Common Tragedies

Thoughts on Environmental Economics

The progressivity of congestion pricing

Posted by Daniel Hall on November 29, 2007

Ryan Avent has checked out for the weekend, so I am going to try to temporarily step into his role as MC Urban Transit.

Jonathan Leape of the London School of Economics writes about London’s experience with congestion pricing in this week’s RFF policy commentary:

The impact of the scheme exceeded expectations. In the first year of the charge, traffic delays in London dropped by 30 percent, journey time reliability increased by 30 percent, and average speeds rose 17 percent, reflecting a sharp fall in traffic jams at intersections…

The London experience has also shown that it’s possible — and important — to spread the benefits of congestion pricing widely. By committing to plough all the revenues raised by the congestion charge into public transportation improvements, London has ensured that congestion pricing didn’t just improve mobility for car drivers who can pay the charge (the “Lexus lanes” problem) but also increased access to the city centre for everyone.

As Leape acknowledges, congestion pricing schemes are often criticized for being regressive: the rich can afford to pay and keep on driving, while it’s the poor who must adjust their driving habits. But lowered congestion greatly increases the value of service provided by buses, which are used most by the poor. Leape continues:

…the shift from cars to buses outstripped predictions. Inbound bus passenger numbers increased 37 percent in the first year, about half of whom had previously traveled by car. … A key reason for the surge in bus passenger numbers appears to be the “virtuous circle” for bus transport that can result from congestion pricing. The higher cost of rush-hour car trips and increased bus travel speeds, due to reduced congestion, result in increasing passenger numbers and falling average costs — which, in turn, lead to improved service levels and lower fares that stimulate further shifts to public transport and additional reductions in congestion.

This is a hugely important point. As anyone who’s ever relied on a bus transit system can attest, the value of the system is strongly related to the density of the service — both the number of routes and the frequency of service along routes. And as Leape points out, as the service becomes more valuable, more people flock to it, lowering unit costs and making it easier to provide even more and better service.

Mass transit systems are a network good with positive externalities — beyond reducing congestion, buses are a far less polluting alternative than cars — and hence should be subsidized to achieve the socially optimal level of provision. Public roads, on the other hand, are a common pool resource whose value is rapidly degraded when given away for free.

The DC Metro system should not have to be arguing about how much to raise rates in order to close its funding gap. The District should put a proper price on the use of its roads and then cross-subsidize mass transit. Such a policy would not only be more efficient, but also prove a boon to the region’s poorest residents.

8 Responses to “The progressivity of congestion pricing”

  1. […] I should let everyone know, however, that henceforth I’ll be responding only to “MC Urban Transit.” That is […]

  2. Donald A. Coffin said

    Someone should let the Chicago Transit Authority/Regional Transit Authority know about these results. And maybe the Illinois Legislature. The Chicago area has been threatened with significant service reductions and fare increases, but no one–no one, that is, except a few economists–has raised the possibility of congestion fees. Congestion fees would be easy enough in some ways here, because of the large number of toll roads.

    But driving is a constitutional right, isn’t it?

  3. extrapreneur said

    I don’t think there should be a congestion charge, i think it is an outrageous idea. People need to drive their cars, they shouldn’t be punished for it.

    check out my blog at http://www.extrapreneur.wordpress.com

  4. […] Via Common Tragedies. […]

  5. maureen said

    Extrapreneur,

    That’s the thing, dear. In London people don’t “need to drive their cars”. Forty percent of London’s 7 or 8 million population does not have regular access to a car and they manage perfectly well.

    We have buses – hundreds of them – and a bus service which runs 24 hours a day. The congestion charge has paid for more buses, better buses and the regular prompt adaptations to meet changes in either demographics or demand.

    Admittedly the “tube” – born 1865 – is a bit stressed by demand but we get new lines and there is currently a massive investment in overground rail and suburban services. We are constantly getting more and better planned interchanges so that using public transport is easier than falling off a log. We even have free travel for the over-60s and buses which take both infant buggies unfolded and wheelchairs.

    If someone has a disability and needs to use a car then they are exempt. If someone has a convenience need to drive a car – if they really must do all their Christmas shopping on one day and at a central London store – then they pay the charge for just that day. Or they could take a taxi – also exempt.

    If someone has a psychological need to drive a car well then they go and do it somewhere else!

  6. […] quality of the service of their riders. This result has been documented for both parking fees and congestion pricing on […]

  7. truthwalker said

    Yay! So many attempts to make the world a better place, and particularly make the the cities we live in a better place are neo-Marxist plop. It’s great to hear about an idea that really works. Of course, a moments reflection explains why it works: The hoary old “Tragedy of the Commans” (which I assume the title of this blog is punned after). If somebody could figure out away to apply a similar system to recycling and air pollution we’d be set.
    Yay for congestion pricing.

  8. BOB2 said

    If you like less access to London businesses, fewer job opportunities in London, no increase in bus or tube service, lots of money in contracts for the politically connected vendors, virtually none for the transit system, then you’ll love the congestion pricing scheme in London. Way to go Kennie boy!

    Right wing twaddle, implemented by a left wing Mayor–politics does indeed make for strange bedfellows?

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