I strongly agree. Many of my friends, nearly all of them “liberals,” exhibit knee-jerk opposition to things like road congestion pricing, and pigou taxes on alcohol, cigarettes, and fossil fuels.
Based on London experience I’m quite strongly opposed to congestion pricing.
First, cost of operating the system are enormous. Of £929.8m in 2001-2007 revenue, TfL got ridiculously low £275m in net income, and after subtracting capital costs it’s barely positive return of £10m. If you add transaction costs on charge payer side, the ratio of revenue to waste is even higher.
This makes congestion charge one of the worst ways of raising money. This billion pounds is pure loss. Taxing alcohol and cigarettes on the other hand is one of the cheapest ways of getting extra revenue.
And second, there’s very little evidence that this billion of pounds had significant impact at traffic in London. For example “A report by TfL in early 2007 indicated that there were 2.27 traffic delays per kilometre in the original charging zone. This compared with a figure of 2.3 before the introduction of the congestion charge.”, so it failed quite spectacularly at long term way to reduce congestion. There are some shifts in traffic patters, but they don’t seem to have terribly much impact.
These results surprise me, as I expected significantly better revenue to waste ratio (at least 4:1, not 1:4), and significant impact on congestion levels. But I feel proven wrong and now I’m strongly against congestion charges.
Thanks for the info, it does dampen my enthusiasm a bit, but I’m still an advocate for carefully considered congestion pricing.
The cost of a well designed system should fall over time because of improvements in technology.
Congestion pricing can already be implemented on highways at very low costs. Even if it were currently impractical for a large area like the one in London, there is still much to be gained by implementing it where it is already inexpensive to do so.
One big improvement would be to charge more (or only charge) during rush hour. In some cases this makes administration and enforcement more expensive but I’m convinced we can drive the costs down.
London already charges only during work days between 7 am and 6 pm.
Technology might improve revenue to waste ratio, but right now it would need to get over order of magnitude cheaper to be practical, and that sounds unlikely. Also—if there are hardly any changes in congestion, it’s still a stupid tax even if it became much cheaper. If you just want to charge traffic, gasoline taxes and car taxes are much easier way to go.
It’s not obvious that toll roads really reduce highway congestion. I know in Poland they introduced them as a backdoor tax to fund building highways, in no way related to congestion issues. The costs include not only operating costs, but all the slowdowns to pay the toll, and extra travel due to invariably reduced number of highway exits. I’m not so sure if revenue to waste ratio is really that good.
“on a weekday, the average car driven into Manhattan south of 60th Street causes a total of 3.26 hours of delays to everybody else. (At weekends, the equivalent number is just over 2 hours.) No one car is likely to suffer excess delays of more than a few seconds, of course, but if you add up all those seconds for the thousands of affected cars and trucks, it comes to a significant amount of time.”
I had to add to this thread because I found this quote in what appears to be a good analysis of Manhattan’s transportation externalities and a proposal that includes congestion pricing.
If this is accurate, does it change your opinion on the need for congestion pricing? How much?
Would congestion pricing significantly reduce amount of traffic? I quite doubt it.
People are willing to stay extremely long in the traffic, a few extra dollars of congestion charge on top of that won’t make much of a difference, and cost of operating the scheme would be enormous.
Unless the congestion charge is really extremely high, like $100 a day, that would probably work well enough to reduce traffic, but it’s unlikely they’ll ever do that.
To be fair, many of these sorts of taxes can be regressive, so even if you’re fine with paternalism, you might legitimately have qualms about them. In theory of course, you can alter the overall system of taxes and benefits to redress this, but in practice it seems unlikely to work that way.
Obviously we should discuss the impact of each pigou tax I mentioned: alcohol, cigarettes, congestion pricing, and fossil fuels, needs to be discussed separately and in detail. The distribution of the tax burden would be affected far more by taxing fossil fuels than any of the other categories, but cap-and-trade has similar effects on people’s pocketbooks. As far as I can tell these are the only two reasoned approaches to global warming.
In many cases the poor experience the negative externality most heavily, so its unclear that taxes which appear regressive, actually are.
I strongly agree. Many of my friends, nearly all of them “liberals,” exhibit knee-jerk opposition to things like road congestion pricing, and pigou taxes on alcohol, cigarettes, and fossil fuels.
Based on London experience I’m quite strongly opposed to congestion pricing.
First, cost of operating the system are enormous. Of £929.8m in 2001-2007 revenue, TfL got ridiculously low £275m in net income, and after subtracting capital costs it’s barely positive return of £10m. If you add transaction costs on charge payer side, the ratio of revenue to waste is even higher.
This makes congestion charge one of the worst ways of raising money. This billion pounds is pure loss. Taxing alcohol and cigarettes on the other hand is one of the cheapest ways of getting extra revenue.
And second, there’s very little evidence that this billion of pounds had significant impact at traffic in London. For example “A report by TfL in early 2007 indicated that there were 2.27 traffic delays per kilometre in the original charging zone. This compared with a figure of 2.3 before the introduction of the congestion charge.”, so it failed quite spectacularly at long term way to reduce congestion. There are some shifts in traffic patters, but they don’t seem to have terribly much impact.
These results surprise me, as I expected significantly better revenue to waste ratio (at least 4:1, not 1:4), and significant impact on congestion levels. But I feel proven wrong and now I’m strongly against congestion charges.
Thanks for the info, it does dampen my enthusiasm a bit, but I’m still an advocate for carefully considered congestion pricing.
The cost of a well designed system should fall over time because of improvements in technology.
Congestion pricing can already be implemented on highways at very low costs. Even if it were currently impractical for a large area like the one in London, there is still much to be gained by implementing it where it is already inexpensive to do so.
One big improvement would be to charge more (or only charge) during rush hour. In some cases this makes administration and enforcement more expensive but I’m convinced we can drive the costs down.
London already charges only during work days between 7 am and 6 pm.
Technology might improve revenue to waste ratio, but right now it would need to get over order of magnitude cheaper to be practical, and that sounds unlikely. Also—if there are hardly any changes in congestion, it’s still a stupid tax even if it became much cheaper. If you just want to charge traffic, gasoline taxes and car taxes are much easier way to go.
It’s not obvious that toll roads really reduce highway congestion. I know in Poland they introduced them as a backdoor tax to fund building highways, in no way related to congestion issues. The costs include not only operating costs, but all the slowdowns to pay the toll, and extra travel due to invariably reduced number of highway exits. I’m not so sure if revenue to waste ratio is really that good.
“on a weekday, the average car driven into Manhattan south of 60th Street causes a total of 3.26 hours of delays to everybody else. (At weekends, the equivalent number is just over 2 hours.) No one car is likely to suffer excess delays of more than a few seconds, of course, but if you add up all those seconds for the thousands of affected cars and trucks, it comes to a significant amount of time.”
I had to add to this thread because I found this quote in what appears to be a good analysis of Manhattan’s transportation externalities and a proposal that includes congestion pricing.
If this is accurate, does it change your opinion on the need for congestion pricing? How much?
Would congestion pricing significantly reduce amount of traffic? I quite doubt it. People are willing to stay extremely long in the traffic, a few extra dollars of congestion charge on top of that won’t make much of a difference, and cost of operating the scheme would be enormous.
Unless the congestion charge is really extremely high, like $100 a day, that would probably work well enough to reduce traffic, but it’s unlikely they’ll ever do that.
America does have pigouvian taxes on all of these things. At the federal level, and additionally at the state level.
To be fair, many of these sorts of taxes can be regressive, so even if you’re fine with paternalism, you might legitimately have qualms about them. In theory of course, you can alter the overall system of taxes and benefits to redress this, but in practice it seems unlikely to work that way.
Obviously we should discuss the impact of each pigou tax I mentioned: alcohol, cigarettes, congestion pricing, and fossil fuels, needs to be discussed separately and in detail. The distribution of the tax burden would be affected far more by taxing fossil fuels than any of the other categories, but cap-and-trade has similar effects on people’s pocketbooks. As far as I can tell these are the only two reasoned approaches to global warming.
In many cases the poor experience the negative externality most heavily, so its unclear that taxes which appear regressive, actually are.