Why Are Sensible Policies Often Politically Unthinkable?
Often economic policies which make good sense and can leave everyone better off are dismissed as being politically unthinkable. How does this come about? Let us take an example of a Congestion Charge. Driving into city centres causes negative externalities such as pollution, congestion and higher fuel consumption. People can spend hours of their life stuck in traffic jams, but despite the wastage of congestion they do not want a tax neutral congestion charge which would reduce pollution, reduce the length of traffic jams. If a government raises revenue from a congestion charge, it can use this money to reduce other taxes. This is why we say this is ‘tax neutral’ – the overall tax burden hasn’t changed. We are just paying different taxes. The only difference is that the taxes are now forcing people to make more efficient choices which lead to less pollution and congestion. (since the London Congestion charge was introduced traffic volumes fell, average traffic speeds increased and pollu
