Monday, March 16, 2009

On The Merits Of Congestion Tolling

A reader writes in:

I work in LA county and commute to Irvine. You wrote, "Congestion tolling is a good idea." I don't understand. Without good public transportation, how would congestion tolling not favor the wealthy?

(We already have toll roads that are too expensive for working people to use -- private highways for the rich.)

It is true that congestion tolling would be somewhat of a regressive tax, though I think opponents of such things tend to overestimate the degree to which poor people drive, even in the LA metro area. Still it would be costly for less than rich if not exactly poor people. One way to ameliorate this is either through social contract (using money raised to fund that public transportation) or reduction of other taxes (implement congestion charge, give everyone $1000 tax credit).

But the reason to have a congestion toll is that... there's too much congestion! Road congestion involves an unpriced externality. That is, when you get on a crowded freeway in the morning you take into account your private cost (cost of expected travel time), but don't take into account the fact that your car on the road is making things just a bit worse off. Everyone pays for this excess congestion by extra waiting in traffic time. Tolling is essentially a way to replace "excess wasted time in traffic jams" with money raised, which could either be spent on productive things (SUPERTRAINS) or just rebated back to all people.

The point isn't to punish people for driving, it's to try to line up incentives a bit more closely with actual costs in order to make more efficient use of the existing infrastructure.