Monday, October 17, 2005

Congestion Pricing by a Naked Economist

Charlie Wheelan, one of ten new columnists at Yahoo Finance, turns his attention in his second column to "congestion pricing" on highways. He argues that we should "raise the price of traffic jams" and offers San Diego as a prototype:

The future of transportation will look a lot like the I-15 FastTrak in San Diego. This expressway has free lanes and HOT (High-Occupancy/Toll) lanes that run parallel. Here's the twist: The price of the HOT lanes fluctuates between $.50 and $4.00 depending on traffic conditions. Carpools use the HOT lanes free at all times.

Your toll for the HOT lanes guarantees a "free flowing" speed of travel. If the HOT lanes begin to get congested, the toll will rise immediately, prompting more drivers to choose the free lanes rather than the HOT lanes. (The toll at any given time is advertised on electronic signs on the side of the road.)

There is a drawback to congestion pricing: The HOT lanes are sometimes referred to as "Lexus lanes" because those with deep pockets care less about $4 than those who are counting their pennies. But don't assume automatically that congestion pricing is bad for people lower on the economic ladder. If a plumber's assistant earning $14 an hour shows up for work half an hour late, he gets docked $7. Or, he can get there on time by using the HOT lanes--with a maximum toll of $4.00. Do the math.

And low-level employees get fined for picking up their kids late from daycare or fired for repeatedly being 15 minutes late. CEOs don't.

I think he's right. Eventually, all crowded highways will incorporate some of the elements. I wonder about the privacy aspects of these systems (whether or not they have congestion pricing), because they can record a person's location at a point in time. Some states seem to be better than others, and the issue is moving beyond just cars.

Wheelan's column is called "The Naked Economist," reflecting his recent book of the same name, which looks to be a great non-technical introduction to the field of economics.

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3 comments:

Anonymous said...

Interesting point on punctuality. There are definitely double standards that exist in the economy. It is a lot more than the entry level vs. the CEO. Certain types of people can do whatever they want with no negative repurcussions. Others are not afforded grace of any kind.

Whoever said life is fair anyways.

Lord said...

One of the deficiencies of the system is that you must have previously subscribed at a minimum $30/month charge so many who might use it once, like a tourist, or occasionally, like a plumber, most likely can't. There is a real question of whether the state power of eminent domain should be devoted towards a private road network. It is a stretch to call this a market solution.

Anonymous said...

if we had virtual plumbers who worked from home via technology, all our problems would be solved.