Today’s Wall Street Journal has an article on Stockholm’s road congestion pricing pilot experiment (subscription required). Stockholm is a city of islands, so the road network is subtantially a set of bridges. Not surprisingly, congestion often ensues.
From January through July, Stockholm tested one of the world’s most sophisticated traffic-management systems as part of a plan to reduce gridlock, lower smog levels and improve quality of life in the city. Unlike most other traffic-control plans in place in cities such as London and Rome, Stockholm used a dynamic-pricing system in which drivers were charged different amounts depending on the time of day. If Mr. Astrom, for example, left the city center at the busiest time of the afternoon rush, from 4 to 5:29, he would have paid the equivalent of $2.76. But by waiting until 6:30 p.m., he traveled toll-free. “People changed their habits,” he said.
Traffic volume fell from 9% to 26% at the major tollgates.
The engineering to make this system work is substantial. IBM is one of the technology partners that developed the ability to identify a car within milliseconds at one of the 23 tolling gates around the city.
Mr. Westman [of IBM] worried that the system wouldn’t be able to identify cars in the harsh Stockholm winters because of all the salt, snow and dirt on the roads and vehicles. But the trial period went smoothly and the cameras functioned well in the winter months. IBM’s customer-service center, which anticipated 30,000 calls a day, fielded just 2,000 a day; and few appeals of charges were filed to the tax authorities.
Stockholm officials also found evidence of a basic tenet of economics: people change their behavior in the face of changes in relative prices. Take the case of public transportation, which is extensive in Stockholm.
The Stockholm trial produced another insight into a vexing traffic-reduction programs: getting people to use public transportation. Before the trial began, Stockholm spent about $180 million on improvements to public transportation. It bought about 200 new buses, and added rush-hour trains, express bus routes and more park-and-ride lots. But the changes had little impact on the number of people who left their private cars at home. In spring 2006, however, during the trial, use of all forms of public transportation jumped 6% and ridership on inner-city bus routes rose 9%, compared with a year earlier.
If the cost of driving to the consumer more transparently reflects the actual cost of an individual driving, at the margin that cost will change the behavior of those consumers who don’t value being able to drive at that time of day; they either time shift or take public transportation. People respond to incentives.
Stockholm is also using this experiment as an experiment in democracy: they are putting the congestion pricing to referendum. The six-month trial period has ended, and residents will soon vote in a referendum on whether or not to keep the system. Officials say that if a majority votes against the system they will dismantle all of the equipment in which they have invested, which was extremely expensive. But with the reduction in the peak/offpeak commute time ratio from 3/1 to 2/1, many Stockholm commuters are in favor of the system, as are cyclists, who enjoy a less stressful commute, even though the toll has induced more people to ride their bikes to work instead of driving.