by Alice Temnick

Could a congestion tax be a “best solution” among “poor alternatives?” In this 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.

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.