However the true cost of road transportation is hard to quantify as there are many external costs not considered by an individual when calculating the marginal cost and benefit ratio before undertaking a journey (Parkin. 2000). These externalities include the cost of congestion, especially during peak periods adding to the cost of fuel and time to the journey, air pollution and its resulting effects upon both human health and the environment, noise pollution effecting property value in areas surrounding busy roads, and the costs of traffic law enforcement.

It can be seen that in today's society there is very limited benefit obtained by the continuation of undercharging policies. The excess use of road transport imposes external costs that lie hidden from the consumer in the sense of actual use of road transport but are paid for in other indirect forms. It is apparent that the dependency upon road transport common among many developed nations has been fuelled with the undercharging policy that has been in operation since the very early stages of the motor vehicle industry, within the UK since the 1920's. At present it seems a very unfair policy with the externalities paid for by the whole population in the form of taxation, something that there is no personal choice over paying. This inevitably means that those who use road transport more benefit more from undercharging than those that don't. Those at the greatest include the small proportion of the population that do not drive that in effect pay for those that do in taxation.

Perhaps the greatest external disadvantage of the increased demand for road transport resulting from undercharging is the inefficient use of the cars purchased. With reduced costs a car is used when it is not the most efficient method of travelling, for example for very short journeys. In the long term this creates a market failure where resources are not efficiently allocated, in this case road space, with the sub-optimal use of vehicle technology (Barde and Button.1990). In this situation external cost's, such as congestion costs may decrease the marginal benefit in relation to the marginal cost of road travel and therefore reduce the demand for road transport. Alternatively the external costs are paid for with a decrease in wage income or increase in tax else where, as a reduction in productivity caused by congestion increases manufacturing costs. However undercharging road transport does not provide an incentive for the individual to use road resources efficiently, little is therefore saved by not using road transport as the externalities are paid for else where, for example in tax, which is paid by everyone whether road transport is used or not; there is no internal benefit not to use road transport. Consequently in the long term the effect upon the demand for road transport is minimal.

Subsidising the creation and maintenance of a good road network is again is very beneficial to business and the general public in the short term, reducing the time spent travelling and encou

Some topics in this essay:
Griffiths Wall, Barde Button1990, UK USA, road transport, , demand road transport, demand road, short term, car ownership, external costs, private car ownership, cost road, private car, internal benefit, benefit road, price road, benefit road transport, price road transport, internal benefit road,