New York City has introduced a $9 congestion pricing toll for vehicles entering central Manhattan during peak hours. This policy aims to address the market failure of traffic congestion, a classic negative externality, by reducing gridlock and raising funds for the city’s struggling public transit system.
The toll applies to drivers entering below Central Park between 5 a.m. and 9 p.m. on weekdays and slightly shorter hours on weekends. Off-peak tolls are set at $2.25, with discounts for drivers using certain tunnels.
While NYC is the first U.S. city to adopt congestion pricing, global cities like London and Stockholm have already seen success with similar schemes. However, the toll has faced criticism, particularly from suburban commuters and New Jersey officials who argue it’s an unfair financial burden. Former President Trump called it a “massive tax” that could drive businesses out of the city.
Proponents highlight the toll’s dual purpose: reducing environmental and social costs of traffic while financing transit infrastructure. Despite opposition, NYC’s initiative reflects a growing global trend of using economic tools to internalize the cost of congestion and improve urban mobility.
THINK LIKE AN ECONOMIST!
Q.1 Define negative externality.
Q2. Explain how congestion pricing seeks to address market failure.
Q3. Analyse the potential impact of congestion pricing on NYC’s public transit system.
Q4. Discuss whether congestion pricing is a fair and effective policy for reducing urban traffic.
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