In 2003 Ken Livingstone — then London mayor — introduced a congestion charge as a daily fee for driving in London between 7 a.m. and 6 p.m., Monday–Friday. It was a surprising choice for a left-leaning politician. The idea of road pricing was associated with Milton Friedman, who imagined that in-car Geiger counters would track radioactive road markings. It was also a bold move — the London scheme was the largest of its kind anywhere in the world and there was uncertainty about whether it would work and how popular it would be.
The economic rationale for congestion charging is to correct for negative externalities associated with driving (Box 1). When drivers decide to make a trip, they take account of the private costs — the petrol, the wear and tear on their car and the cost of their time. But driving has negative effects for other members of society that they don’t take into account. These include wear and tear on the roads, local and global pollution and congestion. When drivers join a busy road, they know that the cost of their trip will be higher because it will take longer. But they don’t factor in the imposition of additional costs on other drivers who will also go slower. Because of these extra costs, from society’s point of view, there are too many cars on the road.
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