Congestion Pricing is Good For Drivers

Like Felix Salmon, I was bothered by this Megan McArdle comment:

There’s a real tendency to tell drivers that congestion pricing is great for them: less traffic! I can kind of buy that argument, and then I notice something: almost no one making it commutes by car…

All the people commuting by car seem to think they will hate it. And that makes me think that they probably will.

And the later comment:

I still think that congestion pricing is a good idea for a lot of reasons, but let’s not kid ourselves that it makes everyone better off. It makes affluent people who can afford taxis and congestion fees better off, and poorer folks who can commute by bicycle.

But I was just as bothered by Felix’s response:

Congestion pricing will hurt people who commute by car. That’s the whole point. If you currently commute by car, then you’ll either end up spending more money, or else you’ll use public transit. Neither is an obvious improvement. Some richer commuters will like their faster commute, but car commuters who aren’t wealthy will absolutely be the biggest losers here. We tax what we don’t want, and what we don’t want is car commuters. Most advocates of congestion pricing are pretty clear on that point.

This is wrong. We tax what we don’t want, and what we don’t want is congestion. And since drivers are the individuals most directly and negatively impacted by congestion, drivers are most likely to benefit from congestion pricing.

With a congestion charge, if you continue to drive, then you’ll need to pay money you didn’t previously have to pay. As compensation, you receive useful time that you previously spent stuck in traffic. Now it is possible for there to be losers in this arrangement. Commuters who didn’t value their time as much as they valued a marginal dollar (and these will tend to be lower income individuals) will feel some loss from this shift. But it’s unlikely that there will be BIG losers; even the poorest automobile commuters out there (and you can’t be that poor and still be an automobile commuter) place a positive value on their time.

Meanwhile, there will be enormous utility gains elsewhere. Some subset of commuters would have preferred to use transit to driving, but found the bus system too slow and unreliable to be a reasonable option. Bus riders, current and potential, also benefit substantially from congestion pricing. Poor riders who never had the financial option to drive will experience huge gains from faster and more reliable bus transit. And just as the positive value of time ensures that there will be no big losers among drivers, it also means there will be some very big winners. This includes the rich, obviously, but also those with pressing needs. Any given day, there are many, many drivers who need to get somewhere in a hurry: for economic, or medical, or other reasons. These drivers would likely be willing to pay tens or hundreds or thousands of dollars to avoid congestion, but before congestion pricing they wouldn’t have that option. The consumer surplus generated for these drivers from an effective congestion price is simply massive.

So yes, drivers will benefit from congestion pricing. Meanwhile, it’s equally unclear whether cyclists and subway riders — the assumed chief beneficiaries and supporters of a pricing plan — would gain, in the short term anyway, from pricing. The charge would obviously generate revenues that could be used to fund transit and bicycle infrastructure, benefiting them down the road. And if some drivers turn to cycling, then cyclists would experience some safety benefit from the safety-in-numbers effect. On the other hand, traffic speeds would increase, which would make cycling more dangerous. And until new transit capacity could come online, packed subway cars would get even more crowded. Ultimately, pricing would be good for non-drivers, but the argument that pricing is green-transport enthusiasts’ scheme to soak drivers is full of holes.

Why then, as Megan says, are drivers so opposed? Well, I don’t know that they are, generally speaking. I can attest that I never want a congestion price more than when I’m stuck in traffic. But let’s assume, for the moment, that drivers don’t favor pricing. Does that mean it’s bad for them?

No. For one thing, as Tom Vanderbilt has ably documented, people are terrible judges of how traffic works and where it comes from. Ask a typical driver to explain a back-up and he’s likely to cite:

- Bottlenecks. But of course, the removal of a bottleneck would either lead to a delay at the next bottleneck or speed the flow of traffic, thereby encouraging others to begin driving, up to the point at which congestion again takes hold.

- Insufficient capacity. But of course, new capacity will simply attract new drivers who will use the underpriced resource up until the point at which congestion makes it unattractive to do so.

- Idiots. And he may have a point. But the issue continues to be the unpriced externality.

That negative externality isn’t an intuitive concept. Voters in recession may not favor stimulus — another counterintuitive concept — and earthlings might not like the idea of carbon pricing, but that doesn’t mean that those things are bad for those people.

Meanwhile, if 30% of drivers hate the idea of congestion pricing, 50% are indifferent, and 20% would benefit massively from it (see the above consumer surplus point), then drivers on net would likely benefit from the charge, but you still wouldn’t see a majority calling for one.

And then there’s also the point that drivers tend to underestimate the cost of daily congestion. They dislike the idea of a congestion charge, because they’re not doing a very good job of accounting for the impact of congestion on their budgets and happiness.

So I think it’s right to make the argument that congestion pricing is good for drivers. It is. And the fact that many drivers have a tough time imagining how that might be isn’t relevant.

Comments

  1. Rob says:

    Is it not true that drivers in many metro areas ALREADY pay a congestion charge? And that charge comes in the currency called time? The idea that driving in its current form is cost-free (at least cost-free at the margin) is something that really boggles my mind.

  2. Alex B. says:

    It also seems to be a pretty simple question to answer – if you want to know how drivers feel about congestion pricing, why not survey some drivers in London or Stockholm or Singapore?

    Now, that may not address the fact that people are indeed poor judges of their surroundings, particularly when faced with counter-intuitive principles like externalities, but we can at least ascertain if they are actually opposed to the charge or not.

  3. Okay, but I can change the hypothetical so that it’s massively bad for drivers on net, and since neither of us are basing these numbers in anything except our imaginations, that’s not probative of anything.

    I don’t think you can just dismiss the notion that drivers might know what they want better than we do. The notion that it’s “better” rests on a tradeoff between money and time, with a subjective valuation that they are better qualified to evaluate than we are.

  4. Ben Ross says:

    Actually, in London, congestion pricing benefited subway riders (leaving aside what was done with the revenue). The buses moved so much faster than more people switched from subway to bus than switched from car to subway, and the subways became less crowded.

  5. Damian Hockney says:

    I was a Member of the London Assembly (the body that holds the London Mayor to account) and the debate on Congestion Charging never takes into account the hidden consequences. My group clearly established through an analysis of sales tax registrations that the charge had a pretty astounding effect on business. The number of businesses in the zone fell markedly, while the numbers opening outside of the zone increased. Also congestion itself has not been actually proved to have lessened (the messing about with huge roadworks timed to end at the time the C-Charge was introduced makes the statistics flawed). And one vital thing. All that revenue, yes all of it, went to the operators of the charging system. The only way they could make it ‘profitable’ was through fines. And these fines were often made by confusing the payer. Best one was setting an arbitrary cut off time in the day for paying (10pm) and jamming the lines half an hour before. So at 10.01 you mysteriously got through and an instant fine of $80 was registered! And the charge has doubled in five years. Tell me anywhere else in private business where you can double your price in half a decade, with a 25% increase being levelled now in a time of recession?

  6. Damian Hockney says:

    Ben, the reason for the increase in bus speeds is nothing to do with the C-Charge. Several studies have contradicted the propaganda that traffic speed is faster now since the C-Charge was introduced. Bus speeds have increased because of the construction of Bus Lanes, for buses alone, removing the right of other traffic to use those lanes. But where bus lanes do not exist, comparable journey times are no faster than they were on timetables in 2002.

  7. Derek says:

    Two things:

    1.) There are no collective values that apply to every member of the set of drivers. Different individuals have their own trade-off calculation to make in regard to congestion pricing, just as Megan says.

    2.) Congestion pricing doesn’t make the decision for all of those drivers. It increases the cost of driving. Each driver will be able to make her own decision about whether driving to work is still her best option.

    It’s misleading to switch between the will of “drivers” and the subjective valuation that each driver makes. The former is imaginary, and the latter is not at all undermined by congestion pricing policies.

  8. Chad N says:

    Basic economics: When a good is scare, you pay with your time or you pay with your money.

    When roads are free but congested, all drivers pay with their time (regardless of income).

    When roads are tolled but flowing freely, all drivers pay with money (which is inequally distributed in our society).

    Therefore those who benefit most from congestion tolling are the wealthy.

  9. Ed G says:

    Living in southwest CT, the roads are bumper to bumper most mornings at it is not ususual for a 20 mile ride to take an hour.

    When gas prices went up $1.50 a while back, costing many commuters an extra $20 a week, there was no let up in traffic. So my question is — if they implement congestion pricing, will there be refunds when the roads remain crowded?

  10. Michel Phillips says:

    You can’t go by what drivers THINK they want until they’ve tried it. That’s why Alex B.’s suggestion to “survey some drivers in London or Stockholm or Singapore” is spot-on.

    Here in Georgia, the DOT is introducing roundabout intersections. The proposals always draw opposition from locals who are convinced they will be slow and dangerous. But actual before-and-after data uniformly shows fewer accidents, fewer injuries, fewer fatalities, and FASTER traffic flow.

    It’s similarly pointless to speculate about congestion charging in a vacuum. Study places with actual experience of it.

  11. TT says:

    “Ask a typical driver to explain a back-up and he’s likely to cite: . . .”

    Badly-timed lights! Here in Northern Virginia, the timing of traffic lights in some areas is so haphazard and senseless that it creates huge backups all by itself. Just look at Seven Corners, the intersection of Rt. 7 and Idyllwood Road in Falls Church/Dunn Loring, or, worst of all, the stretch of Rt. 50 from I-66 to Rt. 28.

  12. Louis says:

    Congestion pricing is only one solution to this problem. Other solutions might get better results, including:

    1. strict caps on inner city parking. Issue a moratorium on the construction of new parking spaces, reduce the number of city-provided spaces, and impose high parking fees on the remaining spaces. Private lot owners will support this proposal, as their competition will be reduced, and the bill will target the right people (commuters going to places where they don’t need to drive, rather than commuters passing through high-traffic areas).

    2. raise the driving age, ban driving by people over 80, make the driver’s test more difficult and expensive. Charging drivers a $100, and making the test hard enough that one has to study for it, will reduce the number of drivers and ensure that the remaining drivers are more competent, and less likely to be in wrecks.

    3. Tax second, third vehicles at increasingly higher rates. This would raise revenue and encourage people to just own one car.

    All of these proposals can be accomplished without taxing driving/gasoline directly, and by attacking the marginal driver, they will likely win more support.

  13. Mark says:

    Megan McArdle is a moron and it is a sad statement on modern American media that she has been able to *fail* upwards so quickly.

    Statements like “all the people…hate it” are the kinds of arguments she makes when she can’t even think of even the flimsiest reason why something is bad policy. Think about another true argument of the same type: “All the people who own businesses would be happy if their employees worked for free.” So then it’s a bad idea to play employees?

    There are good and bad policy ideas in this world, but whether a minimally-informed public supports them is not an indication of their merit. Invading Iraq at times polled better than guaranteeing that children have health insurance. You need some principles in this world, not just a finger in the air.

    Of course, Megan McArdle is the one who said that having a chronic illness while she was unemployed made her more opposed to Medicare. So thinking that her comments on congestion pricing came from anything other than a 1952 Ayn Rand mad libs book was your first mistake.

  14. ttay says:

    Is it really an either/or (either driving alone or take a bus)? Isn’t carpooling an even more likely outcome? Congestion pricing provides incentive for less cars on the road, not less people.

  15. N says:

    Idea shoot-down follows:

    1. Congestion pricing – people have to work; particularly people who need money. . . a.k.a. “poor people”. Further eroding the time=money value proposition in their daily commute. Either they’re waiting in traffic, or they’re sitting in inefficient public transportation. Or they’re sitting at home twiddling their thumbs collecting welfare because they can’t afford the “congestion fee” + “mandatory liability insurance” + “epa emissions inspection” + “gas tax” on a mandated 39-hour work-week (where an employer can’t afford to hire them full-time).

    1.5. Supplement this with a damn-good public transit system, the likes of which has never been seen in the Western Hemisphere. . . and maybe it could be worthwhile.

    2. Cap on parking spaces – does not address city visitors (museums, zoos, restaurants, other business) who do not have advance knowledge of the parking situation. Result: wasted trip into the city; reduced revenue to city businesses and attractions -> Leads directly to -> Urban Blight.

    3. Multi-vehicle tax? WTF? So a person can’t have a small, efficient commuter car, for daily commuting + a larger utility vehicle or station wagon for weekend camping/family events/hauling kids to soccer games? THEREFORE: people will choose to have one vehicle, and that is the multi-purpose MONSTER SUV. High vehicle registration fees in the 1990′s is partly what encouraged the SUV craze. People would happily own 2, 3, 4 cars – they can only drive 1 at a time, yet they’re being billed registration and insurance fees as if they’re driving 2, 3, 4 all at the same time. So they choose 1.

    3.5. Let people register and insure a small, second 1-person electric commuter for free, and that’s the car people will drive to work. A canopied motorcycle or trike, for example, will take up less road footprint as well, less parking space. But the congestion problem isn’t really addressed by this.

    4. GAS TAX. Oh, I won’t shoot this idea down. Because it’s a great idea. It directly addresses the problem of overconsumption of gasoline. It “pays for” undesirable externalities like, political/military entanglements with oil-producing regimes, oil spills, road congestion, pollution, fatalities from oversized vehicles, etc.

    I live in a state where there are no toll roads. I recently spent time in a state where there ARE toll roads – and while the situation has improved dramatically, with regard to moving to an automated payment system. . . the toll road state’s highways are generally far more congested, road “quality” is poor, (fewer signs, less convenient exit/entrance ramps, routes with no worthwhile or time-saving endpoints; due to significant street driving to reach any worthwhile destination). . . and the toll fees were fairly outrageous. (Both states have an income tax).

    What’s the solution to congestion?
    Either population control, or sprawl. You can’t move high densities of people long distances without congestion.

  16. Louis says:

    Point 4. I agree that a gas tax is preferable to any other proposal, but it’s also politically very difficult. I was trying to think of alternatives.

    Point 2. Cities spent a fortune in the 60s and 70s trying to make themselves car-friendly, and all they got was urban blight. The infrastructure required to accommodate cars makes urban areas very difficult for pedestrians to spend time in. You’re better off using park and ride lots at the peripheral and then having people take transit in.

    On top of that, it’s easy to provide parking spaces, when necessary, to visitors while excluding residents (almost every college campus does this).

    Point 3. SUV’s took off because they were classified as light trucks, which were cheaper to make (due to regulatory differences) and thus seemed like a good deal in an era of cheap gasoline.

    You could easily amend, as you’ve suggested, higher fees for second and third vehicles while still accomplishing the same goal: to reduce the number of vehicles per person. People would think twice about buying their 16-year-old a car if the fees for a third vehicle were prohibitive.

  17. Damian Hockney says:

    I would make one suggestion, looking at all the discussions and comments. Anyone who is genuinely interested in the impact of road pricing in urban areas needs to look in a detached and dispassionate way at the outcomes of the largest experiment so far – that of London, UK. If you have already decided politically that a Congestion Charge is what you want, then you can simply look at skewed official statistics or the comments of those who make cash from it and select even from these what you want to “prove” your point. But if you are genuinely interested in the pitfalls and benefits, there is a lot of material out there to help you on all sides of the debate. Lots of discussion generally on this subject (in cities where it becomes an issue) seems to be reinventing the wheel at all its stages of development, rather that building on the experiences elsewhere (not just in London but in Stockholm and Oslo as well).