Moving 5 MPH in rush hour traffic, do you ever think that you are the problem?
In rush hour traffic, we create an extra 4 second delay for each car behind us. Add it all together and you get 4.8 billion hours that people wasted during 2010 in traffic. For the average commuter, the annual total is 34 hours and 14 gallons of fuel.
Reasons for traffic congestion? We all work at approximately the same time every day and the richer we get, the more cars we can buy. As Brookings scholar Anthony Downs points out, “…traffic congestion is not caused by poor policy choices but rather, by economic success.”
Ironically, sometimes reducing congestion only winds up making it worse. Once you add to mass transit or road capacity, people who avoided rush hour join it. Congestion pricing programs? They are controversial and you need the right geography. Mass transit? People tend to combine rail lines with car commuting and home buying decisions that sometimes exacerbate the problem.
Consequently, we all continue creating the costs of traffic congestion that are called negative externalities. Rather like a factory’s air pollution can affect the health of people who have no connection to the factory, driving during rush hour imposes a cost on multiple unknown individuals. The 4.8 billion wasted hours from congestion is only a part of the cost.
Where does this leave us? Maybe traffic congestion is part of what we pay for economic growth.
Sources and Resources: Economist Timothy Taylor presents a wonderful lecture on traffic congestion in his Teaching Company course, “Unexpected Economics.” His lecture took me to this Washington Post article by Brookings scholar Anthony Downs and the Texas Transportation Institute (Texas A&M University) annual report on traffic congestion. Also, I always enjoy returning to sections of Traffic by Tom Vanderbilt. For this post I reread his chapter, “Why More Roads Lead to More Traffic (and What To Do About it)”
Congestion’s Impact From the Urban Mobility Report
From the 2011 Annual Urban Mobility Report
When a country’s economy is ranked the 2nd freest in the world, how do they manage auto congestion and pollution?
By auctioning a limited number of vehicle permits, Singapore makes owning a car very expensive. A VW Passat in Singapore could cost as much as the median price of a house in a US metropolitan area ($158,100).
The reason is demand and supply. On the demand side, there are lots of millionaires (17% of all households), unemployment is low, job security is high and businesses will make interest free car loans to employees. On the supply side, permits are limited. As a result, according to auction information on Bloomberg, the vehicle permit alone could cost you S$89,990 ($73,332.52).
In other words, Singapore creates a market in vehicle permits to control traffic congestion and auto pollution.
Sources and Resources: My thanks to marginalrevolution.com for the Singapore story and Bloomberg for the details. Also, here, Bloomberg reports the most recent price of the permit and here is the (astronomical) price of a VW Passat. Finally, to see why Singapore is categorized as a free economy when its political system is much more restrictive, you can look at the Singapore link in the Index of Economic Freedom.
Posted by: adminEcon
Tags: auto pollution, Certificate of Entitlement, COE, cost, demand, Index of economic Freedom, negative externalities, Pigou, singapore, supply, traffic congestion, vehicle permits, VW Passat
Stuck in traffic, alone in the car, and you’ve got to get to work soon. Will you pay to move into the High Occupancy Toll (HOT) lane?
Here is how it works: Traditionally reserved for High Occupancy Vehicles, the HOV lane has been the exclusive territory of vehicles with 3 or more people, buses, certain fuel efficient vehicles and motorcycles. Now, close to Atlanta and in other participating areas, a commuter with a transponder on his or her car to record HOT lane mileage can also move into the express lane.
How much does it cost? It depends on the congestion. The worse the traffic the higher the price. It could be a penny a mile or as high as 99 cents. However, when Atlanta charged $5.05 for traveling in the HOT lane during peak travel time, so few motorists chose it and so many objected that the governor lowered the price to $3.05.
Still though people are objecting but for a different reason. Reserving a HOT/HOV lane means more cars elsewhere. One driver said that his commuting time doubled when the lane became available. Some traffic experts believe, though, that when managed appropriately, congestion can be diminished by a special use lane while others do not.
The Economic Lesson
Called the tragedy of the commons, when a resource such as public roads is owned by the community rather than privately, it tends to be overused and abused. Some say the solution is making roads more costly. Others point out that the solution is regressive because those who have the least would pay, proportionally, the most. Pointing to the regressive character of HOT lanes, opponents have called them Lexus Lanes.
An Economic Question: How might you illustrate HOT pricing on a demand and supply graph?
If extra road mileage is built, would you predict more or less traffic?
The WSJ tells us that more roads led to additional driving from local residents, commercial traffic and people moving to the area. Public transportation did not influence driving decisions. Roads did. 10% more road mileage meant 10% more driving.
The Economic Lesson
Here is where economics enters the picture. This is all about cost. If we want people to do less of something, their cost needs to increase. With roads, the problem was traffic congestion. The solution, more roads, did not work because it did not increase cost. It made driving more attractive. As a result, the authors of this study conclude that the answer is congestion pricing.
Similarly, looking at auto emissions and housing, again, cost makes the difference. For emissions, higher gas prices would reduce emissions. For housing, lower prices will increase sales. And yet, hasn’t public policy been the opposite?
An Economic Question: For auto emissions, assume your goal is diminished gasoline usage. For housing, your goal is more home purchases. Describe what will happen to demand and supply if cost is used to achieve the desired objective.
Sometimes policies for economic growth can be found in the most surprising places. Seeing a new paper on peak hour travel started me thinking about the amount of time we spend commuting. And commuting took me to economic growth.
If you have to commute, Chicago is the place to live. At 32.6 minutes each day, Chicago has the shortest commuting time when compared to 51 major U.S. metropolitan areas. By contrast, Nashville and Oklahoma City are among the worst. Much more than congestion, though, the study’s author says that distance is the cause.
Variables that commuter researchers look at include the time spent in free flowing and congested traffic and the distance. Then, of course, gasoline enters the picture. Time and gas are economic variables. Whenever time and gas can be used more efficiently, the economy is affected.
The solution is urban planning. If, like Chicago, more communities were closer to commercial districts, then commuting would require “about 40 billion fewer miles per year and two billion fewer gallons of fuel”.
The Economic Lesson
Suburban sprawl has a massive opportunity cost. With “denser metros” as the alternative, commuters would have more time and spend less on fuel. Resources not used to commute would be allocated elsewhere.