The problem of road congestion: the fultility of 'avoidable cost' estimates

The Bureau of Infrastructure, Transport and Regional Economics estimates of the costs of road congestion in Australian capital cities ($9.4 billion in 2005 and projected to more than double by 2020) are widely cited. But these projections appear to overstate the problem and provide little, if any, guidance for sound policy development. They are not measures of the net gain from introducing congestion charging. Moreover, such numbers provide no help for evaluating the net benefits of other policies to deal with congestion, such as increasing road capacity. Without efficiency-based cost-benefit analysis of all policies to deal with road congestion, governments run the risk of lowering social welfare.