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Using the price mechanism to boost allocative efficiency: car parking charges

Monday, January 12, 2015

The price mechanism should help the economy to allocate resources more efficiently. Scarcity drives up prices, sending a signal to the economy – usually giving firms an incentive to produce more, and households the motivation to ration their consumption.

Offering free parking sounds like a terrific idea, until you think of some of the possible consequences.

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The Poo Bus

Thursday, November 20, 2014

Apologies, but I can't resist the prospect of using this story about a new solution to the market failure of pollution: an eco-friendly bus which has just gone into service to transport people between Bath and Bristol Airport.

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Contrasting approaches to managing road traffic

Thursday, September 11, 2014

The transport economists amongst you will be giving considerable thought to the question of tackling road traffic congestion. I’ve picked up on two stories here because they take contrasting approaches. The first is to use technology and regulation to tackle the problem – the so-called command and control approach. The other relies on price signals, so might be described as a market led approach.

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Will Hutton argues for railway nationalisation

Monday, August 25, 2014

Here is a timely polemic from Will Hutton arguing for a return to state ownership of the railways and pointing to the success of Network Rail and Directly Owned Railways (which runs the East Coast line) as evidence in support of the argument that "networks of key public services such as rail are natural monopolies; ownership in other countries respects that truth, and Britain's attempt to escape it has been a costly debacle.' Do you agree?

Read the article here:

More ideas like HS3 are needed to solve our regional problems

Tuesday, July 22, 2014

In London and much of the South East, the recovery has been well under way for a considerable time. House prices boom and restaurants are packed. The economic data for the UK as a whole looks just as encouraging, with employment being at its highest ever level.

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MTR wins London CrossRail Operating Franchise

Monday, July 21, 2014

An important part of the CrossRail project has been decided with the news that the £1.4bn contract to run the new Crossrail service through London from 2018 has been awarded to Hong Kong-based MTR Corporation.

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Transport: competition in the cross channel market

Wednesday, July 02, 2014

When the Channel Tunnel opened in May 1994 bosses of many ferry companies were glum. But it was the backers of the channel tunnel who lost a fortune: according to The Economist (the source of the graph above), the train through the tunnel was meant to carry 28m passengers a year by 2010. Ferries were expected to lose foot passengers, cars and lorries. Like many predictions in business, this soon came to seem wrong; now it seems wrong only in the timing. Now it looks like competition in the market may be about to collapse, with ferries coming under increasing pressure.

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Development Economics: Building Roads, An Economic Gain in Senegal

Sunday, June 22, 2014

This new short video from the World bank looks at the economic benefits that flow from investment in an improved road network in Senegal

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Paul Ormerod: Innovation, Job Losses and Living Standards

Wednesday, June 18, 2014

Here is your starter for ten. What do the Uber app and David Ricardo have in common? Ricardo, I hear you ask. Scarcely known outside academic economics, he ranks equal with Adam Smith and Keynes as the greatest ever British economist. His classic Principles of Political Economy was published in 1816. He made millions of pounds on the stock market, at a time when a million was a vast amount of money.

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Transport Economics: pollution costs from different modes

Thursday, June 12, 2014

If you’re starting out in transport economics, a good place to begin is by evaluating different modes of transport. One area you’re sure to look at is pollution. Here’s a statement I sometimes use to start the conversation:

Rolls-Royce says the four engines on the A380 are as clean and efficient as any jet engine, and produce “as much power as 3,500 family cars”. A simple calculation shows that the equivalent of more than six cars is needed to fly each passenger.

Take the calculation further: flying a fully laden A380 is, in terms of energy, like a nine-mile queue of traffic on the road below. And that is just one aircraft. In 20 years, Airbus reckons, 1,500 such planes will be in the air. By then, the total number of airliners is expected to have doubled, to 22,000. And whereas cars are used roughly for about an hour or so a day, long-haul jet airliners are on the move for at least 10 hours a day.

I’ve started putting together some more links below:

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Transport Economics: The Return of Trams - Benefits and Costs

Sunday, June 01, 2014

Trams have been experiencing a revival in a number of towns and cities in the past few decades. Edinburgh is the latest city to invest in trams, and hopes they will boost local economy. But do the benefits outweigh costs? Manchester, Sheffield, Blackpool, Nottingham, Newcastle and Croydon have all installed trams / light rail and others are considering investment. 

The Edinburgh trams at running (at last) but the jury will remain out for a long time about their net impact on economic activity, traffic congestion and the broader health of Edinburgh and the local environs.

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Costs, benefits and ‘discounting’ the future

Thursday, May 22, 2014

Measuring costs and benefits is a crucial part of many microeconomic models. It’s central to understanding the pricing and output decisions firms make. You can’t understand how market failure may arise from the problems presented by externalities without measuring costs and benefits.

Yet making those measurements is often tricky, especially when some of the costs or benefits arise in the future.

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Cost Benefit Analysis - The Crossrail Project

Sunday, April 27, 2014

Here is a streamed version of a revision presentation on the Crossrail project, a good example to use when teaching transport economics and the main principles and issues governing a cost benefit analysis approach to infrastructure investment appraisal. It is designed for use with AS and A2 economics students.

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The World needs Infrastructure!

Thursday, April 24, 2014

According to The Economist, much of the world faces a familiar supply side constraint: the need for massive investment in infrastructure.

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Unit 2 Macro: Network Rail plans £38bn Investment Programme

Monday, March 31, 2014

A significant 5 year rail infrastructure investment plan adds weight to the belief that capital spending will be a major driver of the next phase of the UK economic recovery. Network Rail is state owned, a not-for-profit business whose commercial returns are reinvested into the rail network.

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Lecture on the UK Rail Industry - 18 March 2014

Saturday, March 01, 2014

Staff and A2 pupils who live in the Bath area might be interested in attending a lecture at Monkton Combe School on Tuesday 18th March from 5.00-6.00pm.  The topic is rail privatisation and it will be presented by Graeme Hampshire, Director of Stagecoach Rail.  He will be covering the structure of the UK rail industry, the performance to date since privatisation and looking at the finances of a train operating company and how they bid for franchises.  He'll conclude by examining how reality managed prediction and he'll then take questions from the audience.  This presentation should be excellent preparation for anyone studying for A2 Transport Economics.  If this is something that interests you please send an e-mail to Robert Campbell on

Boris Bikes - Do Benefits Exceed the Costs?

Friday, February 14, 2014

Boris Johnson, The Mayor of London, has been happy to extend the use of bicycles in London; and the pattern of use has thrown up some interesting points. There were 7.4 million cycle hire trips last year but an estimated 71% of cycling use was by men. Most of these journeys would have been made on foot (31%) or by public transport (47%). Coverage of the study published in the BMJ looked at the health effects is found here.. The notes in the article, provide good examples of the strengths and weaknesses of cost benefit analysis.

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Transport Economics: Airline Passenger Data for 2013

Thursday, February 06, 2014

Are you teaching transport / airline economics? The newly released 2013 IATA data resource might be useful -

Globally there was a 5.2% increase in passenger demand compared to 2012. The 2013 performance aligns with the average annual growth rate of the past 30 years. Capacity rose 4.8% and load factor averaged 79.5% up 0.4 percentage points over 2012.

Unit 3 Micro: Profit Satisficing and Profitability Factors

Thursday, January 30, 2014

Here is an updated revision presentation on satisficing as an alternative to profit maximisation and also some of the factors affecting the profitability of a business such as Stagecoach plc - A2 economics revision notes can be found here

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Unit 2 Macro: Europe’s Biggest Infrastructure Project

Monday, January 06, 2014

An important landmark has been reached in the construction of Crossrail, London's £14.8bn rail programme. The tunnelling of 21km of twin-bore tunnels dug beneath the capital is well underway and the project is now at the half way stage assuming things run to plan. The first tunnel was completed in November 2013

The scale of the project is epic - one of a number of infrastructure projects that are underway or in the planning stage in the UK. the importance of infrastructure investment is often debated by economists. They can affect both aggregate demand and aggregate supply and have wider effects on a nation's competitiveness. 

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Unit 4 Macro: Centre of Gravity in Car Manufacturing Moves East

Wednesday, January 01, 2014

Volume car production has been surging in recent years in many Eastern European countries - this FT news video provides some of the background and offers some revealing insights into the complex sources of competitive advantage in a key industrial sector.

The vehicles that roll off the production line at the Czech company's state-of-the-art car plant near Prague now outstrip many western rivals not only on cost but on reliability and finish too.

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Unit 3 Micro: Buying Power at the Dubai Air Show

Sunday, November 17, 2013

The numbers are breath-taking and they reflect the growing scale and prominence of Gulf air carriers in the international aviation market. Emirates, Etihad and Qatar Airways together have just ordered over 200 of new Boeing 777X aircraft, a more fuel-efficient version of the 777 jumbo. Here we have the monopsony power of major buyers coming face to face with the duopolistic market power of the dominant aircraft manufacturers - US plane maker Boeing, and European rival Airbus.

More here from BBC news

Check out our revision notes on monopsony power using the link below

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HS2 Cost Benefit Analysis

Tuesday, September 24, 2013

There are lots of resources out there for students and teachers wanting to cover the debate about HS2 - here is a brief selection of video clips on the debate

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New! OCR A2 Economics Unit F584 Transport Economics Rapid Revision Q&A 2013

Tuesday, August 27, 2013

We are delighted to announce the publication of a brand new edition of our popular rapid revision guide for OCR A2 Economics Unit F584 (Transport Economics).

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Introduction to Economics - Portugal’s Ghost Roads

Monday, August 26, 2013

Here is a superb five minute news video from the Financial Times that could serve as an excellent introduction to both micro and macroeconomics. Helped by EU structural funds, Portugal has invested huge sums in their motorway network; indeed Portugal has four times more motorway road space per head of population than the UK. However beset by persistent recession and the lagged effects of high fuel prices, many of these gleaming new roads are virtually empty - a waste a scarce economic resources. Road traffic has fallen more in Portugal than in any other European country in the past 15 months. Peter Wise, Lisbon Correspondent, reports on why empty roads provide a revealing insight into the depth of the country's recession.

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Container Economics - Maersk’s Big Bet

Monday, August 19, 2013

This is a simply fabulous video to show to economics students of whatever vintage - there is so much relevant stuff in here it would struggle to fit into one of the containers that fill the world's largest ever freight ships. Challenge your students to find as much economics in this as possible and then make some connections between the topics!

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Transport Economics - Sorting out Transport in London

Saturday, June 29, 2013

We link here to a recent lecture given by Professor Doug McWilliams at Gresham College that might be of particular interest to students and teachers who are taking the transport economics option. 

London has some major disadvantages that would make any transport policy difficult. However, even given the constraints, the current policy mix is so far away from ideal that it could be costing each household about £1,000 more than it should if transport were to be organised rationally. The lecture outlines some proposals for transport reform in the capital.

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Transport Economics: Sustainable Transport in Mexico City

Thursday, June 27, 2013

Over five million cars swamp the streets of Mexico City but the authorities are attempting to build the infrastructure of a sustainable transport network. Critics claim that they are not moving fast enough. As vehicle ownership climbs, Deborah Bonello from the Financial Times reports on the Mexican capital's battle to curb car use. Activists such as the masked El Peatónito (Little Pedestrian) are pressing for a cultural shift and a radical improvement in public transport

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Unit 3 Micro: Looming Price War in the Aircraft Duopoly Industry

Sunday, June 23, 2013

Airbus is pushing Boeing for market leadership in the twin engine aircraft market. Andrew Parker reports from the Paris air show on why a price war might be in the offing -- which would be bad news for the two manufacturers, but good for airlines.This short Financial Times video considers the prospects for a price war emerging in an industry which is often used by teachers and students as a classic case of duopoly.

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Unit 2 Macro: London Gateway Super Port Prepares to Open

Wednesday, June 12, 2013

The scale of the new London Gateway Super deepwater Port is truly stunning and its importance to the economy as a trading nation is hard to underestimate - Britain will have a new world class hub port in a key location impacting on many trades and services in and around the South East and beyond. It has taken 10 years to establish and build this huge new infrastructure project, building eventually started in 2008.

Behind the port sits Europe's largest logistics park connected to the South east by road and rail.

This Financial Times news video looks at the background to the project - it is a good example to consider of the macroeconomic consequences of the investment. What price a new Thames Estuary airport (supported by Boris Johnson) to amplify the transformative impact in the years ahead?

Update: BBC news (November 2013) - click here

London Gateway is new competition for Felixstowe port

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Unit 3 Micro: Debt Rises at Network Rail

Saturday, June 08, 2013

Network Rail is a state owned business whose debts are backed up by government. Network Rail owns and operates the UK's railway infrastructure. Their stated objective is "Building a safer, smarter, bigger, greener network – every day."

It is achieving rising revenues but remains heavily reliant on state subsidy - there is plenty of applied business economics in this article if you read through. It runs a network creaking under capacity constraints - passenger numbers are growing well ahead of forecast. 529 million more passenger journeys per year have been completed on time compared to 2002 but Network Rail faces problems over failing to meet tougher punctuality targets.

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Paul Ormerod: Do the proper sums, HS2 is worth it

Friday, May 24, 2013

The High Speed 2 rail project is under fire on many fronts.  The Nimby protests in the affluent Home Counties have been augmented last week by more weighty criticism by the National Audit Office (NAO) of the scheme.  At least, this is how the NAO’s work has come across in the media.

But the NAO review of the HS2 project is in many ways much more a criticism of the Department of Transport than it is of the high speed rail link itself.  According to the NAO, ‘the Department’s methodology for appraising the project puts a high emphasis on journey-time savings, from faster and more reliable journeys’.  Surely this is a sensible thing to do?  Faster mean less journey time.  It seems obvious.

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The importance of container shipping

Wednesday, May 22, 2013

I have to come clean as a self-confessed container nerd (geek alert: follow the world’s containers using this amazing tool).  Not only are the ships hugely impressive from an engineering perspective, but they are a gift for an Economics or Business enthusiast.  You might want to be thinking about economies of scale, or the negative externalities associated with transport – or perhaps discuss supply side issues and infrastructure.  Container ships cover the lot.

A while ago I argued that container shipping is the greatest of all 20th century innovations, and this week The Economist has reported that the container has been a greater driver of globalisation than all trade agreements in the past 50 years taken together.

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Unit 1 Micro: Falling Car Use among Younger Drivers

Monday, February 18, 2013

The number of young people taking driving tests in UK has dropped a fifth in the past five years - that is a reduction of over 200,000 people having lessons and then taking their driving exam. According to data from the RAC there are significantly fewer young men with a driving licence today, down 14% compared with mid-1990s. What factors might explain the decline in demand for car use among this age group?

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HS2 - A Video Overview and Analysis

Saturday, February 09, 2013

A useful, concise summary (particularly for transport economics students) of the proposals for HS2 here from the team at the Economist which hints at the lack of coherence in the proposed route of HS2. 

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HS2 The Ultimate Vanity Trainset

Monday, January 28, 2013

Today's announcement of routes for the HS2 project highlights the importance governments ascribe to public works projects.

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Unit 1 Micro: Making the Bus Cool!

Friday, October 26, 2012

The conventional wisdom is that bus transport in many countries including the UK is an inferior good - demand declines as real incomes fall. Consumer perceptions of bus travel are hard to shift and default choices when it comes to transport are often deep-rooted and tough to change. The total annual number of bus journeys made in the UK experienced a long term decline from the 1950s for nearly forty years although a recent House of Common select Committee report found that, since the mid-1990s, there has been an upturn in total passenger numbers for Great Britain, largely as a result of the introduction of national concessionary travel schemes and passenger growth in London.

Perhaps this rather wonderful video from Denmark does more than most to make bus travel cool once again! What do you think?

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Unit 2 Macro: Ford announces the closure of UK assembly plants

The headline news from the Financial Times could not be starker. Ford Motors has announced the closure of its last two remaining assembly plants in the UK  with the probably loss of thousands of jobs. The Ford Transit plant in Southampton will close in early 2013 and a tooling factory will close in Dagenham, east London. Workers in these two factories are paying a heavy price for the sustained fall in new vehicle orders and production since the credit crunch came in 2007. Since then there has been a more than 20 per cent decline in total demand for vehicles. New passenger car registrations in Europe are expected to be just over 9 million in 2012 compared to 13 million in 2011 and 15 million in 2007. Demand for commercial vehicles has also suffered as businesses have cut back on their capital investment.

Ford is not alone in making difficult decisions to restructure their European business as a way of stemming losses and maintaining competitiveness in a hugely difficult market. Many other leading car manufacturers are taking steps to lower their production costs and survive this turbulent period:

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Some very revealing data from the Department for Transport

Monday, October 15, 2012

Well done to Olivia- my only student to get today's 'starter answer' of 13 pence correct. This is the subsidy per passenger mile for Southeastern, our local train franchise. Read on to find out more details about these stats, and the figures for your local trains...

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Transport Economics Conference 2012

Saturday, October 13, 2012

I spent Friday afternoon with my A2 pupils at the 8th annual Transport Economics conference at the University of Huddersfield, hosted by well-known transport economist Professor Colin Bamford and his team. The theme for the day focussed around market failure and government intervention in transport. My notes below are some of the themes discussed on the day and provide some context and application to a lot of transport theory that economists may study in the classroom.

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West Coast Rail Line franchise decision - a fine example of Government failure

Wednesday, October 03, 2012

Every cloud has a silver lining!  News reports out today confirmed that the original decision to award the next 15 year franchise of the West Coast Rail line to FirstGroup instead of the incumbent Virgin Rail has been rescinded and the bidding process re-opened at a potential wasted cost of £40 million (by the way, have they fixed that leaky roof at your school yet?).  This may seem like a fiasco to train users and the general public alike but to us Economics teachers it's a super example of government failing to intervene correctly in a market.

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Unit 4 Macro: Urbanisation in Indian Cities - Challenges and Opportunities

Saturday, September 15, 2012

Many of India's biggest urban areas have witnessed massive migration in recent years - the inflow of people stretches a city's resources, making the basics, like housing, electricity, sanitation and education a luxury inaccessible to many. This selection of news videos looks at Indian urbanisation and the economic, social and environmental challenges this process poses

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A2 OCR Transport - Derived Demand

Thursday, September 06, 2012

I came across this while searching for some resources on the concept of derived demand  when teaching the introductory lessons to transport economics. Derived demand can be a difficult concept for students to get their heads around. This diagram and attached hand out may help your brighter students move from 12 to 15 marks and also enable your weaker students to cement their understanding.

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Unit 3 Micro: OFT Investigates the UK Retail Fuel Market

Wednesday, September 05, 2012

The Office of Fair Trading (OFT) has announced that it is launching an investigation into prices at the pumps  amidst fears that the retail market for petrol and diesel is not operating properly and causing damage to the welfare of fuel buyers including millions of motorists and businesses.

For a long time motorists have complained that the prices they pay are quick to rise when the world price of crude increases, but the cost of filling up the tank falls much less quickly when crude oil is available on international markets at lower prices. This BBC news video report  provides some background.

Our chart below tracks the weekly average price of petrol and diesel against a benchmark international price for crude oil - is there any evidence here for the wrath of customers?

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Park, and Ride to nowhere

Tuesday, August 28, 2012

A park and ride scheme may be introduced to encourage motorists to use public transport, buses or trains to reach their workplaces. It is a government policy to overcome market failures associated with the negative externalities of congestion viz increased journey times, increased fuel and running costs, and atmospheric pollution.

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Unit 3 Micro: Regulated and Unregulated Train Fares

Tuesday, August 21, 2012

For millions of regular rail users, the fare system in operation in the UK is almost impossible to understand! Annual changes in a complex system of rail fares bring about anger and hostility and there are regular claims that the increasing cost of travelling by rail is a disincentive to use the train instead of the car.

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Introducing Transport Economics - Some Lesson Video Ideas

Monday, August 13, 2012

As the new term approaches, I am researching and updating some audio/visual clips that I use in class to introduce some of the key problems/solutions in the world of transport economics.

I have included some links below, some of which are a few years old now, but are still relevant in stimulating classroom discussion on some of the key issues facing transport decision makers in the UK and abroad.

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Unit 4 Macro: Global Competition in High-Speed Rail Technology

Friday, July 13, 2012

Japan’s high speed rail network has been for decades one of the world’s benchmark industries for rapid mass transport. Their safety record over the last forty years has been impeccable with not one single passenger fatality from a derailment.

The FT news video report available below captures the cutting edge technology and quality of infrastructure that makes Japan the envy of many other rich nations. But competition is growing especially from France and China notably in the battle to win export contracts to licence the technology and hardware used in investing in new rail capacity.

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Behavioural Economics: Incentives to Cut Road Congestion

Wednesday, July 11, 2012

Here is an interesting experiment in applied behavioural economics designed to get some motorists to alter their time of road use and make better use of existing road and motorway capacity. Click on Earn Rewards for Smart Commuting and read this background article from the New York Time: Incentives for Drivers Who Avoid Traffic Jams

Similar ideas are being applied to incentivising people to use mass transit systems at off-peak times and the experiments also include an important social network or “badge effect” - where your socially beneficial transport choices are transmitted to your friends and acquaintances. Are these incentives enough? Are they durable? Most transport policies towards congestion involve sticks rather than carrots - which do you think is most effective?

Behavioural Economics: Compulsory Breathalysers

Monday, July 02, 2012

Alcohol-related accidents are the leading cause of death and serious injury for victims of car crashes in France and the government has decided to introduce a strong behavioural nudge by making it compulsory for every car to have a portable breathalyser kit in their vehicles or risk a fine. This applies to every vehicle including those driven by tourists. Vehicle owners will have until November 2012 to get used to it before the fines are imposed.

Having a breathalyser in the glove box or on the front passenger seat might well be an effective reminder for people before they turn on the ignition. Reminders of our mortality and/or our morality can often prime us to make safer, better choices. I applaud the French government for introducing this new law. All motorists must also have with them a high-visibility safety vest and a warning triangle.

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