Video by Oran.
It’s sort of obvious that congestion is bad and makes people’s lives worse. But what actually causes congestion? I promise you it isn’t bad drivers. I’m going to try to explain a little bit of the economic theory that shows just how it makes people’s lives worse – known in economics speak as “reducing welfare” – and why charging people to drive makes society better off.
Too many drivers trying to access a roadway at the same time – in economic speak, excess demand for a good in fixed supply – causes congestion. When there’s no traffic, adding new drivers to a roadway does not reduce travel times. However, once a highway becomes congested, adding more cars to the road does not increase the number of cars the road carries (evidence suggests it actually reduces the number of cars through).
The demand for highway transportation represents the value that consumers place on traveling at a particular time, in particular manner and to their particular places. Some trips are valued very highly – “getting to the airport”, some trips not as much – maybe going to the supermarket across town that has the bread you like. The lower the cost of driving, the more people drive. This means drivers taking longer trips or more trips as costs decrease.
When roads are free, the only cost to drive is time. Once a roadway approaches congestion, each additional driver impacts all other drivers, slowing them down and costing them time. This is a negative externality: the cost to the driver (his time) is less than the cost to society at large (his time plus the delay he caused to everyone else).
This time sitting in traffic is lost for everyone driving, and is a large net social loss. Everybody places some positive value on their time, so keeping people in their vehicles unnecessarily and away from productive uses (working, playing, exercising, etc) is bad for them. All that wasted time adds up, 4.8 billion hours in the US last year.
Congestion pricing solves this problem. You put tolls in place and time is exchanged for money. People who value their trip less than the toll price won’t make the trip, which is an increase in welfare since the price they were paying before was less than the price to society. A nice side-effect is that the money is not lost to society (unlike the time spent in traffic), the money could then be put to whatever productive use people can think of.
Congestion pricing would also be good for transit. Bus service is priced in hours, not distance, so reducing the amount of time buses spend in traffic would reduce the cost of operating the same level of service. It’s also possible to spend some of the money on new transit service or construction, something transit advocates should be in favor of.
Unfortunately, it seems more likely we’ll be passing laws that make congestion pricing illegal than passing laws putting it into effect. Part of this reluctance is a sort of status quo bias – why should I pay for something that was previously free? Part of it is also just a lack of understanding of how congestion works: I’d bet a sizable minority of people think congestion is caused by bad drivers. It’s all really a shame, because congestion pricing works, the much needed revenue could plug huge wholes in our transportation budgets and when people are stuck in traffic no one benefits.