1. THE RATIONALE FOR ROAD PRICING: STANDARD THEORY AND LATEST ADVANCES Kenneth Button 1. INTRODUCTION Road Pricing is a simple concept that extends the common practice that is virtually ubiquitous in every other sector of a market economy whereby prices are used to reflect scarcity, and to allocate resources to those that can best use them. In most places road space, even in such supposedly market orientated societies as the U.S., is in actuality allocated in a manner more akin to the general practices employed in pre-1989 communist Russia, namely by waiting in queues and lines. While there are some that see merit in using waiting as an allocation device (Barzel, 1974), by and large society finds congestion inefficient and wasteful. After many years of adding capacity in an attempt to reduce congestion, a number of transport and road authorities at national, regional and local level are seeking to move away from the centralist approach to roads policy to one that has at least a veneer of economic rationality underpinning it. The introduction of Area Licensing to Singapore in 1975 is the classic case study of a pioneering application, but despite the success of the measure it is often seen as not being particularly relevant for other cities, and especially those in Western Europe and North America. It has taken over a quarter of a century for another scheme to essentially replicate it. Certainly there have been toll rings Road Pricing: Theory and Evidence Research in Transportation Economics, Volume 9, 3–25 Copyright © 2004 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0739-8859/doi:10.1016/S0739-8859(04)09001-8 3