Some Unintended Consequences of Congestion Pricing
by Sandy Ikeda
Wed, 19 Dec 2007 at 5:20 PM
One of the more useful things that economics can do — and here I'm speaking as an economist — is to help us answer the "instead of what?" question. If you eat my cake, can I have it too? No. If the government raises the legal minimum wage, can the least skilled workers in the labor market still work legally? Probably not, unless their employers give them fewer non-monetary benefits. That sort of thing.
Some of these instead-of-what phenomena fall under the heading of "unintended consequences," because some nasty side-effects could be avoided by doing something else.
Take Mayor Bloomberg's proposal to charge drivers $8 to enter lower Manhattan. You can see and download the original proposal, which has since been amended in various ways, here. The original proposal puts 86th street as the northern boundary, but lately 60th street has been proposed — either way, downtown seems to have moved considerably uptown. (There are several aspects to this proposal that are of considerable interest, especially the alternatives to it that have been suggested, but I will blog those another time.)
Anyway, the intended consequence is to reduce congestion during the busiest times and places in the City by charging drivers when they add to it. The other intended consequence is to raise more revenue for the city government.
Now, an economist can appreciate the role of market-based prices in rationing scarce resources, and to the extent that the government is able to mimic the market this might prove successful. Of course, what it will charge is not a price in the ordinary sense, but is more akin to a tax or toll because genuine market prices emerge from a process of competition that is largely non-existent in the case of the publicly-owned streets and bridges.
As for revenues, well, there's a trade-off. The more you discourage people from entering the congestion zone (CZ) by raising the congestion price (CP), the lower the revenues will be. So, what does the city government want to do, reduce congestion or raise revenue? To some extent these goals are mutually exclusive unless you are able to gauge closely how sensitive drivers are to various levels of congestion pricing.
So, can this proposal achieve either of these goals? Well, in London, where CP has been in place since early 2003, it does seem to have cut traffic in its CZ and raised revenue. There's some talk even of extending this policy to the rest of the UK. You can read the report of Transport for London, which runs this program, here (it's a 2.25 MB pdf file). So it might be successful in this sense in New York.
But let's try to think of some of unintended consequences that might work against this. First, charging too high a CP will harm businesses in the CZ if too many people are discouraged from shopping there. This seems to have happened in London, although Transport for London claims that these reports are misleading. (This also suggests that increasing the CP to raise revenue from cars might also reduce sales-tax revenues from shoppers.)
Second, traffic has a way of moving around and so does congestion. So if the CP manages to divert cars from lower Manhattan, that doesn't necessarily mean that people will leave their cars at home. Instead, congestion may simply appear at the periphery of the CZ (Midtown and where the CZ bounds the outer boroughs), shifting congestion and parking problems from one part of the City to others.
Third, the Wall Street Journal reported that there's been an upsurge in thefts of license plates belonging to residents of London's CZ, who pay a lower CP. I've also heard that there's been a significant increase in residential density in London's CZ, thus offsetting some of the gains in congestion reduction, by car-owners who've moved in trying to avoid paying the higher charge. (Unfortunately I don't have that reference handy).
Anyway, these are just a few unintended consequences and I've probably left out some other interesting ones. Is there a way to avoid these problems? What is the "something else" we might be doing? So, anyone care to think like an economist? I'd love to hear from you.
Culture of Congestion Homepage
|
Print
Send
RSS
