Friday, June 02, 2006

Glaeser on City Congestion

Readers of my Principles text know that I have long sang the praises of road pricing (see the chapter on "Public Goods and Common Resources"). Charging for the use of public roads is a sensible Pigovian tax to deal with congestion externalities. As far as I know, economists of the right, left, and middle all think this is a good idea.

Matthew Kahn draws my attention to a nice article on the topic, published in the NY Sun last week, by my Harvard colleague Ed Glaeser. Here is how Ed makes the case:

The Soviet approach to markets set prices at some controlled price, and then let shortages ensue. Under this system, millions wasted hours queuing and goods went to consumers with the time to stand on line rather than to consumers who valued the goods most. Today, you don't need to go through the messy process of getting a visa to Cuba or North Korea to see the social costs of under-pricing. Right here in New York, we don't charge anything for using a particularly valuable resource: car access to Manhattan streets. We ration the limited access to streets through time wasted in traffic. New York's mean travel time to work was 40 minutes in the 2000 Census, almost 15 minutes more than the national average. We've set the price of driving at zero and inevitably too many people drive....

New York should follow London and charge drivers for driving in the city during peak hours. London's congestion charge system, introduced on February 17, 2003, requires drivers to pay eight pounds before they enter a congestion charging zone during peak hours. The zone is eight square miles in the heart of London.

Drivers pay either online or at one of many payment facilities. The system is enforced with a network of fixed and mobile cameras that take snapshots of license plates. Individuals who are caught driving without paying are fined 100 pounds. The fine system is computerized, and it is both reliable and inexpensive to operate.

According to London's "Third Annual Monitoring Report," the number of cars entering the charging zone during peak hours fell by 33% after the congestion charge. As traffic fell, speeds rose. Before the congestion charge, the average traffic delay was 3.7 minutes per mile during morning rush hour and four minutes per miles during the afternoon rush hour. After the congestion charge, delays per mile fell to 2.4 minutes per mile in the morning and 2.6 minutes per mile in the evening. Overall, there was a 30% decrease in time wasted in traffic delays.

Some critics of congestion charges argue that they are unfair to low income people, but in London, lower-income bus travelers were the charge's biggest beneficiaries. Bus riders didn't have to pay the charge and their travel times plummeted. As the time cost of bus travel fell, the number of bus passengers during morning hours increased by 38% (some of this is due to improved bus service provision). Like London, New York has many more people who commute by public transportation than by car, and New York's many bus travelers would particularly benefit from a congestion charge reducing their commute times.