Following yesterday's brief mention of a congestion tax, here's a description of how it works in London.
It's important to note that the thinking behind a congestion tax isn't simply about "charging people to drive," it's about the fact that driving on crowded roads involves an unpriced negative externality. That is, there's the private cost of driving which you take into account when you drive down the road and then there's the external cost which is due to the fact that the presence of your car slows things down a bit for everybody else. So what happens is that there's too much traffic, relative to what there would be if the full social cost of driving were taken into account when people made the decision to drive to work.
In other words, it's a tax/toll even economists can love.
