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July 21, 2006


Polly Toynbee really is so predictable. Me, yesterday:

This will of course, as previous such studies have been, seized upon by various lefties (who wants to make a bet on it turning up in a Polly Toynbee column soon?) as evidence that we must have more income redistribution.

Polly today:

Cowardice stops Labour talking about gross inequality and the harm it does. Inequality is not only the root cause of crime, but yet another report shows how inequality can also cause early death. It's not diet or ignorance that kills the poor, but low ranking in the pecking order.


Cowardice often hides behind "globalisation" as an excuse for inertia. Often it is the Americans who puncture the convenient myth of the helpless nation-state. Here's the latest example: the US senate is about to outlaw online gambling by preventing credit cards and banks paying out to gaming sites. But Labour uses "unstoppable" online gambling as an excuse for many more slot-machine dominated casinos here, to tempt gambling back on-shore within British regulation and taxation. The US shows you can just ban the banks from paying any money to online gambling sites at home or abroad, so this lethal explosion can be stopped.

Such faith in the law! We’ll ban something and it will stop happening! Polly dear, haven’t you noticed that online gambling is already illegal in the US? Have you not seen in the papers that a Briton is currently in jail in Dallas on a charge about this? Have you not got the gumption to see that while it is already illegal millions upon millions of people are still doing it? "Make it illegal!" doesn’t actually work all of the time.

Cowardice has marked Labour's feeble response to climate change. Ken Livingstone shows how easily it can be done, his congestion charge defying every new Labour political rule.

Congestion charge? Climate change? What are you wibbling about woman? The congestion charge is a form of road pricing designed to cut congestion. There’s a clue in there somewhere, in the name of the tax itself. Congestion. And, if I might remind you, it’s precisely sod all to do with New Labour, the left or communitarian politics. You do know was the intellectual originator, don’t you?

Curiously, Sir Alan Walters, Mrs T's personal economic adviser, was one of the early pioneers of the theory underpinning road pricing to charge for congestion: Track Costs and Motor Taxation, Journal of Industrial Economics (1954), The Theory and Measurement of Private and Social Cost of Highway Congestion, Econometrica (1961), and The Economics of Road User Charges (John Hopkins University Press, 1969)

Obviously a new intern in the office today.

Update: Factchecking Pollyanna:

For someone who condemns gambling, she's taking a heck of a punt.

July 21, 2006 in Idiotarians | Permalink


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But Tim, don't you think that the purpose of the congestion charge has been blurred from the start? Is it not true that certain alternative fuel vehicles get a discount? They don't neccessarily cause less congestion but do cause less pollution. And if this is true...


Tim adds: The bane of any government intervention. Mission creep.

Posted by: brian | Jul 21, 2006 9:46:57 AM

If we dig further into the provenance of the notion of externalities, it was there in the great Alfred Marshall's Economics of Industry (1879) and developed at length in Arthur Pigou's The Economics of Welfare (1920):

It could be of some passing comfort to Pollyanna that at one time an entirely unsubstantiated rumour circulated that Pigou was a Soviet spy:

However, it turned out that the "fifth man" of the Soviet spies at Cambridge - after Maclean, Burgess, Philby, and Blunt - was more likely John Cairncross although he denied it.

Btw as best I can gather, John Cairncross's culpability was no more than passing on military information gained from Ultra relating to German battle plans for what became the huge tank battle at Kursk in 1943:

Posted by: Bob B | Jul 21, 2006 10:10:09 AM

Oddly enough, the Congestion Charge was intended to charge for the additional costs inflicted on road users for congestion.

Presumably, I will use a car if the private benefits I anticipate enjoying thereby are at least equal to the costs I incur from making the trip. Absent the Congestion Charge, there is no reason why I should necessarily take account of the longer journey times that my use of the vehicle inflicts on other road users of congested roads in inner city areas. The Congestion Charge is intended to address that gap between social and private costs. Most polls that I've seen show clear majorities in favour of the London Congestion Charge. More sophisticated congestion charges could be devised and applied by satellite tracking of vehicles but with associated costs for administration and from intrusions on personal privacy.

Air pollution from motor vehicles is a different issue. After a broad fashion, fuel taxes are intended to address that.

The Lib-Dems (as best I can tell) and some environmental lobbies are pressing for vehicle taxes relating engine capacities. As someone who once made some modest contribution to the official debates about that, I'm opposed to taxes relating to engine capacities for the good reasons that:

- engine capacities poorly correlate with fuel consumption: the Coventry Climax engine was brilliant for Grand Prix racing in the 1960s with a capacity of only 1.5 litres but a fuel consumption to match a racing engine. One effect of taxing engine capacity will be to induce motor manufacturers to boost the power of engines with smaller capacities.

- Another predictable effect will be to cause capacities of motor engines to cluster just below break points at which the higher taxes apply. If the break points vary haphazardly as between various EU national markets and the US, this will just add to red tape costs for the motor industry and cause loss of scale economies through truncated lengths of production runs.

If the policy objective is to encourage better fuel economy then increase the excise tax on motor fuels and devise some scheme of tax rebates or welfare payments to compensate those who live in rural areas which are poorly served by public transport. The Scots and Welsh will otherwise complain loudly about the inequity of higher fuel taxes for residents in rural areas.

If the intention is to reduce NOX and SOX emissions then we need taxes, regulations or periodic checks to focus on that. A serious practical problem is that the performance of various catalyst converters on exhaust pipes tends to degrade with use. A tax appropriate to a vehicle and engine type when new ceases to be appropriate as time passes.

Posted by: Bob B | Jul 21, 2006 11:21:48 AM

Against congestion? Ridiculous. We have dying towns and cities in the US that pray for some congestion. Congestion means people want to be there. It may be an annoyance, but what isn't?

Posted by: bird dog | Jul 21, 2006 12:49:41 PM

London functions better with less traffic congestion and most polls of Londoners report support for the Congestion Charge. There's certainly no shortage of folks trying to move to London to take up residence here so the problems of dying towns are sure not going to be alleviated by abolishing the Congestion Charge in London. In fact, the problems of dying town are much more likely to get worse.

Posted by: Bob B | Jul 21, 2006 1:04:33 PM

"Against congestion? Ridiculous. We have dying towns and cities in the US that pray for some congestion. Congestion means people want to be there. It may be an annoyance, but what isn't?"

That's the exact same argument as noting the popularity of Soviet food shops by the queues outside.

Posted by: Matthew | Jul 21, 2006 2:19:44 PM

Tim, Ken Livingstone wants a £25 'congestion' charge specific to SUVs in the next few years.

Jonathan Freedland wrote about it here.

Nothing to do with congestion, everything to do with emissions.

Posted by: Chris White | Jul 21, 2006 3:15:11 PM

Raise the congestion charge to deal with Climate Change? But the externalities of climate change are already more than covered by Fuel Duty, with 37p per litre to spare.

Posted by: chris | Jul 21, 2006 10:23:43 PM

oops ... my mistake for not checking my blog for the numbers before commenting.

That should be 43p per litre to spare on Fuel Duty after paying for the externalities of C02.

Posted by: chris | Jul 21, 2006 10:46:40 PM

Chris White:

Nothing to do with emissions either (for which, as has been often noted here, the correct way to internalise the externalities is a tax on fuel), but rather more to do with a nasty statist class-warrior having a pop at a soft middle-class target.

(A fuel tax is also a reasonable way of paying for roads. The weakness in internalising both road costs and environmental costs in fuel prices is the large European lorries arriving at Dover with a full tank, driving around and returnong home empty. Lots of road damage and emissions, no tax.)

Posted by: Sam | Jul 22, 2006 3:54:54 AM

The London cabbie who drove me to Liverpool St. a couple of weeks back said that although intially the congestion charge resulted in a noticeable drop in traffic, after a few months businesses just factored the cost into their numbers, probably by passing them onto their customers. Apparently, the traffic now is as bad as it ever was.

Posted by: Tim Newman | Jul 22, 2006 5:35:28 AM

Tim - That's instructive, if London based business can load the Congestion Charge onto prices charged to customers and clients then the businesses were not charging what the market would bear to start with.

If traffic is back to what it was prior to the Charge, that suggests the Charge should be increased if it is to do what it is meant to.

Whatever else, the Congestion Charge doesn't seem to have done much harm to inward investment into Britain:

"The UK received more inward investment than any other country last year, according to newly released internationally-compiled figures. The Organisation of Economic Cooperation and Development (OECD) said foreign direct investment into the UK hit a record $165bn (£91bn) in 2005."

What's curious is the claims from some Euro enthusiasts and even celebrated economists a few years back about how inward investment would be seriously hit if we didn't sign up to join the Euro. Evidently, not so.

Posted by: Bob B | Jul 22, 2006 10:20:55 AM


Your first two paragraphs....I agree.

Posted by: Tim Newman | Jul 22, 2006 10:55:18 AM