Carnival Of The Capitalists: Highway Pricing

Carnival of the Capitalists, hosted this week at A Special Kind of Stupid, highlights a lot of the interesting posts during my absence. Of particular interest to me is Steve Verdon’s post on highway congestion pricing, an idea that has been way, way too long in coming. Steve spends a lot of the post delving into some specific problems he has with the way Mark Kleiman puts his argument, and I’d like to take issue with some of Steve’s issue-taking, just to (hopefully) clarify the matter.

First, the claim that highways are, as Mark put it, “the classic example of the commons problem”, where a good is rivalrous but where access to it is not governed or excluded. This is correct, and I think Steve’s taking issue by saying “either a good is rival or it’s not” is only partly true. Rivalrousness of a good is a matter of degree; a purely nonrival good is, for example, broadcast communications, and a purely rival good is, for example, an article of food or clothing. But there are a host of goods on the continuum between those two endpoints, so saying “either a good is rival or it’s not” is not entirely correct, and misses a lot of the interesting goods over which we have lots of policy wrangles, including highways. Steve is right to say that you’re still consuming the good even when congested, but the important point is that you are paying for it through your time, and not through some mechanism that does a better job of prioritizing the use of scarce resources, such as prices.

But this conversation between Steve and Mark creates an opportunity to highlight something that is often overlooked in the policy consideration of highways. They are open access by choice, not by any technological or cost feature. Certainly not in this era of infrared toll-collection devices, which make the “the transaction costs of toll collection outweigh the congestion reduction benefits” argument completely specious.

For highways as for many goods, we choose to govern them as a commons to some degree (in the case of highways, usually as open access, with the resulting overuse and necessity of pricing their use through time instead of through prices). This decision is at least in part a function of the costs and benefits of defining and enforcing the property right, defining and enforcing the exclusion. Technology has reduced these definition and enforcement costs. But the existence of incumbent interests (hey! We’ve never had to pay for the roads before! I’m not gonna do it now!) and the political obstacles to implementing a toll that would be high enough to remove the congestion make it difficult to achieve the benefits of defining and enforcing the right to make highways an excludable good.

Of course, if congestion gets bad enough and people get fed up enough, then perhaps attitudes will change.

On the policy front, my former colleague Bob Poole heads up the Transportation Program at Reason Public Policy Institute, and has been a pioneer in innovative approaches to surface transportation and highway congestion. One of Bob’s great ideas is HOT lanes, high occupancy toll lanes. The idea is this: if you are a high occupancy vehicle, you can use the HOT lane without charge. If you are a single driver, but are in a total rush to pick the kids up from soccer or some such thing that makes the value of your time at that moment extremely high, then you pay a toll to use the HOT lane. This system reduces congestion in the regular lanes, gets you to where you need to be on time, and generates revenue to support the business end of the system. Bob’s done a recent study of HOT lanes and the pilot implementations of them, summarized here. See also this oped in the Atlanta Journal-Constitution by Benita Dodd of the Georgia Public Policy Institute, where she notes that

Happily, when time is money, many Americans reconsider the perception that HOT lanes are “Lexus lanes” to benefit only the rich. That’s when they see the advantages of what Poole calls “congestion insurance.”

“You would know that no matter where you needed to go, and no matter how bad the congestion was on the general-purpose regular lane, there’d be an uncongested lane or lanes available to you for a price whenever you need to use it,” Poole points out. “That’s something today you cannot buy for any price, no matter how bad your need is.

“Whether you’re a single mother with a child in day care facing late fees and you would love to pay $5 in order to avoid a $12 late fee; the electrician needing to get in one more appointment for the day; . . . when you’re going to the airport, might miss your plane, or have a very important meeting to get to — you don’t have that choice.”

These examples of thinking creatively about how to use pricing to prioritize the use of highways illustrate the variety of approaches that can improve congestion and the daily lives of commuters without building more highways.


2 thoughts on “Carnival Of The Capitalists: Highway Pricing

  1. Lynne,

    What is an example of a partially rivalrous example. I don’t think the highways/freeways works myself. Are there any others? Doesn’t partial rivalry indicate partial consumption?

    Steve is right to say that you’re still consuming the good even when congested, but the important point is that you are paying for it through your time, and not through some mechanism that does a better job of prioritizing the use of scarce resources, such as prices.

    Didn’t I cover the second part with the reference to rising marginal social costs?

    But this conversation between Steve and Mark creates an opportunity to highlight something that is often overlooked in the policy consideration of highways. They are open access by choice, not by any technological or cost feature. Certainly not in this era of infrared toll-collection devices, which make the “the transaction costs of toll collection outweigh the congestion reduction benefits” argument completely specious.

    Ha! Great point. I hadn’t thought of that, I’ll have to remember it next time the toll charge/freeway issue comes up somewhere.

    One of Bob’s great ideas is HOT lanes, high occupancy toll lanes. The idea is this: if you are a high occupancy vehicle, you can use the HOT lane without charge. If you are a single driver, but are in a total rush to pick the kids up from soccer or some such thing that makes the value of your time at that moment extremely high, then you pay a toll to use the HOT lane. This system reduces congestion in the regular lanes, gets you to where you need to be on time, and generates revenue to support the business end of the system.

    A great idea.

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