The economic view of traffic congestion

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Traffic congestion has had a significant impact to the economy, it involves costs and expense to the economy that lead to losses. It is difficult for a country to control traffic congestion hence it is required to provide measures to control the adverse effects rather than to avoid it. In the report below the following will be discussed so as to expound on the economic view of traffic congestion: the relationship between the economy and traffic congestion, what impact it has both at a national and personal level and finally to provide solutions that can help reduce chances of ruining the economy through traffic congestion.

Relationship between traffic congestion and the economy

Traffic congestion refers to the state in which road networks are crammed with cars, queuing of vehicles moving at a very low speed, and a lot of time is taken to cover a very short distance. This is a condition present in most modern cities today. Traffic congestion is viewed as a time waster as a lot of time is wasted due to the low speed hence it gradually affects the economy and this has had several impacts on the economy. Traffic congestion in many cities, both developing and grown cities, is characterised by both cases of vehicles queuing on the highways moving at very low speeds leading to time wastage and consumption. In the United States with over 75 million licensed drivers, with each travelling an average of sixteen thousand kilometres per year taking into consideration that the streets are also crowded with people traffic congestion is inevitable. Rush hours which mostly involve the morning hours, lunchtime and evening hours are the three periods in a day which lead to heavy traffic congestion; morning hours is associated with people heading for work, lunchtime is attributed to people going for lunch and evening hours involves people going home from work others heading to work.

Economics refers to the activities in a country that involve the production, distribution and, sale of goods and services within a country; trade may also involve other countries as well. Economics involves money and what a country does so as to receive income and be able to build itself. The growth of a country’s economy is dependent on various significant factors which include resources, labour, capital and entrepreneurship. These among other factors assist in production of goods and services. Economists have a saying, “time is money”, and this is actually true. The production of goods and services is greatly dependent on distribution; it involves the distribution of raw material and also the distribution of finished product to the market. The relationship between traffic and the economy is linked through distribution. Firms and industries require raw materials so as to produce goods that are required by the consumers while on the other hand finished goods need to be transported from the manufacturing firm to the consumer who is the market. When traffic congestion occurs it acts as a barrier for both distribution processes and this gradually affects the economy. For example, a flower farm is required to transport roses to the airport for export, considering that flowers are perishable products, if delayed it may lead to the deterioration of the product’s quality and possibly if it takes too long no product is exported. The producer and the economy suffer a double loss since no money revenue is gained and the products get destroyed.

Impacts of traffic congestion on the economy

Lack of ability to employ use of incentives

The use of incentives so as to boost production is one of the economic principles which helps boost the economy (Bekiaris, 126). However this has no impact traffic congestion since no incentives can be offered so as to encourage drivers not to use the roads often. Incentives in economics refer to factors that assist in making production easy for example paying employees extra money to work extra hours in the company. With the use of roads, this is practically impossible since the only incentive would be trying the use of roads more. A literature review of the impact traffic congestion has on the economy indicates that firms and organizations are forced to shift locations to less congested places, the suburbs, and this would be a disadvantage because it means moving away from the consumer. Through time loss, production rate reduces and this leads to a decrease in the economy since the country’s Gross Domestic Product reduces. Supply of raw materials for the firm, and supply of the finished products to the wholesaler, retailer and finally to the consumer may be affected due to traffic congestion.

Increased cost

Cost is another economic principle that can be used to address the traffic congestion issue in terms of its impact to the economy (Conor, 28). Through traffic congestion the economy suffers both indirect and direct costs. The Canadian economy for example indicates that traffic jams are a major threat to the economy and the country loses six billion dollars annually as a result of the direct and indirect costs. Some of the costs involved with traffic congestion include delivery costs which increase hence increasing the cost of production which gradually has a negative impact on the economy because businesses and organizations will be forced to increase their prices on products. Delivery costs can be a total of the: labour and fuel costs due to longer working hours, fewer deliveries are made hence increasing the number of deliveries to various destinations, the organization may decide to increase the number of vehicles so as to maximize their deliveries (Blanco, 3). These delivery costs lead to increased costs for the company which lead to poor economic growth in the country. Due to the slow traffic and delays, businesses are forced to conduct their activities at night when there is lesser traffic which are costly to the organization.

Increased cost has a negative impact on the economy since issues such as delayed production, increased cost on delivery, and change in activity hours leads to the increase in production cost. Increased cost of production causes increased pricing on products and services as a way for the organization to compensate for the extra expense incurred. Increased pricing lowers demand for products in the market which leads to low revenue. All these lead to slow economic growth which is a negative impact to the economy.

Scarcity of time

Economists describe economics a simply ways to satisfy human wants through production; production requires labour, capital, and resources to be present so as to ensure maximum production is done at a minimum cost (Conor, 22). However, the resources are scarce but they are still required to satisfy human wants. Time can also be considered as a factor that is important in production but due to traffic congestion it is also considered scarce. Scarcity of time is characterized by few deliveries made in a day due to traffic congestion, late deliveries due to the low speed, and delays in the supply of raw materials to the firm which delays production. This becomes an expense to the business organizations because the rate returns are low compared to the rate of money used. Business organizations are forced to shift working hour from day to night which is costly to the business and it reduces its chances of maximum production; with scarcity of time as a result of traffic delays makes it hard to satisfy human wants which leads to poor economic growth. Companies are forced to make decisions which will affect them in the future.

Increased costs, lack of the ability to employ incentives, and scarcity in time are three negative impacts which traffic congestion has had on the economy. At a personal level traffic congestion has its impacts as well. People waste a lot of productive time sitting in traffic which becomes an expense to the individual. This is because the individual is using a lot of money on fuel and is probably forced to work extra hours, which he or she is not paid for, to finish their work; the extra hours would have been used to do something else. Medical research reports that traffic congestion compromises the health of many people causing conditions such as high blood pressure; this lead to less labour in the country and increased medical expenses. Traffic congestion therefore leads to poor and slow economic growth.

With the above negative impacts, the government as well as the transport industry tries to come up with solutions that can help reduce traffic congestion and save the economy.

These are some of the recommendations that have been developed:

Increasing the cost of buying a vehicle, this restricts the number of people who are able to buy cars, hence reducing the number of vehicles on the road. In many developing countries especially in the cities, the number of middle class people that own cars is very high. But with the increase on the cost to buy vehicles less people will be willing to buy vehicles hence reducing traffic congestion. This mostly applies to private ownership of a car for personal use.

Electronic Road Pricing would be another way to reduce traffic congestion. This involves the pricing of roads at peak hours so as to reduce congestion by discouraging motorists from using the roads at certain hours of the day (Dotchery, 53). For example, with a charge rate of about five dollars a motorist who is not in a hurry would rather wait until the peak hour is over; this would reduce traffic congestion.

In conjunction with increase in cost of buying a vehicle, the government can decide to increase tax on fuel hence making it expensive to travel especially for private vehicles. However, so as to still maintain production at low costs the government should provide subsidies to sectors such as the business sector and public transport sector. This measure reduces and encourages people to use public means of transport, for example trains hence reducing traffic congestion on the roads.

Traffic congestion if not controlled can lead to adverse impacts on the economy and lead to slow and poor economic growth or none at all, hence with the use of the above measures the situation can be managed. This would enable production to increase and companies can focus on other scarcities apart from time hence the ability to satisfy human wants which improves the economy and increases its growth rate.

References

Bekiaris, E., and Y. J. Nakanishi.Economic Impacts of Intelligent Transportation Systems, Volume 8 Innovations and Case Studies.. Burlington: Elsevier, 2004. Print.

Connor, David E., and Christopher C. Faille. Basic economic principles: a guide for students. Westport, Conn.: Greenwood Press, 2000. Print.

Docherty, Iain. Traffic jam: ten years of ‘sustainable’ transport in the UK. Bristol: Policy, 2008. Print.

Blanco, Andrés Guillermo. The economic cost of traffic congestion in Florida. Tallahassee, Fla.: Florida Dept. of Transportation, 2010. Print.