Traffic Jams: Inducing Rage or Zen?

EconTalk Extra
by Amy Willis
Michael Munger on Traffic... Vincent Rajkumar on the High P...

by Alice Temnick

Could a congestion tax be a "best solution" among "poor alternatives?" In this week's episode, host Russ Roberts and recurring guest economist Michael Munger delve deeply into variations of taxation and the consequences of taxation in an attempt to reduce this ubiquitous urban problem.

Does your daily commute make you angry? Share your thoughts with us about addressing (or accepting) high traffic commutes, incentives that work and how you think about this collective action problem. We want to hear from you!

1. Munger points out that people are becoming more productive while stuck in traffic, that as disutility decreases, there is an increase in willingness to be on the road during high traffic times. How do smart-phones affect one's opportunity cost of commute time? What else might contribute to this effect? Is this increased productivity a net positive effect?

2. Singapore, Stockholm and London are among the cities implementing congestion taxes. Munger questions if there is any reason to believe government will be able to set a tax efficiently. How might a socially optimal quantity of traffic and tax amount on drivers be determined? If people make location decisions based on commute times, will improvements in traffic patterns provide incentives for more people to move to cities?

3. Munger further points out that the payment made by the taxed driver is not compensating the non-driver, but instead is collected as revenue by the government to pay for some other venture. In fact, both parties are punished and that the dead weight loss imposed on non-drivers can mean trips not taken, lives not lived. What other examples of taxed or regulated negative externalities that result in a net loss can you cite? Why do such instances persist? Why don't the affected parties protest?

4. Are there other questions to ask about why roads have to be public goods?
Are the assumptions of nonrivalry and nonexcludability as true today as they were twenty years ago? Might an innovation regarding road access rival the Uber introduction of ride-sharing and payment technology, and what might such an innovation look like?

5. Why don't we see more examples of cities with successful private road alternatives? How might future cities handle the congestion problem? Are there other "public goods" that cities have effectively privatized, and how are they different from roads?

Alice Temnick teaches Economics at the United Nations International School in New York City. She is an Economics examiner for the International Baccalaureate, teaches for the Foundation for Teaching Economics and Oxford Studies Courses and is a long-time participant in Liberty Fund Conferences.

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COMMENTS (9 to date)
big al writes:

1. It seems that this problem would be ideal for using computer modeling to optimize a congestion tax or other system.

2. Point #1 seems so obvious that people must have been working on it for years by now.

3. But I can't find evidence of optimized solutions, even though people must have been working on it for years already, so maybe it's harder than it looks.

4. All will be solved, of course, by autonomous vehicles functioning in smart city networks, and I will be able to schedule a ride for whatever trip I need to make and I'll get a discount if I allow a wider window (thus allowing the system to optimize my use of it) and will pay a premium if I need a specific time during a high-use period.

Craig H writes:

I want to add to Russ Roberts example of how he postponed a home improvement project (a porch) because a surge in demand for carpenters had raised the cost of the project. (Surge caused by widespread flooding in the region.) Much of the podcast was spent lamenting the fact that a driver who is willing to pay for a quick trip cannot directly compensate other drivers to stay off the roads. Congestion taxes don't set up a market like that among drivers. But in an ordinary market, like for carpentry, customers with urgent needs like flood damage repair are not expected to directly compensate customers with less urgent needs. No one laments the lack of a commodities market in home repair. Russ pointed out that although road congestion taxes don't make all drivers collectively better off, they could make society better off, collectively (assuming not too much bureaucratic waste), summing the benefit of reduced congestion with the tax revenues. There is never going to be a market in roads where road builders compete with each other for road customers, the way carpenters compete. And there is not going to be a commodities market in less congested roads. A well designed road congestion tax might be the best solution we can hope for. Better than just letting the roads get congested.

PaulS writes:

Count me as a pessimist.

2 and 3: in the megacities where congestion is a truly live issue, non-rich commuters are already largely confined to slow, smelly, grossly overcrowded buses and subways. This owes not only to congestion, but also to the extortionate price of and/or non-availability of parking at many destinations.

A London-style downtown tax, no matter how extortionate, might not induce many such people to engage in political acts of protest. After all, they already have no discretionary time to speak of, having already wasted nearly all of it hiking to, waiting for, and creeping along in those tardy, unreliable, awful buses and subways.

4: Privatizing roads may not help much. NIMBYism and environmentalism both overwhelmingly prefer gentrification - in the case at hand, gentrification of the clock, exiling the non-rich to anti-social hours - to accommodation. Thus the roads mostly still wouldn't get built. Gotta keep the world ultra-safe for weeds, bugs, and vermin - who gives a stuff about people? No, gentrification merely of space simply wasn't enough. The point of privatization would be to impose huge tolls to drive those "others" off the roads.
As long as our billionaire overlords exercise limitless power, and use it to confine nearly every decent job to a dysfunctionally overcrowded - but prestigious, mind you - mega-downtown, the problem simply cannot be solved. Indeed, for billionaires' convenience and for their egotistical and maniacal pursuit of prestige, maybe we will all eventually be planted in Brobdingnagian "arcologies" borrowed from Greg Bear's speculative fiction.

There is plenty of room here in the USA. There is no true need whatsoever for anyone to endure burdensome traffic congestion every day. The means of communication have improved greatly over the last few decades. It has become perfectly possible to engage in trade, including trade in ideas, without needing always to be in the same physical room, as though we lived within some Medieval woodcut. After all, even in downtowns, nearly all communication with folks outside the individual shop or workplace is via telephone or internet.

Thus, the choice to cram into overly dysfunctional downtowns is just that, a choice. But it is a choice imposed by the billionaires who autocratically determine workplace location. The only possible offset would be some kind of exercise of governmental power. Of course the trouble with that is the tendency of governments to make things worse instead of better.

P.S. autonomous vehicles will not help one whit:

A. They may well increase traffic by substituting deadheading for parking.

B. They will absolutely be cauldrons of respiratory disease (like airplanes, only far worse) due to it being economically infeasible to de-germ them between uses; due to "sharing" rides in close quarters; and due to that "sharing" occurring two or three orders of magnitude more frequently than flying for most people.

C. They will reinforce gentrification of the clock by charging extortionate fares at sociable travel times. In academic circles that will be characterized as global systems optimization. That language will prove incomprehensible to many of those excluded from living their lives, and may induce them to vote in ways that academics likewise find incomprehensible.

P.P.S. and never mind the "cultural" excuse for hyper-overcrowding. Many folks I know/knew in New York City never in their whole lives set foot in, say, Lincoln Center. Given the grinding daily ritual of hiking, waiting, and creeping along, they were usually exhausted, and they rarely had any time, and never mind the other-wordly ticket prices.

Rod Miller writes:

The last year of podcasts have been exceptional. Econtalk is a must listen show.

I wonder if a market could be created through technology. All licensees in the State of CA for example get a fastpast whether it is for their car, subway ticket, bus ticket, or train ticket. All have an account through dmv or virtual account. When they enter the congestion system via roadways or other transportation they pay fees or receive credits based on whether they are creating congestion. So at rush hour the vehicle drivers will be paying for subway riders or bus riders trips. Our system would need to be better adapted to make it easier for system users to at the margin to switch between public and individual transit. We kind of have crude version of this because gas taxes pay for public transit. It would be better to make the incentives individual. Hopefully you do a show on cost of housing and on cannabis regulation.

Dominic Walley writes:

Great to see an episode in my area of economics.

My colleagues and I spent a long time designing and optimising a congestion charging system for the UK city of Manchester. Key issues were:
- Examining the 'marginal external congestion costs' created by each car at different times of day and for different journeys. This is critically dependent on how much everyone would be prepared to sacrifice to speed up their journey (their value of time), so market segmentation was really important.
- Designing a system which matched the charge as closely to the marginal external congestion cost, while keeping charging as predictable and legible as possible. On economic efficiency grounds, the charge would vary in real time and by location as congestion varied, but this is expensive and creates uncertainty for users.
- The scheme was ultimately put to a public referendum and was voted down so it never happened.

It was very difficult to optimise a system that was forecast to generate net benefits (where the Pareto gain offset the cost of implementation). In Manchester's case, the system was forecast to generate small economic benefits. However, this was the difference between two large numbers. On one side, the modelled value of more efficient road use was substantial but uncertain. On the other side the scheme implementation costs were also sizeable (it was based on cordons enforced by cameras - at the time the GPS technology was not quite up to it.) So the case looked positive, but with high margins of error.

Instead, the scales of the economic case were tipped by a third party (national UK government) which offered additional income so that substantial net LOCAL gains could be generated for Manchester taxpayers and voters. It did this as an inducement to develop and test the system as a pilot. But this was of course 'cheating' as the extra funds would come from taxation of people from across the nation.

Drivers did have to be losers in aggregate as the congestion charge must outweigh the value of the time saved, or people would not get off the road and reduce congestion.

Finally, it seems a bit strong to say that it is morally wrong for a congestion charge to result in redistribution. Seems to me that there is no a priori answer to how road access rights should be allocated. Roads are costly to provide so it isn't obvious that people should have a right to access them for free. Instead, it might be better to say that there is shift in the property rights from road users to the road owner. In the case of Manchester, the road owner was the local government which represents both road users and non-roads users. So the plan was for the financial surplus to fund both public transport improvements as well as road improvements to ease congestion.

Having taken a deep dive into this professionally, it is clear how difficult it is to put together a case for congestion charging. But it did suggest that it was possible - at least in the most congested locations (even without the central government contribution/intervention in Manchester).

For now, congestion charging is off the policy agenda in the UK, but it may come back in a few years as technology drives down implementation costs.

Great episode. Keep up the good work!

Jonas writes:

Hi Russ,

I live in Stockholm, Sweden, one of the cities Mike mentioned with a congestion tax on the main highway through the city. The way the tax collection system works is with toll gates on all entries and exits to the road going to the city center. The goal is to decrease the traffic to the city center during rush hour. The tariff is time-based and differentiated during several time slots in the morning and in the afternoon. When the system was introduced the traffic did decrease substantially and subsequently congestion also decreased.

Now, many people opposed the tax due to various reasons. People on the right opposed it due to the "we don't like taxes and love our cars" argument and people on the left opposed it due to the "only rich people will afford to drive" argument. I think that you made an error in your discussion regarding how the tax affects poor people. You said that even though congestion decreases, poor people that choose to travel on the road does not benefit from the tax. For me that is clearly false since they benefit from the faster trip as much as the rich guy in the next car.

I've been thinking a lot about this tax and whether there is a better way to ration the capacity on the road. The best idea I think I've come up with, but not fully figured out, is to have some kind of auction system. The way I've thought about it is that there would be "toll rights" that gives you the right to travel on the road during a specific time period. There would be a cap on the number of rights based on the capacity of the road and the cap would probably need to be adjusted in the beginning. So to go on the highway on Monday 07.00 you would have to own a toll right to do so. If you choose to not purchase a right you would be charged a penalty fee. I don't know what the penalty fee would be but maybe 2x the price of the last right sold or something like that.

I have some different ideas on how to distribute the rights.

1) You could give a right randomly to all persons with a drivers license living in the Stockholm county.
2) You could give a right randomly to all persons owning a car living in the Stockholm county.
3) You could have the government auction all rights.
4) You could give a right randomly to all persons buying a monthly card for the public transport system.

There are probably more options, and they all have there own pros and cons.

Next we create a market for the rights to find the real value of driving on the road for each person. I haven't thought that much about the auction system, but you can probably do it in different ways. The main idea is that if you choose not to go on the road when you have a right to do so, you can sell your right and pocket the price for electing to give up your space on the road.

I did a quick search and there seems to be several papers available on the topic. It would be great to hear you and Mike expand on the idea. I think that with the current technology it would be feasible to handle the auction through a mobile app.

As a final note, I have several friends who choose to travel in the bus lane (rarely congested...) and they typically get stopped by the police 1-2 times a month and pay a fee of ~$100 each time. They still find it worth the money to continue to use the bus lane to speed up their commute. That's also a way to solve the problem on a personal level... ;-)

I've been listening to Econtalk from the very beginning and still enjoy every episode. Keep up the good work!

Tim Lee writes:

I love EconTalk, but this was a frustrating episode to listen to. Two big things I think were missed.

First, it ignores the possibility that congestion can be highly non-linear. In the extreme case, suppose removing 1 percent of cars from the road doubled average speeds from 30 to 60 mph. Then you'd only need to set the congestion tax at a level sufficient to deter 1 percent of people from driving. Potentially a large fraction of the 99 percent of people still driving would be better off, because going twice as fast might very well be worth a lot more to them than the cost of the toll. 1 percent is obviously not a realistic number but the real numbers might still be pretty dramatic.

Second, a tax is not a deadweight loss! In particular, road users pay gas taxes. So impose a congestion tax during periods of high demand and use the revenue to lower the gas tax by an equivalent amount. The average road user pays exactly the same as before, but the road capacity gets allocated more efficiently and average travel times go down during periods of high demand. This doesn't make literally everyone better off, but it plausibly makes the vast majority of drivers better off.

Michael Byrnes writes:

The one think that didn't come up was that maybe focusing on congestion as the enemy (or at least an enemy) is an overly narrow view. I mean, I think it is fair to call congestion "bad", and a congestion tax makes sense in a Pigouvian sense in that respect. But there is also the bigger picture - there's a reason why suburbs exist and why people commute into cities and that commuting is by and large a good thing.

Actually, I think Munger and Roberts did take this into account implicitly, to some degree, in their overall opposition to congestion pricing.

But what I would suggest is that one way to assess the impact of any congestion policy is via its effect on daily commuting into cities. A policy that leads to highways that are pristine and uncongested 24-7 would be a disastrous policy if it vastly restricts the number of people who commute (not necessarily drive) into the city. On the other hand, a policy that gets more people into cities efficiently, might be a net gain. Emphasis on "might" - I think there are obvious limits to how useful an indicator this would be (a policy aimed at maximizing daily commute numbers irrespective of all other factors would be misguided) - but it might have some value in assessing the level of harm done by a given congestion policy. (Maybe the right way to do congestion pricing is to credit people who commute during off-peak hours).

Ron Arad writes:

Towards the end of the episode you said that placing a congestion tax on roads, in conjunction with public transport, is not like a market.
I disagree.
At least in theory, if the tax is redirected into public transport, you could attain an equilibrium in which using your car is balanced by public transport. The tax + congestion + parking issue balance the availability + comfort + speed of the public transport.
As more money from parking, and taxes is converted into public transport, its use becomes more prevalent, reducing the burden of congestion.
The problem is political, the collected funds from the tax + parking are not directed into public transport directly and that keeps the congestion problem without a real solution for many large metropolises, especially in the US.

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