Tuesday, February 13, 2007

Congestion Pricing

The NY Times has an article up about congestion pricing on roads and highways. Congestion pricing involves charging a toll to motorists to reduce congestion on roads -- in particular, varying the toll based on how much congestion & traffic there is.

The reasoning behind congestion pricing:
congestion pricing holds out the possibility of harnessing people’s innate economic rationality and self-interest in order to promote a series of public goods. Every time a driver turns onto the Henry Hudson Parkway, she slows down the travel speed of all the other drivers, imposing a cost — or, as economists say, a negative externality — on countless fellow citizens. “Everybody wants fewer people to drive, and everybody wants people to use less gas,” said Gregory L. Rosston, deputy director of the Stanford Institute for Economic Policy Research in Palo Alto, Calif.

But so far, high gas prices and concerns about emissions haven’t led Americans to alter their driving patterns significantly. By making people take into account the true cost of driving — beyond gasoline, insurance and lease payments — congestion pricing in theory encourages people to car-pool, or to drive at different times of the day, or to take the train or bus.
The most famous implementation of congestion pricing is in London, where you have to pay a toll to drive in the center of the city. In the United States, most cases of congestion pricing have been implementing a toll to drive in an "express lane."

What do you think of charging tolls in this way? What are the pros and cons?

I particularly like this quote from the article:
“Everyone accepts that if your car is stationary, it’s fine to pay for parking,” said Alexander Tabarrok, professor of economics at George Mason University. “But if you tell people they have to pay to move their car between two points, they think it’s crazy.”
This subject is one that we may also discuss in class because I did some graduate research in this area.

(Source: Greg Mankiw's Blog)


Anonymous said...

I think that ideally this proposal is a good one: charge external costs to affect a more ideal cost-benefit balance; however, my only concern is that governments might exploit this ability solely to raise revenue. What's to stop the state or local governments from charging tolls that maximize producer surplus rather than establish the equilibrium of total social cost and benefit. This toll might result in reduced efficiency if too few drivers are willing to use the toll road (i.e. effects on businesses with fewer customers, etc.). The government already seems to do that with the red light cameras: in my opinion, although there is more money available for government projects as a result, the accidents caused by drivers slamming on their brakes or speeding up through the intersection to avoid getting a ticket actually increases society's risk, rather than decreasing it. The only motive behind such "good intentions," it seems, is extra revenue.

Anonymous said...

That one was my comment by the way.