Second-best road pricing

While first-best analysis as discussed in this school’s first lecture is an important benchmark for economic policy evaluation, the practical relevance is often limited. That is: two important assumptions that underlie typical first-best analysis include that there are no constraints on policy instruments (including technical, political and societal constraints), and that the market failure under consideration is the final remaining distortion in the economy. Whenever either assumption is violated, second-best analysis becomes the relevant framework for analysis. No surprise that this is often highly relevant for transport. In this lecture we discuss second-best transport policies in some more detail, including a discussion of some methods we may use to design and evaluate second-best policies from an economics perspective.

Erik Verhoef's research focuses on efficiency and equity aspects of spatial externalities and their economic regulation, in particular in transport, urban and spatial systems. Important research themes include second-best regulation, network- and spatial analysis and methodological development, efficiency aspects versus equity and social acceptability, industrial organization in network markets, valuation and behavioural modelling, and policy evaluation. He has been involved in various national and international research consortia. His research is at the interface of welfare-, micro-, transport-, urban-, spatial- and environmental economics. He has published various books and numerous articles on these topics.