Ken Livingstone Understands Applied Economics

Apart from the proven contribution to global warming, another externality that results from increasing use of automobiles is that of road congestion in many mega cities. So who would be best placed to answer the question that Ken Livingstone, the Mayor of the City of London who introduced what was an unpopular measure in the apt name of the congestion charge. at the point of its introduction, there was widespread skepticism about its effectiveness and indeed some cynics simply stated that it was a measure meant to merely raise more revenue.

Writing in a blog entry in the Guardian newspaper, Ken Livingstone responds to the major criticisms that the initiative has encountered since its introduction in 2003. Among the successes of the Congestion charging initiative was that the number of automobiles going into the metropolis reduced by the number of vehicles going into the city by 70,000 in 2006 but also a concomitant expansion in the number of cyclists by n expansion in the number of cyclists into the capital's major roads by 72%. pessimists had forecast that shopping in the city would be reduced due to the charges and yet London outperformed the rest of the country in retail sales.

Following the admirable improvements, the mayor is contemplating an expansion into other parts of the city that are faced with road congestion and I will not hedge my bets here. It too will be successful. The moral of the story: intelligent application of economic principles in market design can solve common problems with a high level of efficiency.