Keith Dimond's solution to road congestion is about as well-intentioned as it is wrong. His basic plan relies on the old, but failed, ideas of centralised power, central planning, and the ability to use raw power to force people to do one's will.

These policies failed when tried openly for entire economies, as the collapse of communism has shown, and they fail when applied to specific issues as well.

Mr Dimond basically argues that the way to prevent congestion is to ban used-car imports, thus forcing up the price of cars especially for lower-income groups.

In other words, he wishes to price poor people off the roads to make additional room for people more like himself.

He wants to drive the university out of the city. He wants to create a mega-city government so that a million-plus people are under the control of one political body.

Of course such centralisation everywhere makes government more expensive because local government is more responsive to taxpayer demands.

Nothing Mr Dimond suggests addresses the underlying problems of road congestion.

Road consumers simply overuse the roads because there is no connection between road usage and what they pay for the roads.

We have a socialised road system where we all are taxed and the money is dumped into a centralised budget. From that, money is drawn out and spent as the politicians deem in our (their) best interests.

If I use a road during rush hour or use it at 4am, my basic costs remain almost identical. I have no incentive to look at alternative times for my trips or alternative means of transport.

Even during rush hours, various American studies have shown, something like one-fifth of all drivers on the road needn't be there at that specific time.

People always overuse a resource when there is no connection between their costs and their consumption.

The methods used by the Government today to fund roads destroy this important link. In the process this distorts the incentives of drivers and encourages the crisis which politicians claim they want to solve.

Governments tax fuel as a means of raising funds for the roads. But as cars become more fuel efficient, this revenue declines. And if there is one thing governments love, it is tax revenues. After all, a huge amount of taxpayer money is used to gain the support of the special interest groups that form the coalition that elects our present Government.

For this reason the Government is floating the idea of a tax based on kilometres travelled. There is no mention if this is to replace a fuel tax or is in addition to it. Even this idea does not address the problem.

Road congestion is not a problem of all roads, only some roads. Nor does it happen all the time, only some of the time.

These systems of road financing do not link consumption of roads, at a specific time and place, to the costs. No individual road user knows the real cost of using that road at that time.

It's comparable to funding movie theatres with a tax on the amount of popcorn one consumes. But theatres are packed on Friday nights, not Monday morning, and a popcorn tax wouldn't solve that problem.

Theatres solve the problem by raising prices for their rush hour and lowering prices during other times.

Bars do the same thing, having specials on Tuesday nights, but imposing cover charges on the weekend.

The market already deals with congestion rationally. Only when the market is banished and politicians try to replace it with their grand schemes do we run into the types of problems we now face, especially in regards to the roads.

We should directly link road consumption to costs. Remove taxes on petrol and cars per se but charge for road use.

A general charge on distance travelled could fund minor and secondary roads.

For major highways a tolling system is best. This can easily be done electronically without requiring cars to stop at a toll booth. In addition, it should be clear that during peak hours the rate for using the road will be higher than during non-peak hours. During low-use periods, like the early hours of the day, the toll can be removed.

Consumers will then pay for the roads they use when they use them. Those whose road-use patterns create the problem are the ones who should pay to solve the problem. Those who use the roads the most pay the most. The elderly who may use them rarely will pay in proportion to the benefits they derive. Each consumer will have incentives to look at alternatives that make sense for them.

Is mass transit is the answer? Rail and bus prices are distorted by the Government, as well. Subsidies make them appear cheaper than they are. Even so, consumers don't find mass transit's generally inflexible service to be worth using. Whether this remains true when roads and mass transit both are priced to reflect their true costs, we don't know.

But one thing we do know is that no solution is possible as long as the Government is so intent on meddling with prices, via taxes or subsidies, that the true costs of transportation in New Zealand are unknown to everyone, especially to consumers.

The overuse of roads, or congestion, is what we expect when markets are not allowed to operate. We can't rationally look at alternatives because important price information is hidden from us. Only by the use of market signals will we get feedback that allows us to make rational choices between the alternatives.

* Jim Peron is the executive director of the Institute for Liberal Values and the author of the forthcoming book 'The Road Not Taken: Resolving the Crisis on the Roads'.

Herald Feature: Getting Auckland moving

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