I remember in 2017 when the Auckland regional fuel excise was being debated, someone asked Bill English why his nominally “centre-right” party didn’t support this small step closer to a user-pays system, and he said “we already have a user-pays system”. It still sucks out massive subsidies from rates and general taxation, as well as imposing big externalities on society. Now a reasonable chunk of it would come from users in the form of fuel excise and vehicle registrations.īut it’s definitely sub-optimal. Previously transport infrastructure had been funded from general taxation. At the time it was seen as a massive step closer to a “socially optimal solution” than what we had previously, mainly because it introduced an element of user-pays. Our current framework was introduced in the 70s and is largely unchanged since then. It’s what we should be trying to get as close as possible to when setting up the economic framework in which our transport systems exists. Another way of putting this is that our current economic framework does not result in a “socially optimal solution”.Įconomists define a “socially optimal solution” as “ the optimal distribution of resources in society, taking into account all external costs and benefits as well as internal costs and benefits.” I’ve heard this said a few times and I think it’s worth repeating. Congestion is a problem of bad economics, not bad engineering.
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