Development of road transport has brought several advantages. It made people to save time, trade scarce resources and even travel the areas that could not be explored before. However, it is also clear that road transport causes several external costs simultaneously. External cost is the cost of adverse side-effects that all production and consumption of services produce and the producers are not obliged to pay for. (Persson and Ödegaard, 1995) The main external costs related to road transport can be defined as three kinds. First of all, it causes traffic congestion inevitably due to the high demand. Second, it leads to a lot of people’s death by traffic accidents. Last but not least, road transport has critical influence on air pollution. South
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Since 1970, South Korean government launched various road construction plans to boost their economy. However, the plans were too focused on rural areas rather than urban areas. This has deepened the problem of urban traffic congestion and increased its cost constantly. According to Sung, et al. (2012), the annual cost of road congestion of South Korea recorded 27.9 trillion won in 2009, which is almost same with 190 trillion pounds in current exchange rate. The main portion of them goes to metropolitan cities, such as Seoul, Busan, Daegu, etc. It accounts for 17 trillion won, similar to 110 trillion pounds in current exchange rate. If we look into the graph below about the cost per person, it shows the increasing trend obviously. Except the downfall in 2009, it has been increasing since 2005 and also recorded the highest point in …show more content…
Road pricing is to charge a fee equal to the time delay to drivers. It is to make the less desperate drivers away from the peak time and loose the congestion. This is efficient, because there is a gap between Marginal Social Cost and Marginal Private Cost (Average Social Cost) of traffic congestion. The difference between the two, which is called Marginal External Cost, should be covered by the congestion tax the drivers pay. Socially optimal amount of traffic flow/congestion happens where MSC and Marginal Social Benefit (Demand)
Since 1970, South Korean government launched various road construction plans to boost their economy. However, the plans were too focused on rural areas rather than urban areas. This has deepened the problem of urban traffic congestion and increased its cost constantly. According to Sung, et al. (2012), the annual cost of road congestion of South Korea recorded 27.9 trillion won in 2009, which is almost same with 190 trillion pounds in current exchange rate. The main portion of them goes to metropolitan cities, such as Seoul, Busan, Daegu, etc. It accounts for 17 trillion won, similar to 110 trillion pounds in current exchange rate. If we look into the graph below about the cost per person, it shows the increasing trend obviously. Except the downfall in 2009, it has been increasing since 2005 and also recorded the highest point in …show more content…
Road pricing is to charge a fee equal to the time delay to drivers. It is to make the less desperate drivers away from the peak time and loose the congestion. This is efficient, because there is a gap between Marginal Social Cost and Marginal Private Cost (Average Social Cost) of traffic congestion. The difference between the two, which is called Marginal External Cost, should be covered by the congestion tax the drivers pay. Socially optimal amount of traffic flow/congestion happens where MSC and Marginal Social Benefit (Demand)