[lbo-talk] Congestion pricing goes down

Wojtek Sokolowski sokol at jhu.edu
Tue Jul 17 13:48:41 PDT 2007


Michael:

Just out curiosity, can you explain the principle behind that aversion? I say this as a man who shares this POV as a prejudice. But since mainstream economics, the orthodoxy of our day, basically declares that user fees are always good, and the more the better, it's a prejudice that always needs defending. Belief in the postulate that user fees make things more efficient and that lack of them leads to disaster is an argument opposed to social-democratic programs all across the board. I'd love if you had a counter one.

[WS:] There are two faces to user fees - investment recovery and behavior regulation. Only the latter is associated with efficiency - imposing a cost on a user prevents him or her from wasting a particular resource.

However, a user fee to recover the initial investment can lead to greater inefficiency, because the amount of the fee my be a barrier to using the resource at all, and force the potential users to resort to less efficient resources.

Just think of hospital care - if hospitals were to recover the full cost of health care through user fees, this would lead to great inefficiency - as many people could not use that service thus becoming sick and potential vectors of diseases. On the other hand, the total absence of user fees could lead to unjustified use of that resource and making it less accessible to those who really need it.

So if the user fee is determined on the need to regulate behavior (i.e. prevent wasteful uses) rather than to secure return on investment - it is a good thing, but the other way around - it is a bad thing.

Wojtek



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