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Congestion as an externality In economic terms congestion is a mixture of externalities, information failure and transaction cost. Negative externalities exist as cars produce emissions, which are harmful to the environment, the wear and tear of roads, and the opportunity costs are not included in the monetary costs of motoring. Drivers are both the cause of the externalities; and are the victims of others at the same time. One can say that the information failure is very clear, as drivers are not effectively told of delays and congestion before they take there journey, if this was to be done it would help reduce congestion on the roads. However the market that currently exists doesn't produce these kinds of signals to the consumer, so this solution wouldn't ever be perfect, as the congestion will eventually just transfer to the alternative rout. All these externalities represent market failure; this can be said because the socially...

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