The Case for Congestion Pricing
Every now and then Ben & Jerry’s holds a free ice cream cone day during summertime. As you know if you’ve ever tried to get your free cone, showing up may not cost you any money, but it sure does take a lot of time. And of course it does! Ice cream is tasty. People like it. It’s the sort of thing many people would willingly exchange money for. And when you lower the price of something valuable to zero, what you get is overconsumption and long lines. Raise up the price of ice cream, and the enormous lines dissipate. But if we decided to make every day free ice cream day, with the ice cream paid for out of tax revenues and then handed out for free to whoever wanted it, we would find that hot summer days we had huge ice cream lines.
And so it goes with our roads. Put in a road somewhere and unless it’s a Bridge to Nowhere-style boondoggle, it’ll spur development along its route. And with that development comes vehicles. And soon enough it becomes too many vehicles. Access to a well-situated road is worth more than $0.00 and yet access to most well-situated roads costs just $0.00 and therefore you wind up with too many vehicles and too much traffic. The Washington Post has a report on how DC area businesses are trying to respond to increasing traffic problems in the city by increasing the size of their fleet of delivery vehicles. Individually, that makes sense — if you can’t make your deliveries on time, adding more trucks will help. But, again, because access to the roads is free lots of people will try to respond to congestion by taking up more space on the streets. And that, of course, only makes the overall congestion problem worse.
What’s needed is a system in which we levy a fee for using the roads at peak times, with the money plowed into transit services. Then some trips that currently occur at peak times will shift to less-crowded off-peak times. And some trips that currently occur at peak times will shift onto transit or not be undertaken. And firms that feel they really do need to be on the roads at peak times will pay the fee, rather than paying to add trucks. All this will reduce the traffic burden and create a situation wherein rush hour car commuters, yes, will be burdened by an additional fee but in exchange will get much faster and easier commutes. Meanwhile, air quality will be improved and emergency services vehicles don’t wind up stuck in traffic. The idea is, yes, unpopular at the moment but if American cities started doing it people would quickly find that it makes almost everyone better off in the end.
47 Responses to “The Case for Congestion Pricing”
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October 6th, 2008 at 10:44 am
Forget congestion pricing and ask yourself who owns the rights of way and why there should not be a right to choose how these rights of way are used.
And then what you would but on them, if all the horses, excuse me I meant cars, were removed.
This is the starting point for a discussion of the future of transportation.
Best, S
October 6th, 2008 at 10:44 am
The idea has merit, but I’m not sure how the logisitics would work. Would you put up toll booths at key locations? Wouldn’t doing so increase a certain amount of traffic and congestion? Admittedly, I come for a southern sprawled largely suburban area, so these problems are distant from me, but I’d be interested to see your explanation as to how it would work.
October 6th, 2008 at 10:51 am
This is an excellent analogy and I am a fan of congestion pricing.
But you ignore an important counterweight to this argument. There are already countless situations where the rich have a massive advantage over the poor. Currently allocation of the roads is “democratic” in that it is equally bad for everyone. But if you price the roads in a way that only the already-rich have access to them, you probably exacerbate growing inequality. The rich will get to more meetings than the poor guy. They will get to the ticket line while the poor guy is busy walking from the subway.
How much should this plan be applied to health care? (That is John McCain’s plan, no?). To clean air?
What goods should be allocated “democratically” and which via the market?
As I said, in this case I am a fan of using the market. But I think you have to take *some* of the revenue and put it directly back into the hands of people who need it rather than have them wait 10 years for an improved transit system.
October 6th, 2008 at 10:54 am
What do you have against Ben & Jerry’s? It’s probably good that every day isn’t free cone day, but why is it problematic to do that kind of thing once a year?
October 6th, 2008 at 11:02 am
Great analogy.
Your post didn’t say this, but it reminded me that we already have congestion pricing for transportation - on transit. It makes sense to people that they should pay more to ride a train at peak times than at off-peak times. We should be able to make the case, then, that the same should be true (more true!) of driving on roads. But I don’t recall seeing this particular argument elsewhere. In fact, it strikes me that this could be a plausible political bargain as well an effective way to mitigate the distributional consequences: we’ll levy congestion pricing on roads and eliminate it on transit.
October 6th, 2008 at 11:12 am
What the other guy said. Toll booths or it doesn’t work (in 2008/2009).
Remote/EZ-pass type technology doesn’t seem to me to have reached the point where a driver could buy the right to be on a certain street from home and a sensor on that street verify that purchase. When the technology is here, congestion pricing will be here.
October 6th, 2008 at 11:14 am
it makes sense to people that they should pay more to ride a train at peak times than at off-peak times
It does? Most people who ride trains during peak times - me included - would much rather ride off-peak when the trains aren’t cattle trains, but we have no choice in the matter.
October 6th, 2008 at 11:18 am
MSI’s question about distributional impact is reasonable.
The first answer is that the lower your income, the less you drive. But this is really true only of areas with good transit systems. In New York, congestion pricing’s costs would overwhelmingly have fallen on suburban commuters with incomes well above the local median. I imagine the pattern is similar in DC.
Second, while the distribution of income is a very big problem in this country, it’s not the only problem. We should address income inequlaity through policies that affect it directly, like progressive taxation, raising the minimumw age, limiting exectuvie compensation, encouraging unions, and so on. Transportation policy should be focused on improving transportation.
October 6th, 2008 at 11:23 am
I don’t disagree in principle but I fear this will become the only congestion control. Too much traffic? No need for new roads just jack up the rates! Make them high enough and we will look like North Korea with 6 lane highways with no cars.
October 6th, 2008 at 11:23 am
I’m deeply uncomfortable with the concept of commoditizing mobility, taking the ability to move from “a” to “b” out of the public domain. We already charge gasoline, a defacto congestion fee. For this to have a meaningful effect on traffic patterns, it would need to be burdensome. Notice how little driving consumption patterns have altered in the face of a tremendous spike in gas prices.
And, frankly, I’d rather have traffic jams than fees, if it came to it. I may even be in the majority.
It should also be noted that this is a regressive tax program.
October 6th, 2008 at 11:24 am
Arnold -
Congestion pricing has already been successfully implemented in London. Automated video cameras are used to scan passing license plates within the priced zone. No toll booths or EZ-pass involved.
msi -
The rich/poor argument is a canard generally used to great effect by (wealthy, car-driving) opponents of congestion pricing.
In fact, overly congested roads are no good for poor people either (and like most things, the poor are hurt by this worse than the rich). And of course, where possible, many already take public transit. Furthermore, revenue from congestion pricing can and should be used to improve public transit, or in other ways to improve the mobility of the less well off.
October 6th, 2008 at 11:30 am
I’m deeply uncomfortable with the concept of commoditizing mobility, taking the ability to move from “a” to “b” out of the public domain.
I think you’re confused about what Matt Y. is talking about ehre. No one is proposing that private companies sell access to the raods for profit.
And, frankly, I’d rather have traffic jams than fees, if it came to it.
Why?
October 6th, 2008 at 11:34 am
taking the ability to move from “a” to “b” out of the public domain.
But that’s not what congestion pricing does. It restricts your ability to move (1) to a very particular and tightly circumscribed “b” (2) in the manner (i.e., car) and (3) time of your choosing. You can still come into the city at that time, just take mass transit. Or you can feel free to come in another time when you will not be causing congestion. Or you can drive to your heart’s content in the rest of this wide-open land of ours. The idea that this relatively minor restriction is some un-American abridgement of your “rights” is really a joke.
October 6th, 2008 at 11:44 am
We should address income inequlaity through policies that affect it directly, like progressive taxation, raising the minimumw age, limiting exectuvie compensation, encouraging unions, and so on. Transportation policy should be focused on improving transportation.
This point is an extremely good one, and applies beyond just transportation policy to things like energy policy as well. The “problem” with the poor is not that congestion/pollution pricing adversely affects them, the “problem” is that they are poor. Trying to address poverty through congestion and pollution policies is going to be problematic in general. It’s like the gas tax idiocy. If the goal of the policy is to put an extra $50 bucks in the pockets of working families, then just make the policy “we will put an extra $50 bucks in the pockets of working families.” Of course, this requires you to believe that the point of policy is to improve people’s well-being, as opposed to furthering one’s campaign.
October 6th, 2008 at 11:54 am
I’d also like to put in a word for the those of us who actually live in the city and don’t drive. Congestion isn’t just a negative externality due to its effect on drivers trying to get somewhere, it’s a negative externality on pedestrians and residents. Try crossing the streets in Manhattan during rush hour when the cars are gridlocked and you have to weave in and out of several lanes. And having the streets full of cars (and trucks, etc.) just sitting there pumping out fumes while they go nowhere is pretty crappy for air quality.
Oh, and before someone says, so why don’t you move, maybe you should think about whether we shouldn’t be making cities like NYC more livable, given that (among other things) we have a per-capita carbon footprint about 1/3 of the nation’s average.
October 6th, 2008 at 11:55 am
Make them high enough and we will look like North Korea with 6 lane highways with no cars.
Well, yes. A price that left the highways empty would be too high. Simialrly, a price (like $0) that frequently leaves the highways jammed, is too low. The correct price is one that keeps traffic just below the level where speeds begin to drop sharply.
October 6th, 2008 at 11:59 am
Why complicate things with congestion charges?!
There is no infrastructure in place to charge a congestion toll. This would have to be built - and you can be sure it would be complicated and controversial.
The infrastructure to charge for parking *is* largely in place - parking is simply underpriced.
Thus the simple way to charge for congestion is to raise the price for parking.
October 6th, 2008 at 12:00 pm
What’s needed is a system in which we levy a fee for using the roads at peak times, with the money plowed into transit services.
They tried this in that capitalist paradise the Netherlands about 10 years ago, and it caused the government to collapse. If I recall correctly, Norway tried it to only for the announcement to result in a populist uprising.
The idea has merit, but I’m not sure how the logis[i]tics would work. Would you put up toll booths at key locations?
The answer to the above commenter’s question is the initial part of the congestion pricing systems was to make an EZ Pass type system mandatory. There would be then be sensors installed in overpasses, bridges and road signs to monitor who went on and off the limited access highways. This had a lot of privacy groups understandably up in arms since the argument was that Big Brother could track where you were driving your car on the road.
I don’t necessarily disagree with the premise that congestion pricing is something that should be thought of. The problem is, as you said, people think of highways as something that their tax dollars already pay for and is therefore seemingly “free”. This is a case where the implementation of a good policy has too many other non-monetary costs too it to actually be implemented, especially where taxation is seen by large majority as a necessary evil instead of being something patriotic or an investment in the future.
October 6th, 2008 at 12:03 pm
The infrastructure to charge for parking *is* largely in place - parking is simply underpriced.
I don’t know where you live, but I would respectfully disagree with the fact that parking is “underpriced.”
October 6th, 2008 at 12:31 pm
On Saturday the Post had an editorial supporting the airport slot auctions proposed by the FAA for the New York City area airports — a conceptually similar issue
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/03/AR2008100303614.html
October 6th, 2008 at 12:38 pm
What’s needed are the downtown alleys and warehouse districts on the edge of downtown that we used to have. We’ve given all that up for more offices that demand more deliveries. But we’ve replaced alleys where delivery trucks used to park with 7-story atriums inside office buildings. But we’ve given over land zoned for warehouses to condos and office parks.
This is a fundamental failure of planning that doesn’t need a 21st century anti-egalitarian tax to fix.
October 6th, 2008 at 12:43 pm
we already have congestion pricing for transportation - on transit.
Hm? Which cities have this? I’m genuinely interested.
October 6th, 2008 at 12:58 pm
London has congestion charging. It works, and it pays for itself. Unfortunately, this year London decided we’d had enough of having the best mayor in the world, and threw him out in favour of a nazi clown. Said clown is currently wrecking everything good the mayorssiah achieved, in a comically fascistic manner, but that’s another story.
October 6th, 2008 at 1:03 pm
I understand that all countries in Europe charge fees for express highways, except Germany, where we lived up until a few months ago. Here are some points you probably already know:
1. Robin Chase, founder of Zipcar, is putting forth, among other things, the concept of a chip which works like the E-Z Pass, except you don’t even have to slow down. The location and time is registered on a computer and the bill is sent to your home (TED Video)
2. The issue of its being regressive would be mitigated if public transit were available. If fees were paid for highway use, money could be freed up of other transit options. The truly poor do not have cars in the first place.
3. (Slightly off subject) If what you want is denser development supported by a free market mechanism, look into “differential taxation.” It requires legal hurdles in most states, but Pennsylvania allows it. It allows local governments to assess property values such that site value (land value) is calculated separated from the value of improvements (buildings, landscaping, anything added to the site.) The purpose is the have a separate the value brought about by the efforts of the owner, the value brought about by nature or the collective efforts of the community. Once those values are established, the millage rates are gradually reduced on the improvements and increased on the site value, encouraging owners to put their property to better use and discouraging people from sitting on vacant and valuable land. I’m an amateur expert on this arcane subject and it has great possibilities for supporting New Urbanist development. Pittsburg is an example of a city using that system, and my home town Fairhope, Alabama, was started a hundred years ago, in part by my family, as an intentional community to show how land taxes would make better and more equitable communities. Henry George was our hero. This strikes me as, possibly, your cup of tea.
October 6th, 2008 at 1:12 pm
Parking in DC costs about $1.00/hr for about 200 sq feet.
Office space in DC costs about $16.00/hr for 200 sq feet.
At those prices, you’d be a fool to use any patch of land in downtown DC as parking.
October 6th, 2008 at 1:19 pm
Ugg. Its time for progressive bloggers to stop supporting regressive taxes. Yes, queue rationing stinks for the relatively wealthy, but its much better for the relatively poor.
If progressive bloggers feel the need to support economist-wet-dreams like this, at least limit your support to progressive congestion pricing, where the tolls are higher for people with more wealth/higher incomes.
October 6th, 2008 at 1:23 pm
I agree with the general thrust of the post, but may I just draw your attention to the real news in the post? Matt used the word “peak” 4 times, and didn’t once misspell it as “peek.”
Please give us back the Matt we know and love.
October 6th, 2008 at 1:43 pm
we already have congestion pricing for transportation - on transit.
Hm? Which cities have this? I’m genuinely interested.
New York, for one: you pay higher fares on Metro-North and the LIRR during peak vs. non-peak times. E.g., Stamford-to-Grand Central is $12.25 peak, $9.25 off-peak.
October 6th, 2008 at 2:26 pm
But if we decided to make every day free ice cream day, with the ice cream paid for out of tax revenues and then handed out for free to whoever wanted it, we would find that hot summer days we had huge ice cream lines.
No, I’m pretty sure the lines would be just a little longer than they are now. Whether that suggests that you’re also wrong about roads, I don’t know.
October 6th, 2008 at 3:11 pm
But if we decided to make every day free ice cream day, with the ice cream paid for out of tax revenues and then handed out for free to whoever wanted it, we would find that hot summer days we had huge ice cream lines.
How does this apply to financial bailouts? Housing? Health care?
Are you joining the libertarians, Matt?
October 6th, 2008 at 3:17 pm
There’s a very easy way to do congestion pricing:
Charge high prices for public parking.
Tax private parking.
All the money, all the incentives not to drive downtown, none of the surveillance infrastructure.
October 6th, 2008 at 6:14 pm
Asher is right: one of the reasons there are lines for the free ice cream cone is that it’s not every day someone is handing out free ice cream. Lots of people who could have ice cream whenever they’d like as it is will show up for free ice cream. Human behavior isn’t well described by a continuous chain of rational cost analyses.
That being said, go go congestion pricing. There are all sorts of things in the centers of cities that we poor people can’t do, like purchasing thousand-dollar bottles of champagne or what have you. I’m okay with allowing the rich their consumption luxuries, especially the boring, awful luxuries like driving around urban centers looking for parking.
In my extremely limited understanding, when it comes to congestion pricing in a place like New York an important dimension is commercial traffic: trucks that double-park while unloading goods don’t pay parking fees, but they generate a lot of the traffic in and out of Manhattan each day.
October 6th, 2008 at 6:30 pm
Did Congress actually pass the funding for DC’s Metro that was just up? (McCain, I am sure was strenuously against it.)
Metro hasn’t had any dedicated funding. People are very much encouraged to use bus and Metro (of course!), but little is being done to improve capacity. And fares go up.
I live in Arlington, and I’d be happy to use bus and Metro to go in and out of DC, but the fact is, it takes a darn long time. It’s not an efficient system. And IT COSTS A LOT. Five bucks or more is a chunk of change for me. You bet I will avoid the District entirely before I pay a $10 congestion fee.
Invest in and improve public transit before burdening it even more.
October 6th, 2008 at 10:37 pm
Those of us who have cars might have noticed the… um… gas tax. Cars, you might have heard, run on gas. The taxes go to pay for… roads.
Maybe that tax isn’t high enough. That’s an argument worth having. But to say that the roads are “free” to drivers is only true of ones driving Flintstone cars.
October 7th, 2008 at 10:29 am
Parking in DC costs about $1.00/hr for about 200 sq feet.
Office space in DC costs about $16.00/hr for 200 sq feet.
Parking costs are (generally) born by the individual consumer. Office space costs are born by business and the government. Also parking garages require much less maintenance for an owner than commercial office space; a commercial owner will hire a management company to run said parking. Therefore your $16.00/hr. to $1.00/hr. comparison does not take net costs into account. (let alone office building occupancy)
Also, high parking prices are a business climate loser. If you want to drive business out of the city, you raise parking prices to the point where businesses relocate to the suburbs, where parking is generally “free”. In the case of DC, for example, that doesn’t solve the congestion problem since most of the congestion occurs on the Beltway which goes around the City.
October 7th, 2008 at 10:40 am
The problem with expecting poor people to be able to get by because congestion charging fees will get fed into better transit is that many poor people live in out-of-the-way places, which are not likely to be a priority for transit improvements, but still need to get to their jobs in higher-traffic areas. They have no choice but to drive, and anything short of vast transit improvements will still leave them without any choice. And even if they happen to be lucky enough to live in the areas that will be serviced by the transit improvements paid for by congestion charging, those improvements will take time to come online.
Fix the transit first. If that doesn’t help, then consider congestion charging, with the fees going into the general fund.
December 14th, 2008 at 11:50 pm
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December 14th, 2008 at 11:51 pm
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