internalised.

    Including noise and traffic accidents also is stretching an honest use of externalities. Living life produces noise. And accidents happen in life. These “externalities” are as valid as me charging ugly people a tax because seeing them makes me sad.

    Also, you shouldn’t tax car drivers for the supposed costs of truck drivers.

    Externalities are perhaps the most over-used and least well understood excuses rolled out in economics. If you want to ban, tax or subsidise something, you can always find some half-baked externality story. People should be immediately skeptical when they hear the word.

    Having said that, Harry misses the most obvious reason for charging a petrol tax — wear and tear on the roads. This would be a real cost for a private road company, which would in many instances be passed on to the road customers in a free-market scenario. Though of course, some road owners would probably find it economic to cover this cost themselves to encourage traffic (a loss-leader strategy).

    Harry is of course correct that fuel is relatively inelastic (ie doesn’t change behaviour much), which makes it a relatively efficient tax. I think the long-run elasticity is closer to -0.7… but either way it’s inelastic. Though of course that is only one consideration when looking at tax policy.

    But none of this justifies the absurd way that these topics are now discussed. Unfortunately, words matter, as they shape how people see a debate. And calling tax a “saving” is dishonest and needs to be called out.

  27. John,

    Wear and tear on the roads is paid for by trucks through the huge rego fees they pay. There is cost recovery but it isn’t an efficient way of pricing – trucks are not charged a lot for using particular low durability roads.

    Congestion, traffic accident and noise include classic externalities since indivduals are not motivated to internalise the costs imposed on others.

    The Donnely estimate you cite for elasticities is old and does not accord with current or other older estimates – Breunig & Gisz (2009) have estimates online that you can check and the Litman (2008) survey at VTI has a whole set of estimates for Australia that are much less elastic than Donnelly’s.

    I agree with your last sentence.

  28. Congestion is internalised. If the roads are congested, that is a cost. The more people who enter, the higher the cost that they face. Just because the cost of congestion is time and not money, that doesn’t mean it’s not real. To replace the “time cost” with a “money cost” is simply biasing the system away from the “time rich” and towards the “money rich”.

    Noise and accidents are a part of everyday life. It may annoy you that I sing, and it may annoy you that I trip over some stairs near you… but these things do not justify government intervention.

    If that is your standard for intervention, then there is no government policy you couldn’t justify. Which means the concept has become pretty much useless.

    (If you are going to reference other work, it would help if you could provide links, if available.)

  29. A fuel tax does not really reduce congestion except in so far as it reduces road use in general. It hardly seems like an effective idea.

  30. John, That’s right when you get on the road you internalise the congestion you face. But not the extra congestion costs all the other drivers on the road face which is therefore an externality.

    Same w.r.t. noise and traffic accidents. Yes you internalise these costs since you bear them but not the costs imposed on others.

    I tried to write what I know about road damage externalities here. On traffic congestion externalities here. On traffic accident externalities here.

    They have references.

  31. But not the extra congestion costs all the other drivers on the road face which is therefore an externality.

    Oh utter nonsense. As John and I described the cost of congestion is already taken into account. John nicely explained to you that there are other ways of counting the costs.

    People simply make trade offs.

    Where is the evidence, harry, that you accounted for the benefits associated with driving? You have none, right? So it makes your “analysis” basically worthless… unless of course you are simply trying to convince people to apply your own personal preferences.

    Harry., if you don’t account for the benefits the entire thing is a sham…. and then wasting time on this becomes an externality to the rest of us, which means you ought to be charged on an hourly basis. That’s my personal preference.

    Terje says:

    A fuel tax does not really reduce congestion except in so far as it reduces road use in general. It hardly seems like an effective idea.

    Terje, what’s the purpose of reducing congestion on the roads? To what ends?

  32. hc — I’m not talking about me bearing the costs of my own singing and tripping. I’m talking about your bearing those costs. Quite frankly, such “costs” should not be relevant in public policy discussions. They set the bar so low that everything could be justified… which makes them a useless criteria by which to assess public policy.

    The social marginal cost of me entering traffic is the same as the personal marginal cost of me entering traffic. Therefore, no externality.

    If there are 100 cars on the road, they each contribute 1/100th to my congestion cost, and I contribute 1/100th to each of their costs. 100 * 1/100 = 1 for both personal and social cost. Another way of saying this is that my externality to everybody else on the road exactly equals their externality to me, in terms of the time cost. The only difference is time preference, which is basically the “willingness to pay” when time is the cost.

  33. Hey, we made the news at Von Mises Website! They’re talking about this as a way to go! I’ve also mentioned the claim by a health bureaucrat, Debora Picone, that Australia might have a US style health system, within 5 years, as the State system breaks down.

  34. Thanks for that Nicholas… the grass is always greener, eh?

    In short, they seem to have swallowed the media spin that this is an ending of a subsidy (rather than a rebate).

    That, and they believe the privatisation is good thing. I guess the latter is perhaps a silver lining, but still… talking as though this is an example of good economics is a facepalm moment.

  35. I’m with Fleeced comments on Mises. This sounds good, and in many ways it is good, but the truth behind it isn’t so pretty. To the uninformed observer this makes the Bligh government look they want to cut subsidies to business and privatise. That’s definitely not the motivation and this government wouldn’t do any of these things if they could avoid it without QLD becoming a basket case.

  36. John suppose I enter a crowded road and work out that the time and petrol cost of getting to my destination is $15 (that’s the personal marginal cost of me entering traffic) but that by doing this I get a benefit of $25 so off I go.

    I head off to this particular destination (‘The Honey Motel’) along with 1000 other motorists who go to about the same place. I increase their travel times by 1 second per car so I cost them 1000 seconds or by about 17 minutes. If the value of their time is $50/hour I have increased their travel costs by about $14-20. That’s the larger social marginal cost of me entering traffic. It’s bigger than my personal marginal cost.

    The $14-20 is the charge that should be levied on me if there was efficient tolling. So now my total travel costs would go to $29-20 (my new personal marginal cost of making the journey) so I forego the trip.

    Its sad. In this deal I lose consumer surplus of $10 as a consequence of the charging since I now don’t go. But society saves $14-20 providing a $4-20 social gain. That is the basis for congestion pricing.

    Without it I would have got my $10 surplus but other motorists would have lost $14-20.

    Meanwhile back at ‘The Honey Motel’ my irrepressively sensuous adoring fan growls with annoyance into her mobile phone that ‘this is absolutely the last straw’. But I don’t believe her. I know that I project a well-worn, animal magnetism and that she will still come to offer me new invitations even though I valued an afternoon with her at a mere $25.

  37. I think you’ve stretched the definition of what an externality is. If you can accept that externalities can occur without third parties, you’re simply describing a common pool problem. The non excludability and rivalousness creates the “external” costs.

    What is typically the best solution to common pool problems? Yes you can congestion charge or sell quotas. Or you can privatise the road.

    If market provision of a good is optimal, and the Government currently provides it, this is not a reason to tax the use of the good.

    If there was congestion on a tollway, would you create a new tax or let them set their own prices?

  38. The 1000 motorists lost 1 second each because of you.

    And you lost 1 second because of each of the 1000 motorists.

    So the cost to you of the congestion was 1000 seconds (or $14 assuming $50/hr). And the cost by your contribution to the congestion was 1000 seconds (also $14).

    The problem with your example is that you shouldn’t have started with a cost to you which included the congestion cost. Start with your personal non-congestion costs… then add in the congestion cost to find the optimal decision. To work it out for society you should add $14 to the cost. To work it out for yourself you should also add $14 to the cost. So the incentives are already correct. Good news for your adoring fan.

    The principle to remember is this… not only are you creating a negative externality, but you’re also facing the negative externality from other people.

  39. You applying an incorrect mathematical assertion, Harry. You’re not causing an aggregate time loss of 1,000 seconds at all.

    Harry’s argument also reminds me of John Galt’s speech in Atlas Shrugged when he was railing against the ruin bad ideas had achieved.

    It was about the spurious moral virtue of sacrificing for the so-called greater good of others. Galt basically showed it was a form of philosophical Shylockery.

    Harry of course can choose to live under this curious moral code, however he shouldn’t expect others to and certainly he shouldn’t be advocating taxed etc. that would create that same result.

    Funny how fiction turns into real life performance.

    (I’m not mocking you by the way, but you do remind me of the people Galt was fighting against)

  40. Harry Clarke.

    Harry, I have left it for a few days to give you time to think where you have made the error in your mathematical logic, however since you haven’t come back it may mean that your still confused.

    Let’s take your example of one driver costing all the other drivers combined 1,000 seconds (1 second each). That ‘s fair enough, however you simply can’t account the cost of one driver to the rest without accruing I second from each of the other drivers to single driver.

    So here’s your math equation (999/1000 seconds)+ 1 second =1. In other words each person costs the other drivers equally.

    Harry, if you were sincere about this issue in that you’re serious about pricing traffic rather than green extremism, I would expect you to at least acknowledge this very fundamental mistake in your studies. Failing to do so simply means you’re not and that you actually are trying to deceive.

    It’s up to you to show if you’re sincere or not.

  41. I don’t follow John’s logic when he says you can’t account the cost of one driver to the rest without accruing 1 second from each of the other drivers to the single driver… if the last person to enter the road had chosen to stay at home there would have been a collective savings of 1000 seconds for the other drivers.

  42. JM, the ‘collective’ savings of 1000 seconds is then spread/divided amongst the other 999 drivers, right? Would anyone really notice? Or would they still think that everyone else was a rotten driver who should go back to school?

  43. Its disgraceful that such a rediculous comment (taxing us saves us paying taxes) didn’t get picked up more in the media.

  44. Harry Clarke is back at it again, trying to get the riff raff off the streets.

    Craig, What you want is travel to occur when the private benefits (whatever they are based on) of making a trip exceed all of the social costs created (including such things as congestion, road damages and traffic accident costs). Then society derives a benefit from the journey.
    The user charges approach is to try to capture all these costs and to make the traveller aware of them. Then if an individual is rational – they only make a journey if the benefits from doing so exceed the private costs they face – individuals acting in their own self-interesrt should increase society’s benefit.

    According to this clown getting in your car and driving somehow has to be “beneficial to society” (read beneficial to harry).

    He was shown to be wrong in his thought methodology over at the ALS blog when he presented an example of the reason he wants to charge a congestion tax on top of all the other taxes we get hit with.

    This is the fart whispers example he sued to justify is nonsense:

    suppose I enter a crowded road and work out that the time and petrol cost of getting to my destination is $15 (that’s the personal marginal cost of me entering traffic) but that by doing this I get a benefit of $25 so off I go.
    I head off to this particular destination (’The Honey Motel’) along with 1000 other motorists who go to about the same place. I increase their travel times by 1 second per car so I cost them 1000 seconds or by about 17 minutes. If the value of their time is $50/hour I have increased their travel costs by about $14-20. That’s the larger social marginal cost of me entering traffic. It’s bigger than my personal marginal cost.

    I was ruder but someone else nicer explained to him that his reasoning in fundamentally flawed.

    The 1000 motorists lost 1 second each because of you.
    And you lost 1 second because of each of the 1000 motorists.
    So the cost to you of the congestion was 1000 seconds (or $14 assuming $50/hr). And the cost by your contribution to the congestion was 1000 seconds (also $14).
    The problem with your example is that you shouldn’t have started with a cost to you which included the congestion cost. Start with your personal non-congestion costs… then add in the congestion cost to find the optimal decision. To work it out for society you should add $14 to the cost. To work it out for yourself you should also add $14 to the cost. So the incentives are already correct. Good news for your adoring fan.
    The principle to remember is this… not only are you creating a negative externality, but you’re also facing the negative externality from other people.

    Of course he never came back and apologised.

    He’s now proudly saying his write up has gone off to some government office and may be used in consideration of future planning.

    If it wasn’t so pathetic it would crack me up.

  45. Pingback: Ken Henry talks about road congestion pricing and appears to get it wrong like Harry Clarke. « Lambert watch (keeping an eye on the little guy)

  46. Pingback: Ken henry discusses road congestion pricing and appears to also get it wrong like Harry Clarke « Thoughts on Freedom

  47. Hi
    Although I can see why they want to reduce congestion it does seem a little bit like when someone wanted to create a “Lexus lane” on the Sydney Harbour bridge where a complete lane was dedicated to people with enough money could zoom across while other poorer people ended up with more traffic than before.
    Perhaps rather than using a stick the Parrahub http://www.parrahub.org.au/ carrot could be used with extremely low fares because of the extremely low ($1million/km) initial cost

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