Government And The Market
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- Pages: 39
Government and the Market
Environmental Policy • The environment and production – environmental failures of the market – nature of an environmental policy
• Problems with policy intervention – valuing the environment • financial costs to other users • revealed preference • contingency valuation
– other problems • spatial issues • temporal issues • irreversibility issues
Environmental Policy • Environmental policy options – market-based policy: taxation and subsidies • conflicts with revenue objectives • redistributive effects • problems with international trade • effects on employment • uses of green taxes in various countries
Types of environmental taxes and charges
Green tax revenues as a % of GDP
Green tax revenues as a % of GDP
Environmental Policy • Environmental policy options (cont.) – non-market-based policy: command-andcontrol systems • approaches to devising CAC systems – technology-based standards – ambient-based standards – social-impact standards
• assessing CAC systems
Environmental Policy • Environmental policy options (cont.) – tradable permits • how tradable permits work – deciding on permitted levels of pollution – 'grandfathering'
• their possible use internationally • advantages • problems
• Environmental policy in the UK and EU
Transport Policy • Congestion problems and the impact on society and business
Passenger transport in Great Britain (percentage of passenger kilometres by road)
Passenger transport in Great Britain (percentage of passenger kilometres by road)
Passenger transport in Great Britain (percentage of passenger kilometres by road)
Passenger transport in Great Britain (percentage of passenger kilometres by road)
Passenger transport in Great Britain (percentage of passenger kilometres by road)
Cars per thousand population
Increase in car ownership
Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
Cars per thousand population
Increase in car ownership
UK
Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
Cars per thousand population
Increase in car ownership USA
UK
Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
Cars per thousand population
Increase in car ownership USA
Germany
W Germany
UK
Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
Cars per thousand population
Increase in car ownership USA
Germany
W Germany Sweden
Belgium
UK
Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
Cars per thousand population
Increase in car ownership USA
Germany
W Germany Sweden
UK
Belgium
Spain
Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
Transport Policy • The allocation of road space – demand for road space • a derived demand • determinants of demand • the price and income elasticities of demand
– supply of road space • short run • long run
Transport Policy • Social optimum level of road usage – marginal social benefit – marginal social cost • congestion costs: time • congestion costs: monetary • environmental costs
– socially efficient level of road usage
Costs and benefits (£)
Actual and optimum road usage
MSB O Cars per minute
Costs and benefits (£)
Actual and optimum road usage
MC (private)
a MSB O Cars per minute
Costs and benefits (£)
Actual and optimum road usage
MC (private)
a
e
MSB O
Q1 Cars per minute
Actual and optimum road usage
Costs and benefits (£)
MSC
MC (private)
b a
e
MSB O
Q1 Cars per minute
Actual and optimum road usage
Costs and benefits (£)
MSC
MC (private)
b a
Optimum charge
d c
e
MSB O
Q2
Q1
Cars per minute
Transport Policy • Social optimum level of road usage – marginal social benefit – marginal social cost • congestion costs: time • congestion costs: monetary • environmental costs
– socially efficient level of road usage
• Identifying a socially optimum level of road building
Transport Policy • Social optimum level of road usage – marginal social benefit – marginal social cost • congestion costs: time • congestion costs: monetary • environmental costs
– socially efficient level of road usage
• Identifying a socially optimum level of road building – use of cost–benefit analysis
Transport Policy • Policy 1: direct provision – the road solution – public transport
• Policy 2: regulation and legislation – restricting car access • bus and cycle lanes • no entry to side streets • pedestrian-only areas
– parking restrictions
Transport Policy • Policy 3: changing market signals – extending existing taxes – road pricing • variable tolls • supplementary licences • electronic road pricing
– subsidising alternative means of transport
Privatisation • History of privatisation
Nationalisation and privatisation in the UK
Nationalisation and privatisation in the UK
Nationalisation and privatisation in the UK
Privatisation • History of privatisation (cont.) – forms of privatisation
• Arguments for privatisation – market forces • greater competition in the goods market • greater competition for finance • accountability to shareholders
– reduced government interference – reducing the PSNCR – increased share ownership
Privatisation • Arguments against privatisation – natural monopolies – the public interest • externalities • fairness and social justice
– problems with the PSNCR – problems in the valuation of shares
Regulating the Privatised Industries • Identifying optimum price and output • Regulation in practice: – the RPI–X formula
• Advantages of UK regulation – discretionary – flexible – incentives
• Disadvantages of UK regulation – – – –
disincentives of changes to X excessive power of regulator? alternatively, regulatory capture complexity of regulation
Making Privatised Industries more Competitive • Increasing competition in the privatised industries – allowing competition where there is no natural monopoly • limited extent of true natural monopoly
– allowing access to grids by competitors – forbidding suppliers from being grid owners – capping market share of established firms – competitive franchising to make monopolies contestable
Environmental Policy • The environment and production – environmental failures of the market – nature of an environmental policy
• Problems with policy intervention – valuing the environment • financial costs to other users • revealed preference • contingency valuation
– other problems • spatial issues • temporal issues • irreversibility issues
Environmental Policy • Environmental policy options – market-based policy: taxation and subsidies • conflicts with revenue objectives • redistributive effects • problems with international trade • effects on employment • uses of green taxes in various countries
Types of environmental taxes and charges
Green tax revenues as a % of GDP
Green tax revenues as a % of GDP
Environmental Policy • Environmental policy options (cont.) – non-market-based policy: command-andcontrol systems • approaches to devising CAC systems – technology-based standards – ambient-based standards – social-impact standards
• assessing CAC systems
Environmental Policy • Environmental policy options (cont.) – tradable permits • how tradable permits work – deciding on permitted levels of pollution – 'grandfathering'
• their possible use internationally • advantages • problems
• Environmental policy in the UK and EU
Transport Policy • Congestion problems and the impact on society and business
Passenger transport in Great Britain (percentage of passenger kilometres by road)
Passenger transport in Great Britain (percentage of passenger kilometres by road)
Passenger transport in Great Britain (percentage of passenger kilometres by road)
Passenger transport in Great Britain (percentage of passenger kilometres by road)
Passenger transport in Great Britain (percentage of passenger kilometres by road)
Cars per thousand population
Increase in car ownership
Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
Cars per thousand population
Increase in car ownership
UK
Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
Cars per thousand population
Increase in car ownership USA
UK
Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
Cars per thousand population
Increase in car ownership USA
Germany
W Germany
UK
Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
Cars per thousand population
Increase in car ownership USA
Germany
W Germany Sweden
Belgium
UK
Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
Cars per thousand population
Increase in car ownership USA
Germany
W Germany Sweden
UK
Belgium
Spain
Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
Transport Policy • The allocation of road space – demand for road space • a derived demand • determinants of demand • the price and income elasticities of demand
– supply of road space • short run • long run
Transport Policy • Social optimum level of road usage – marginal social benefit – marginal social cost • congestion costs: time • congestion costs: monetary • environmental costs
– socially efficient level of road usage
Costs and benefits (£)
Actual and optimum road usage
MSB O Cars per minute
Costs and benefits (£)
Actual and optimum road usage
MC (private)
a MSB O Cars per minute
Costs and benefits (£)
Actual and optimum road usage
MC (private)
a
e
MSB O
Q1 Cars per minute
Actual and optimum road usage
Costs and benefits (£)
MSC
MC (private)
b a
e
MSB O
Q1 Cars per minute
Actual and optimum road usage
Costs and benefits (£)
MSC
MC (private)
b a
Optimum charge
d c
e
MSB O
Q2
Q1
Cars per minute
Transport Policy • Social optimum level of road usage – marginal social benefit – marginal social cost • congestion costs: time • congestion costs: monetary • environmental costs
– socially efficient level of road usage
• Identifying a socially optimum level of road building
Transport Policy • Social optimum level of road usage – marginal social benefit – marginal social cost • congestion costs: time • congestion costs: monetary • environmental costs
– socially efficient level of road usage
• Identifying a socially optimum level of road building – use of cost–benefit analysis
Transport Policy • Policy 1: direct provision – the road solution – public transport
• Policy 2: regulation and legislation – restricting car access • bus and cycle lanes • no entry to side streets • pedestrian-only areas
– parking restrictions
Transport Policy • Policy 3: changing market signals – extending existing taxes – road pricing • variable tolls • supplementary licences • electronic road pricing
– subsidising alternative means of transport
Privatisation • History of privatisation
Nationalisation and privatisation in the UK
Nationalisation and privatisation in the UK
Nationalisation and privatisation in the UK
Privatisation • History of privatisation (cont.) – forms of privatisation
• Arguments for privatisation – market forces • greater competition in the goods market • greater competition for finance • accountability to shareholders
– reduced government interference – reducing the PSNCR – increased share ownership
Privatisation • Arguments against privatisation – natural monopolies – the public interest • externalities • fairness and social justice
– problems with the PSNCR – problems in the valuation of shares
Regulating the Privatised Industries • Identifying optimum price and output • Regulation in practice: – the RPI–X formula
• Advantages of UK regulation – discretionary – flexible – incentives
• Disadvantages of UK regulation – – – –
disincentives of changes to X excessive power of regulator? alternatively, regulatory capture complexity of regulation
Making Privatised Industries more Competitive • Increasing competition in the privatised industries – allowing competition where there is no natural monopoly • limited extent of true natural monopoly
– allowing access to grids by competitors – forbidding suppliers from being grid owners – capping market share of established firms – competitive franchising to make monopolies contestable
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