Successes and Failures in Regulating and Deregulating Utilities
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Successes and Failures in Regulating and Deregulating Utilities Evidence from the UK, Europe and the USA

Evidence from the UK, Europe and the USA

Edited by Colin Robinson

This book is the latest annual review of utility regulation and deregulation, published in association with the Institute of Economic Affairs and the London Business School
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Chapter 2: Road networks: efficiency, externalities and consumer choice

David Starkie

Extract

2. Road networks: efficiency, externalities and consumer choice David Starkie* INTRODUCTION In my 1999 Beesley lecture on airport regulation, I argued that there were a number of features about the airport industry that set it apart from the other utilities and this justified a difference of approach. This evening I wish to turn the coin over: road networks are treated differently from other network utilities, but this difference of approach has, in my view, been pushed too far. The distinguished American economist, Herbert Mohring, some time ago expressed the view that the external economies of transport considered to require special investment criteria have their exact counterpart in every other form of economic activity.1 While sharing these sentiments, I will be emphasizing a different but related point: the need to introduce a market approach into road services by integrating pricing and investment decisions and by offering road users a choice of different road services at different prices. Because of this, I concentrate on capacity-related issues and, consequently, I have little to say about the environmental impacts of road use. I touch upon road safety, but indirectly. I also concentrate upon the strategic network of motorways and trunk roads, the road industry equivalent of the high-voltage electricity transmission grid and the trunk gas network. This core network of motorways and trunk roads is in England the responsibility of the Highways Agency, whose budget for investing in and maintaining the network is set by the Treasury. In contrast, the urban network...

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