No. The solution to the externalities that one vehicle imposes on another with "congestion" is a congestion tax, [not a NYC toll for entry tax]. Probably some kind of transponder in each vehicle to sense the proximity of other vehicles, take the time integral of the proximity function and sends a monthly bill.
That would probably be first best. But it may have a much higher operational cost + an issue of pricing transparency in case it gets brought up in a court (i.e. not sure if the law allows for charging a price without upfront knowledge of it).
The price could be announced (by the device itself) as $/per hour foot (or however the algorithm actually calculates). It no difference in saying sugar is $/lb., the total cost depending on my much you buy. Google Maps/Wayz could incorporate the pricing scheme into their routing suggestions.
Yes - but what if you want to opt out. Suppose you get a new price while stuck in traffic because an accident occurs. It's impossible for you to leave the congestion since you can't just leave your car and stop participating in traffic, forcing you to pay. Although from an economic perspective it might be 'optimal', legal-wise, it might be seen as coercive.
It would still need to give you ample warning about the price you'll face, which then is simply dynamic toll pricing.
As a matter of good politics, it might be a good idea to have some kind of cut out for force majeure. Or people could purchase "accident" insurance. :)
@Nominal News, great explainer here as to why it is largely futile to address congestion by adding more lanes.
Congestion pricing is the way. Though I wonder, if the goal is total through put, rather than reducing congestion, is there still come utility to adding lanes?
Thank you for the comment! You raise a lot of important economic points (many that would be entire articles on their own).
The discussion here focused on the common social question of how to reduce time spent in traffic and that the 'intuitive' solution of building more roads does not do that. Now why is congestion a problem on its own?
As you point out - it does have significant economic costs. Spending time in traffic does not, on its own, generate economic output. Time is costly, fuel burn is costly. Moreover, there is the environmental damage, and other health costs such as blocked emergency services. All of these are costs that would be great to reduce.
But as you point out, what matters is overall economic activity. If this cost comes with large economic activity benefit, then it is can be seen as an 'investment'. Now to define the economic activity stemming from roads, we need to focus on the purpose of them - moving goods and people to a specific location. Note - cars and roads are just a form of doing that. There are many others - buses+roads, trains+rails, planes+airports, boats+ports. So on the question of whether building a new road is still beneficial, even though congestion won't change, we would need to look at two things from an economic perspective:
1. Does it actually generate new economic activity or is it a pure substitution (moving from train+rail, to truck+road). If it is pure substitution, then building a road will have no value.
2. The other issue is since roads are costly to build and maintain, is this the best choice of transport to spend on (do we get more economic activity if we build train+rail vs truck+road).
Regarding congestion pricing - the main cost of congestion to economic activity is I think not only just sitting in traffic. It's also the uncertainty of a supply chain/travel times. If goods get delivered an hour or two later, it can cause major disruptions (especially in the current Just-in-Time supply chains). These costs are currently borne 'randomly' - everyone has a probability to get hit by this cost. Congestion pricing internalizes this. By imposing a price to use a certain transportation methods, only the highest economic output activities will use it, which will increase overall economic output. Thus, congestion pricing will increase economic output of a city. It also reduces economic inefficiency by putting a pecuniary value on the cost of time. This increases efficiency in a market based economy.
The last issue mentioned by you is the unequal impact of congestion pricing - the increased costs are more or less equal for everyone, but people have different income levels.. This is an issue that is difficult to resolve. We can implement discount fees/exemptions, but that would act as an incentive to use cars. We could offer tax credits to low income individuals, which would then allow low income individuals to decide whether to use the car (and pay a fee) or use another form of transportation (thus having the tax credit benefit).
Overall, city transportation design is (as expected) a complex question. Not only do we need to determine how will people and firms react to changes (my article here just covered one element - the impacts of more roads on the use of the road), but also there is a question on whose 'welfare' should we aim to maximize (which is a sociological/political question).
No. The solution to the externalities that one vehicle imposes on another with "congestion" is a congestion tax, [not a NYC toll for entry tax]. Probably some kind of transponder in each vehicle to sense the proximity of other vehicles, take the time integral of the proximity function and sends a monthly bill.
That would probably be first best. But it may have a much higher operational cost + an issue of pricing transparency in case it gets brought up in a court (i.e. not sure if the law allows for charging a price without upfront knowledge of it).
The price could be announced (by the device itself) as $/per hour foot (or however the algorithm actually calculates). It no difference in saying sugar is $/lb., the total cost depending on my much you buy. Google Maps/Wayz could incorporate the pricing scheme into their routing suggestions.
Yes - but what if you want to opt out. Suppose you get a new price while stuck in traffic because an accident occurs. It's impossible for you to leave the congestion since you can't just leave your car and stop participating in traffic, forcing you to pay. Although from an economic perspective it might be 'optimal', legal-wise, it might be seen as coercive.
It would still need to give you ample warning about the price you'll face, which then is simply dynamic toll pricing.
As a matter of good politics, it might be a good idea to have some kind of cut out for force majeure. Or people could purchase "accident" insurance. :)
@Nominal News, great explainer here as to why it is largely futile to address congestion by adding more lanes.
Congestion pricing is the way. Though I wonder, if the goal is total through put, rather than reducing congestion, is there still come utility to adding lanes?
Thank you for the comment! You raise a lot of important economic points (many that would be entire articles on their own).
The discussion here focused on the common social question of how to reduce time spent in traffic and that the 'intuitive' solution of building more roads does not do that. Now why is congestion a problem on its own?
As you point out - it does have significant economic costs. Spending time in traffic does not, on its own, generate economic output. Time is costly, fuel burn is costly. Moreover, there is the environmental damage, and other health costs such as blocked emergency services. All of these are costs that would be great to reduce.
But as you point out, what matters is overall economic activity. If this cost comes with large economic activity benefit, then it is can be seen as an 'investment'. Now to define the economic activity stemming from roads, we need to focus on the purpose of them - moving goods and people to a specific location. Note - cars and roads are just a form of doing that. There are many others - buses+roads, trains+rails, planes+airports, boats+ports. So on the question of whether building a new road is still beneficial, even though congestion won't change, we would need to look at two things from an economic perspective:
1. Does it actually generate new economic activity or is it a pure substitution (moving from train+rail, to truck+road). If it is pure substitution, then building a road will have no value.
2. The other issue is since roads are costly to build and maintain, is this the best choice of transport to spend on (do we get more economic activity if we build train+rail vs truck+road).
Regarding congestion pricing - the main cost of congestion to economic activity is I think not only just sitting in traffic. It's also the uncertainty of a supply chain/travel times. If goods get delivered an hour or two later, it can cause major disruptions (especially in the current Just-in-Time supply chains). These costs are currently borne 'randomly' - everyone has a probability to get hit by this cost. Congestion pricing internalizes this. By imposing a price to use a certain transportation methods, only the highest economic output activities will use it, which will increase overall economic output. Thus, congestion pricing will increase economic output of a city. It also reduces economic inefficiency by putting a pecuniary value on the cost of time. This increases efficiency in a market based economy.
The last issue mentioned by you is the unequal impact of congestion pricing - the increased costs are more or less equal for everyone, but people have different income levels.. This is an issue that is difficult to resolve. We can implement discount fees/exemptions, but that would act as an incentive to use cars. We could offer tax credits to low income individuals, which would then allow low income individuals to decide whether to use the car (and pay a fee) or use another form of transportation (thus having the tax credit benefit).
Overall, city transportation design is (as expected) a complex question. Not only do we need to determine how will people and firms react to changes (my article here just covered one element - the impacts of more roads on the use of the road), but also there is a question on whose 'welfare' should we aim to maximize (which is a sociological/political question).
Thank you!