Transport Policy and Transport Tax Reform

We are now entering a new phase of transport policy fiscal instruments. Rather than reforming existing measures, the UK and several other countries are moving towards replacing the whole transport taxation regime. This article reviews the ways that car taxation is used internationally to promote fuel economy, cleaner fuels and reduce traffic growth. Fiscal measures to manage traffic growth in the UK have faced political difficulties and, since 2000, have given way to a somewhat random set of policy decisions, together with a shift in focus towards the dominant issue of congestion reduction. An eventual replacement of existing car taxation measures with a new national road user charging regime is now contemplated, but there is a danger that the confusion in purpose that now characterizes transport taxation policy could be carried over to the new regime.     

Two Cheers and a Qualm for Behavioral Environmental Economics

Behavioral economics can gain more in-roads into environmental economics if we better understand why exchange institutions fail, more effectively reduce health risks and environmental conflicts, encourage more coordination and cooperation, design better incentive systems, more accurately estimate economic measures of value, and promote more protection at less cost. Behavioral economics deserves two cheers for advancing ideas of context-dependence and social preferences, which we illustrate with two examples of recent research.     

Spatial incentives to coordinate contiguous habitat

This paper discusses a series of economic experiments designed to explore whether a set of conservation subsidies—called the agglomeration bonus—can induce a socially optimal spatial pattern of conservation given landowner land retirement decisions are voluntary. The novelty of our approach is the use of the agglomeration bonus idea which depends on explicit topological relationships between a unit of conserved land and its neighboring conserved land; specifically, subsidies paid when one conserved land unit borders other conserved units. The agglomeration bonus approach is refined by providing a menu of subsidies and penalties that can used to encourage particular patterns of land preservation voluntarily. Our results suggest the agglomeration bonus—once our subjects gain experience with coordination—can achieve the specific contiguous land preservation pattern that was targeted.     

REGULATING CARS AND BUSES IN CITIES: THE CASE OF PEDESTRIANISATION IN OXFORD

Debates about whether traffic regulations that limit car use will enhance or hinder a particular urban economy are complex and often emotive. The present article considers evidence from the implementation of a radical traffic restraint and pedestrianisation scheme in Oxford in 1999. The most important achievement was a 17% reduction in car trips to the centre, which did not affect overall visitor numbers. The local economy did though experience a period of difficult trading around the time of implementation.     

The paradox of intensification

Urban intensification as part of a smart growth strategy can facilitate low-energy transport modes and reduce overall car use, with benefits to the global environment, but evidence suggests the effect will be less than proportional. Hence, in locations where intensification occurs, greater concentrations of traffic tend to occur, and this worsens local environmental conditions. This phenomenon is defined below as the ‘paradox of intensification’. The consequent challenges for planners and policymakers, which arise, are considered. The analysis suggests that a compromise involving limited intensification would merely redistribute the balance between the two sets of problems: global and local. It is concluded that urban intensification should be accompanied by more radical measures to constrain traffic generation within intensified areas.     

Negative Values in Vickrey Auctions

Some people assign negative values for new products sold on laboratory auction blocks (i.e., irradiated meat). We explore bidding behavior in two Vickrey auctions when people have positive- and negative-induced values for the good. Aggregate bidding in the second-price auction is precise but biased—highest-value positive bidders tend to overstate benefits, whereas lowest-negative bidders understate losses. In contrast, bidding behavior in the random n th-price auction is demand revealing irrespective of induced value, but it is imprecise. Examining on- and off-margin bidding behavior, we cannot conclude that any segments of demand are significantly different than the demand revealing regression line.     

Repetition, Communication, and Coordination Failure

We examine repetition as an institution that affects coordination failure in a game with and without pre-play communication. We use probit regression with random effects to test hypotheses regarding the frequency and form of coordination failure in the presence of repeated play versus one-shot games. Our results indicate that repetition without pre-play communication results in a lower frequency of coordination failure relative to one-shot game outcomes. This result is reversed when pre-play communication is allowed. Our evidence also suggests that repeated play coordination failures tend to be suboptimal Nash equilibria, whereas one-shot game coordination failures are disequilibria regardless of the presence of pre-play communication.