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Economic instruments are policy approaches that aim to encourage behaviour changes through their impact on market signals (prices) rather than through explicit directives or laws (“command and control measures”). Economic instruments in terms of transport and the environment aim to enhance better practices and avoid harmful ones. Economic instruments refer to diverse means — user charges, prices, fees, taxes, subsidies, eco-taxes, payments, compensation, subsidies, loans, tradable permit systems, etc. –for modifying people’s behaviour through the adapted pricing system.
Economic instruments have a number of benefits compared to other measures. They can allow internalization of environmental or social costs, in line with the polluter pays principle, and give polluters flexibility in the way they respond. The main advantage of economic instruments is that they have the potential to change the behaviour of the users. When environmental costs are fully internalized into the price of a product or an activity/service, consumers are encouraged to substitute away from these products with higher relative prices to alternative products that are relatively cheaper priced and (hopefully) more environmentally friendly. In cases where higher prices may penalize certain needy groups, different forms of compensation may be appropriate.
For more:
* Economic instruments as a lever for policy (WHO) – https://wp.me/psKUY-5jn
* Supporting Facebook page – https://www.facebook.com/EconomicInstruments/
Waiting for free bus services in Hasselt, Belgium
This 2007 Wikipedia entry has been extracted as is from the Internet Archive Wayback Machine at http://archive.org/web. It is intended to serve as a baseline assessment, relative to the current WP entry of this date, and later to a planned 2020 entry.
To get a better feel for this from the perspective of day to day reality when it comes to trying to get wherever you want to go during morning rush hour in Tallinn, let’s have a look at a report by two Estonian researchers, – by Helen Poltimäe and Mari Jüssi, under the title . . .
The program for the recent Tallinn international conference contains useful information and contacts for researchers, planners, policy makers and others wishing to understand the variety of approaches, projects and perceptions which make up this fast-growing and highly varied field of interest for cities and their citizens around the world.
Source: WHO http://www.who.int/heli/economics/econinstruments/en/
Economic Instruments encompass a range of policy tools, from pollution taxes and marketable permits to deposit-refund systems and performance bonds. The common element of all economic instruments is that they effect change or influence behaviour through their impact on market signals.
Economic instruments are a means of considering “external costs,” i.e. costs to the public incurred during production, exchange or transport of various goods and services, so as to convey more accurate market signals. Those “external costs” may include natural resource depletion, environmental degradation, health impacts, social impacts, etc.
Economic instruments facilitate the implementation of Principle 16 of the Rio Declaration, commonly known as the “Polluter Pays Principle.” The article states: “National Authorities should endeavour to promote the internalisation of environmental costs and the use of economic instruments, taking into account the approach that the polluter, should in principle, bear the cost of pollution with due regard to the public interest and without distorting international trade and investment.”
William Spenser Vickrey, winner of the Nobel Prize for Economics, is considered the father of Congestion Pricing. He first proposed it in 1952, for the New York City subway system, recommending that fares be increased in peak times and in high-traffic sections and be lowered in others. Elected officials considered it risky at the time, and the technology was not ready. Later, he made a similar proposal for road pricing.
This review was written in 1992 by Todd Litman, executive director of the Victoria Transport Policy Institute, to summarize some of the defining principles set out in Vickerey’s extensive path-breaking early extensive pathbreaking contributions which in many ways defined the field. This essay can be found in its original form in the website of the Institute at http://www.vtpi.org/vickrey.htm.
Anything missing?
There are a good number of proponents around the world — politicians and activists for the most part — supporting the idea that public transport should be free. It certainly is a tempting idea on a number of grounds. And if we here at World Streets have our own thoughts on the subject (stay tuned), it is always good practice to check out both sides of the issues. to get the ball rolling, just below you will find four short statements taken from the Wikipedia entry, setting out arguments against FPT. More to follow on this but in the meantime we are interested in hearing from our readers and colleagues around the world both with (a) their comments on these criticisms and (b) yet other critical views. (This is sure to be a bit exciting.)
* Note: See numerous, extensive comments below.
Hello Eric, Thanks for forwarding the short reply by Lloyd Wright on Free Public Transit to the list. It made me think: Hmm possibly the comparison of Free Public Transit to public spaces that are generally open to use by the population free of charge is a strong, valid point. Beyond that here are some rough, somewhat wide-ranging and unstructured thoughts:
Like so many issues I feel that this one could benefit from a structured presentation perhaps in the form of a matrix or a similar arrangement to provide an overview of the most important issues, arguments and counter-arguments. (I am open for editing-collaboration for such an undertaking.) However, counterarguments and other considerations came flowing as I sat down to write.
Following up on Simon Norton comments here of 2016/08/07
“Public Space” is generally mostly free. This includes footpaths, parks, and town squares. If one advocates charging for public transport, it would seem most of the same arguments would apply to public space. And yet few would actually support such a position, principally on grounds of equity.
There are also ways to make public transport funded on a sustainable basis while making it free to the user. There are cities which utilize a parking levy to completely cover all public transport costs.
Such modal funding transfers also carry a great deal of appropriateness when one considers the actual societal costs brought by private motor vehicle use and the actual societal benefits of collective transport.
Simon Norton comments: Submitted on 2016/08/07
There are 2 overriding arguments for free transport:
Now for some counter arguments to the ones put forward by Eric:
Anything missing?
There are a good number of proponents around the world — politicians and activists for the most part — supporting the idea that public transport should be free. It certainly is a tempting idea on a number of grounds. And if we here at World Streets have our own thoughts on the subject (stay tuned), it is always good practice to check out both sides of the issues. to get the ball rolling, just below you will find four short statements taken from the Wikipedia entry, setting out arguments against FPT. More to follow on this but in the meantime we are interested in hearing from our readers and colleagues around the world both with (a) their comments on these criticisms and (b) yet other critical views. (This is sure to be a bit exciting.)
* Note: See numerous, extensive comments below.
Bangkok Skytrain: Note the huge investment in public transport to solve the problem. Oops!
First extracts:
“MAY 19 — The Malaysian Government has established an objective of improving public transport in urban areas around the country as a core to stimulate economic growth and relieve traffic congestion. In order to achieve the stated objectives, the government has allocated funds worth up to RM180 billion to be invested in new public transportation systems.
“For example, this commitment can be reflected on the approval of large scale public transportation projects such as the MRT Line 2, LRT 3, HSR (High Speed Rail) KL-Singapore and BRT (Bus Rapid Transit) on the Federal Highway. The shift in focus from building more roads and highways back to improving public transport will no doubt be welcome to the urban population.
“However, despite these colossal public transportation investments, have we gone far enough to ensure public transport usage in Kuala Lumpur is a feasible alternative option to car use? I believe that there are several elements that can be addressed to further improve the attractiveness and effectiveness of the Greater Kuala Lumpur Public Transport Master Plan.”
* By Matt Philips, Quartz, 30 June 2015. Full article and all charts available from Quartz here
The value of any analysis depends, to a large extent, on the beginning and ending you choose.
So it is with Greece, which is seeing its simmering, half-decade-long debt crisis come to one of its periodic boils—and perhaps a final explosion.
Where to start? Records of Greek public debts stretch back at least as far as the Peloponnesian war—around 400 BCE. Should that be included? Or how about the fact that the modern nationstate of Greece has been in default for roughly half of the years since it gained independence from the Ottoman Empire in the 1830s? (After all, some trace Greek resistance to taxation to the historical taxes levied by the conquering Turks.)
For simplicity’s sake, let’s just start in the years before Greece joined the euro. In the 1980s, and early 1990s, the Greek economy was a bit of a mess.
This out of control bulimic spiral begins with man’s uncontrollable tool-making itch, and from there, and utterly unknown to us at the time, to tools which take on transforming lives of their own — one of which in the 
domain of mobility being ever-increasing speed, which in turn leads to ever-increasing distances, and which finally and in largely unnoticed fatal tandem destroys the reality and oh-so important qualities of proximity and community. What we thought at the time was merely more convenient transportation, has snuck up on us and turned into very inconvenient and altogether unanticipated transformation — in fact one of the most intractable challenges of transport policy and practice of the 21sr century
How to break this vicious spiral? Well in cities anyway the key is clearly significant, strategic speed reduction in combination with a phased, multi-step systemic overall as needed to create a truly optimized mobility system for all. And happily we now have the technical tools (the technical virtuosity) to get the job done. We shall see this spelled out more clearly here over the course of the coming months, but before leaping ahead, let’s step back a bit in time and see what Contributing Editor Professor John Whitelegg had to say on this subject in the pages of the Journal of World Transport Policy and Practice, way back in 1993.
As previously documented on World Streets the city of Tallinn, Estonia implemented Free Fare Public Transportation (FFPT) in January of 2013 for all registered citizens of the city. A year and a half into this policy voices from politicians, the media and academia presented an array of opinions in favour of, and refuting benefits of the policy. Thus in May of 2014 I visited Tallinn to conduct interviews with City staff, independent environmentalist consultants and academics alike for my master’s thesis in Urban and Regional Planning Studies at the London School of Economics. My research question was ‘Is Tallinn, Estonia’s free fare public transportation policy meeting its claimed motives as stated by the city’s municipal leaders?’
Which, if you have not noticed, does not seem to be working particularly well when it comes to guiding us (decision makers but also the voters behind them) toward better policy choices, even in matters purely “economic” (money, prices, interest rates, income distribution, taxation, regulation, growth, etc.).
With this harsh truth in mind, we try to keep up on matters economic, and several of our collaborative programs have this as their aim. One, EXERNOMICS, you can follow on Facebook at https://www.facebook.com/pages/Exernomics/552738241538438 . Or directly via http://exernomics.ecoplan.org
Have a look and share your thoughts with us on this
As part of Norway’s ongoing European Mobility Week celebrations, around 10,000 NOK (€1,200) was handed out in the town of Lillestrøm to pedestrians and cyclists in “reverse toll money”. The money symbolised the health benefits of walking and cycling, including better fitness, improved air quality and more efficient transport.
Cyclists received around €12, while pedestrians gained €11. Calculations carried out by the Norwegian Directorate of Health shows that active transport provides the state with a saving of 52 NOK (€6) per kilometer for pedestrians and 26 NOK (€3) per kilometer for cyclists. An average bike trip in Norway is 4 kilometers, providing a health benefit of 100 NOK (€12), while an average walking trip is 1.7 km, worth almost 90 NOK (€11)
The only thing I have to say about this is . . . EXCELLENT!
This is a simple fact! Fare Free Public Transport (FFPT) has no possible justification whatsoever unless your governing officials are willing to do something about adjusting the other half of the modal mix to bring down car ownership and use in the city strategically and as quickly as possible . . . SCR – Systematic Car Reductions.
The tools for achieving these necessary adjustments in the modal split are well known, experience-proven and widely used in cities of all sizes in many parts of the world. There is no possible justification that competent public authorities not be aware of these proven tools and policies. They include most notably:
Continue reading
World Streets welcomes discussion of fare free 
public transport because we believe that it is important to listen to alternative views from different organizations and countries in order to arrive at wise public policy. This contribution comes from one of the most active international groups pushing zero fair public transport, Planka.nu in Sweden.
Carsharing changes our relationship with the cars we owned and loved and hated over much of the century just behind us. And one of the points we hear from proponents again and again is that carsharing offers substantial savings, because the cost of owning a car has become much higher than in the past. Surely the cost of car ownership in the 21st century — and all that goes with it including direct and indirect costs, among them depreciation, insurance, petrol, maintenance, parking, etc., — is no light burden. But how expensive is it really? In this article, carsharing expert Dave Brook digs into the numbers and reflects on the true cost of ownership for most car owners in the United States.
WORLD STREETS __ A New Mobility Action Plan for 2022 