Caveats on Congestion Pricing

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Felix Salmon's article on congestion pricing has gotten quite a lot of attention in the blogosphere, and deservedly so.  Perhaps unsurprisingly I'm in favor of congestion pricing for the same reason I favor tolls:  traffic is a classic negative externality, and should be priced accordingly.  Funding transportation stuff out of tax dollars when you can get the drivers to pay per unit consumed is stupid.

Felix has been having some trouble getting people to take issue with him, apparently, so though I wasn't in on the video session, let me raise a couple of potential objections to the way that congestion pricing is discussed in the policy community, if not to the idea itself.


First, there's a real tendency to tell drivers that congestion pricing is great for them:  less traffic!  I can kind of buy that argument, and then I notice something:  almost no one making it commutes by car. The libertarian in me has an innate suspicion of folks telling other people that they're just going to love a new plan which imposes no actual costs on the planners themselves.

All the people commuting by car seem to think they will hate it.  And that makes me think that they probably will.  It will make the traffic flow more quickly, but it will also cost them something like $200 a month.  That's a lot of money for most people, to do something faster that they can now do more slowly for free. 

I still think that congestion pricing is a good idea for a lot of reasons, but let's not kid ourselves that it makes everyone better off.  It makes affluent people who can afford taxis and congestion fees better off, and poorer folks who can commute by bicycle.  It makes some residents better off.  Especially in midtown Manhattan, it curtails dangerous traffic impedance of emergency services--on the crosstown streets, traffic is often packed so tightly that it is literally impossible for people to make way for ambulances. It makes it easier to get somewhere when you have an emergency and are willing to pay for speed.  These are good things. 

But it makes many commuters worse off, particularly since the congestion pricing is likely to have a substantial adverse impact on the value of their homes.  In the DC area, it's the exurbans, and in New York it's the people in areas of Queens that don't have subway access, because the planned routes were killed when the Great Depression hit.  My sympathy is somewhat limited by the fact that those folks, liking the suburban character of their neighborhood, have lobbied against better public transit.  But many of them are still worse off under a congestion pricing scheme, and they're not much fooled by our grinning assurances that they're just going to love the faster traffic flow.

The other problem I have with congestion pricing planners is that they often talk as if mass transit were an essentially unlimited resource, and the only interesting issue is how to get people to use more of it.  So for example, the folks that Felix talks to want free or low variable pricing of subways.

This is a terrible idea.  For starters, as far as I know, many of the subway lines in New York are basically already at maximum capacity during rush hour.  You could push some larger number of people onto each car.  But you can't run more trains, because the operating constraints are the signaling system and the bridge and tunnel capacity, where the system bottlenecks as trains pass into Manhattan.  The signaling system dates back to the 1930s and is monstrously hard to upgrade because of the MTA's 24-hour operating schedule.  The upgrade of the L train, which is ten miles long and doesn't run particularly frequently, took more than ten years from proposal to completion

That means that increasing ridership would increase exactly the kind of negative externalities that we are allegedly implementing congestion pricing to reduce. In both DC and New York, certain lines already have a phenomenon called "ridebacks"--where people get on a train going in the wrong direction so they can get off further away from the city hub, and find a train empty enough to board.  Cramming more people into the system--and peak demand for mass transit occurs at the same time as peak auto traffic--will only increase that sort of thing.

Second, the subway isn't necessarily a great substitute for most car trips in New York.  Because cars are already such a pain in the ass in congested areas, trips being taken through them tend to be either people who don't live in an area with good subway access, people hauling stuff, or people who are affluent enough to pay someone to drive them around, and thus not necessarily sensitive to the congestion price. 

But most importantly, because lowering the fare will hurt transit capacity.  In theory, the congestion charge can be used to generate revenue for the system.  In practice, historically, the subway fare has been held far below market with the promise that the funds would be made up with tax dollars.  In general, the funds were quickly diverted to other purposes, and the system was starved of capital funds, a situation that took many decades to repair after the problems hit critical mass in the 1970s.  If you want to reduce auto traffic, you need more capacity on the system--and you cannot build that capacity if the system has no reliable source of revenue other than the largesse of the city government.   Though it's worth noting that adding more trains, or more lines--which will, at least in New York, run not-very-full for much of the time--then reduces the positive environmental impact of your congestion pricing.

On net, it's still positive, especially in midtown Manhattan, which is literally so congested that it is often faster to walk than to take a taxi.  But no blessing anywhere is ever quite unmixed, and we shouldn't pretend otherwise.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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