Policies Implemented to Control Negative Externalities in the Transportation Market

Policies Implemented to Control Negative Externalities in the Transportation Market

Policies Implemented to Control Negative Externalities in the Transportation Market

Different markets are associated with various forms of externalities, which may be both negative and positive. The area of concern is usually negative externalities and their effects on the economy. Identifying these negative externalities is often the first step taken by the government in ensuring the implementation of appropriate policies that would eventually combat the negativity of the externalities (Wells & Nieuwenhuis, 2012, p.1690). Taking, for example, the transportation market is associated with many negative externalities including congestion, environmental pollution, and accidents, which continues to affect the community negatively. Therefore, negative externalities, which can be said to be increasing the overall cost of a product in a particular market, are suppressed through implementing specific policies relevant to the ‘market and its externalities.

The first negative externality in the transportation economy is road accidents, which have led to the loss of life and severe injuries by road users. The scenario increases the cost of the transportation market in that, the victims of the accident need to be treated using money (Bagloee, Tavana, Asadi, & Oliver, 2016, p.290). However, the U.S government and many other governments around the world have introduced a compulsory insurance scheme to cater for any damage caused in the roads. The policy has been of a commendable help since; it has to some extent reduced the cost of hospitalizing the accident victims. Besides, the government has also introduced speed governors and seatbelts as another policy of controlling road accidents in the roads. The system ensures that road vehicles do not exceed the required speed limit and also the passengers to fasten their seatbelts to avoid injuries during accidents.

Another negative externality in the transportation market that has been of concern, especially in developing nations is congestion. Congestion increases the cost of transport, which is directly felt by the community. The community may be forced to pay the extra cost of maintaining roads since; too many locomotives damage the streets. On the other hand, the cost of entering a transport sector in congested roads may be high to a private proprietor. The government has, however, introduced a policy that aims at decongesting public highways (Huang, Kuo, & Chou, 2018, p.478). One fundamental requirement of this policy is promoting the use of other means of transport such as railway and airway. The policy has also been aiming at reducing the general transport cost hence; canceling the effects of the externality. Environmental conservation policies have also been introduced to control fuel emissions by locomotives.

Ultimately, negative externalities in the transportation market are known to be imposing financial effects on ordinary citizens. Consequently, it is a wise idea for the government to implement specific policies that are aimed at annulling the results of these externalities. The systems may, however, not be enough control of the externalities, but at least they can suppress the effects caused by the externalities. Transportation market being one of the significant markets used by nearly everyone, calls for the proper implementation of relevant policies such as the ones discussed above as this would assist in controlling incidents such as accidents, congestion, and environmental pollution.









Bagloee, S. A., Tavana, M., Asadi, M., & Oliver, T. (2016). Autonomous vehicles: challenges, opportunities, and future implications for transportation policies. Journal of modern transportation24(4), 284-303.

Huang, S. K., Kuo, L., & Chou, K. L. (2018). The impacts of government policies on green utilization diffusion and social benefits–A case study of electric motorcycles in Taiwan. Energy policy119, 473-486.

Wells, P., & Nieuwenhuis, P. (2012). Transition failure: Understanding continuity in the automotive industry. Technological Forecasting and Social Change79(9), 1681-1692.