Honolulu Advertiser Second Opinion column by Cliff Slater
June 24, 2002
(1) Also known as “value pricing” and “road pricing.”
(2) They are all members of the California Environmental Dialog
Congestion? Not a Problem
Most of our transactions in life are managed through the price mechanism. It is what keeps daily life from degenerating into chaos. Whether we eat steak or chicken (dietary considerations aside) is largely in consideration of their prices. The more desirable housing locations are the most expensive, as are the best wines—or anything else.
Variable pricing is basically a rationing mechanism to make sure that scarce goods are always available—at some price.
Without rationing by price, we can only resort to rationing through waiting-in-line. Since there is a limit to how long people will wait, some drop out and those remaining—the most patient—get the few goods available.
For example, price controls, which are, by definition, prices set at lower than market prices, always causes lines. This is simply because, at the lower prices, there are more people wanting the goods than there are goods available. It is the old Soviet Russian Loaf syndrome where bread was very cheap—but there wasn’t any.
Which brings us back to our highways: Think of the Leeward morning commute as thousands of cars lining up waiting to get into town. They line up because the price of using our rush hour highways is zero and, because of that, there are more people wanting road space than there is road space available.
However, these lines are not necessary. Singapore no longer has traffic congestion nor do the folks using the SR91 Express Lanes from Riverside County to Anaheim, California. That is because both places use electronically collected tolls that are variably priced according to the time of day. It is known as congestion pricing.(1)
The SR91 tolls increase from virtually nothing at 4am and then ratchet up slowly to peak around 7:30 am. Its tolls can cost as much as $150 a month when used every day at the absolute peak times while Singapore’s is much less at about $60 month at the worst.
It offers such a savings in time, fuel usage and pollution that General Motors, the Sierra Club, Chevron and the Environmental Defense Fund have made a joint statement that, "tolls and congestion pricing should be utilized whenever possible." (2)
We know all the objections: It would increase the cost for motorists, it will be a new tax, it will be regressive in that it favors the rich and hurts the poor and, in any case, toll collecting will be a nuisance and also invade our privacy.
However, the new technology allowing anonymous pre-paid tolls has eliminated the nuisance and privacy concerns. And tolls are no more regressive than charging people for bread and milk, which also cost more for the less affluent as a percentage of their incomes. And it would not have to be a new tax since we could give a credit for gasoline taxes that motorists pay—60˘ in taxes for every gallon.
Some are perplexed at the idea of rebating one set of taxes to replace them with another. However, to get motorists to change their behavior it is necessary that they face variable costs and benefits according to when and how they commute. Some people who commute to night or evening work would pay no road tolls but would still be credited for all auto related taxes they might have paid; they would be much better off with congestion pricing. Those wishing to commute alone during the most expensive times would face much higher costs.
Congestion pricing works; the only question for commuters is, which is worse, congestion pricing or traffic congestion?
Next one on traffic: Putting it all together.
Cliff Slater is a regular columnist whose footnoted columns are at www.lava.net/cslater