Estimation of Marginal Social Costs, Issues and Suggestions: The Case for Namibian Roads

Abstract

Road infrastructure while delivering economic benefits, generates negative externalities and places a heavy burden on the fiscus for funding. Road users impose various costs on fellow users, and the rest of the society when making use of the network. Normally, vehicles cause insubstantial damage to the road surface and may not only emit some emissions, but also add significant congestion costs in urban areas and increase the risk of accidents. What is generally less explored in developing countries is the internalisation of negative externalities into road pricing which do influence the present and future price of road use. The price road users pay for their road use hardly reflects the true cost of a trip. Failure by the road users to factor in the external costs when deciding to undertake a journey gives rise to various problems that have repercussions for the transport system, the environment and the society. In order to bring about more efficiency in the transport system, economists advocate charging road users at an efficient price, the so-called short-run marginal cost of road use. This paper explores the possibility of using the pavement management system (PMS) model mostly used by road agencies in Namibia. The model is used to plan and estimate the marginal externality cost of road use. The results demonstrate that it is possible to attain estimates of the marginal cost of road use in Namibia. Importantly, setting road use charge equal to the correct price does lead to road funding deficit, as reported in literature. These findings may indicate a dilemma faced by many developing countries with expansive road networks and a small vehicle population. The paper concludes with various options of how to address the deficit and support road funding without deviating from the efficient pricing principle.