Couldn't we sum it up as trying to ignore "elasticity of demand?"

That's surely a perverse. Are you saying that the buses are undermining the charge? In any case there aren't any traffic predictions that aren't upwards. and to get that close to the right answer at first guess isn't that wrong. The article refuses to consider any of the possible responses (starting but not ending with putting polaroid filters on the cameras, not a big deal. Beyond that he can run slightly fewer buses and raise or lower the charge) and claims that Bond Street Restaurants are suffering significantly because of a charge somewhat less than a starter in that neck of the woods might be deemed, well, convenient.

The Telegraph have pretty much had it in for the CC all along. I think their criticism of it has sounded quite desperate at times. They generally appear pretty muddled on the subject too, and their alternative, the Grid Lock policy isn't too convincing either.

David Sucher's comment about "elasticity" hit the nail on the head. The scheme was designed to reduce traffic volumes by around 15 per cent, which could have been optimal. If the traffic was more sensitive to price than envisaged, the fee should be adjusted.

In the future, one would like to see a fee sensitive to distance travelled, and/or time spent in the zone, with lower fees in off-peak periods.

And that is precisely the problem: government is not sure if it is to manage a congestion charging system to maximize revenue or to maximize social welfare. If they were business-like, they would see that the obvious answer is to lower the price until revenue went back to where they wanted it. Or, if they were clear that this system simply used a fee to achieve a goal they would say "well now, it worked and we even get a bit of money back."

Gabriel, btw your book "Roads in a Market Economy" sounds very interesting.

David -

Thanks. The objective of London's congestion charging was always to maximize benefits, not revenues. This was reaffirmed by Mayor Ken Livingstone in his August 15 letter to the "Telegraph" which can be downloaded from
http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2003/08/15/dt1503.xml

The full text is:

Re: Investment will pay for itself

Date: 15 August 2003

Sir - Not only does George Trefgarne not know who runs his local council (Hammersmith is Labour-run), but he's equally ill-informed about the congestion charge (Opinion, Aug 11).

The aim of congestion charging was always to cut traffic and congestion, not to make money, and it is succeeding - congestion in the zone has been cut by more than 30 per cent.

Inevitably there will be drivers with outstanding penalty notices, but the number is small when compared with the 550,000 motorists paying the charge every week.

We have taken responsible steps with the contractors Capita to improve the service to customers, but that investment will pay for itself - Londoners will not foot the bill.

The camera technology is working fine, and research shows the charge to be having a minimal impact on business compared with the effects of the general economic downturn, which has hit London visitor numbers. No surprise, then, that the polls show that 73 per cent of Londoners think the charge is proving effective.

As for buses "driving around half empty", this couldn't be further from the truth. The bus network has radically improved its efficiency and reliability, and this is reflected in the biggest growth in passenger numbers in London since the Second World War.

From:
Ken Livingstone, London SE1

Has anyone done a study on whether or not commuters are now more likely to make it into work on time? Or, as these are early days yet, is there such a study in the pipeline?

If people are showing up late less often, the financial gains from this need to be taken into account.