Another weekday dawns in cities around the globe, and the only thing as predictable as the rising of the sun is something insidious--gridlock. Since traffic first appeared as an endemic problem in the modern city, there have been few solutions, other than the dubious policy of building more roads.
However, there seems to be an alternative, one advanced and demonstrated by Singapore: a sophisticated road pricing system. Much to the chagrin of elected local officials, who often benefit from such road construction, Singapore has proven road pricing strategies to be not only feasible, but also desirable. Such strategies are not glamorous--they do not promise to end the threat of global warming, but they do promise cleaner cities, shorter commutes, and a host of infrastructure benefits, ranging from better highway maintenance to the development of better systems of public transportation. What is everyone waiting for?
Road pricing schemes have indeed been scarce; wary officials have cited the lack of evidence supporting the panacea-like claims of economists as ample objection to considering such policies. But many recent studies coupled with progressive urban decay and common-sense economics have dramatically weakened the naysayers' case.
The economic justification for road pricing is remarkably simple: cars pollute, and hence, the more one drives, the more pollution one's car adds to the air. Since pollution affects everyone, highway pollution can reasonably be seen as an externality problem: individuals aren't held to account for their vehicles' impact on the environment when they drive. Because there are social costs associated with driving, it makes sense to charge people for exercising this privilege. Even the crude tolling systems that are widely in place today have shown that drivers react significantly to road pricing and adjust their driving patterns accordingly. Moreover, traffic congestion itself is in two ways an externality problem: cars run much less efficiently at such low speeds, thereby exacerbating the environmental effects, and wasting drivers' time and hence detracts from their productivity. Road pricing decreases road usage, thereby cutting back these negative side effects.
Economics also provides an interesting response to those who feel that road pricing unfairly discriminates against the poor. Studies have shown that in terms of Vehicle Miles Traveled (VMTs), the wealthy drive nearly four times more than the poor. As Lester Thurow has noted, this "VMT gap" provides an opportunity for a road pricing solution that is not only egalitarian but also redistributive. Each car could be appropriated a specified "debit card" balance each year; since these dollars would be transferable, poorer drivers who have remaining balances could sell the credits to drivers who demand them. Hence, such a system would become a kind of infrastructure Robin Hood, redistributing wealth from the rich to the poor. Furthermore, the revenues raised through tolls can be applied towards developing better public transportation, thus improving the mobility of those less likely to drive.
One of the most obvious reasons to consider road pricing in the near future is the imminent worsening of traffic problems. The Transportation Research Board and the Federal Highways Administration predict that the average congestion on US freeways will quadruple by the year 2010. That increase translates to traffic jams wasting roughly 5.6 billion extra hours and US$41 billion more than before. Europeans face the same grim prospects. According to estimates from the European Commission, half of all costs associated with road transport, including upkeep, accidents, pollution, and congestion are attributable to over-utilized and trafficked roadways. The cost to economies: an incredible US$154 billion.
Conventional reasoning once held that redoubling road construction efforts would solve the ills associated with congestion without the potential political fallout of tolling. …