Infernal Ramblings
A Malaysian Perspective on Politics, Society and Economics

In the Slow Lane: Toll Policy

Written by johnleemk on 5:32:23 pm Oct 1, 2007.

The Malaysian government is notorious for its degree of control over the economy — control to a stifling degree — and its recent abuse of that control to raise the cost of living. (Or, in economic jargon, bring about inflation.)

Now, some of these measures are actually justified. The Malaysian government does not directly increase the price of fuel; it reduces its subsidy, which is a good thing.

There is no rational reason at all for us to be subsidising fuel; it is money wasted which could be better spent on investment. A defence of this waste can be mounted, but it appeals to the economic fallacy of the broken window — as this is not an article on subsidies, we shall leave that issue for another day.

A more galling issue is the subject of toll collection and toll hikes. Now, this is where the government directly sets the price of road transport, and that is generally a bad thing.

In the free market ideologue's ideal world, tolls would be set by market forces and not by governments; in the United States, the reality is something like this.

Of course, in the real world, we have good reasons for not totally abandoning roads to the market; the positive externalities associated with a new road are not necessarily fully accounted for by the market.

Furthermore, tolls and congestion taxes do serve a purpose, because roads are not free; it is just that they are subsidised by the taxpayer, so they appear to be free.

Indeed, it is very much arguable that tolls are necessary for rationing the scarce resource of roads. Let's face facts: we're more inclined to drive than to take a bus or the train if we don't have to pay a toll.

The problem with this is that our usage of the road is rationed more by who got in the queue first, rather than who places the highest value on using the road to get to where he needs to go.

If I have to get to my best friend's death bed, I would pay a lot of money to not be stuck in a traffic jam — but if the roads are toll-free, I can't do that.

So am I saying tolls are desirable? In general, I would think so. I would not have any opposition to tolls or congestion taxes in Malaysia, if not for the fact that our government has a history of screwing up even the most sane and rational economic policies.

The tolls are being raised not to reduce congestion, just as the fuel subsidies are not being reduced to improve efficiency in government spending.

Rather, these policies are being enacted so the government of the day can keep its gravy train running and dish out goodies to its cronies; the proof lies in the fact that frivolous government spending is as big as ever (if not bigger), while other taxes are hardly being reduced.

If the government sincerely wants the best for its citizens, it should let market forces dictate toll collection, and intervene to prevent accumulation of monopolistic power, perhaps by reviewing toll and road maintenance contracts every decade or so.

That would be a wise implementation of tolls. At the moment, all we have is a hodgepodge policy enacted for the purpose of raising money, rather than raising efficiency — and it is no wonder that those who use the roads are really up in arms.

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Infernal Ramblings is a Malaysian website focusing on current events and sociopolitical issues. Its articles run the gamut from economics to society to education.

Infernal Ramblings is run by John Lee. For more, see the About section. If you have any questions or comments, do drop him a line.

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