Wednesday, October 19, 2011

Opposition To Congestion Pricing Is Likely Completely Rational

I don't really agree that congestion prices have to be perpetually ratcheted up to be effective, but I do think that urban econ dorks need to acknowledge that opposition to it is likely to be completely understandable. Yes, in theory, since congestion is an unpriced externality, if we price it correctly we can both reduce the amount of excess congestion and make everybody better off. But that's only true if all of the toll money collected is somehow distributed back to the affected people, either directly (such as through reduced taxation elsewhere or cash) or in some form such as increased transportation investment. If you collect the money and light it on fire it doesn't make everybody better off. If you collect the money and use it to build a Pony Palace for me it won't make everybody better off. I, however, would have a Pony Palace, which would be awesome.

The point is, in theory we can have congestion pricing, less congestion, faster travel times, and everybody's happy, but that's only if the tolls are put to good use. Otherwise, it won't actually be a good deal for drivers.