watching our words: congestion charge or price or (shudder) tax

There seems to be a flurry of new interest in congestion pricing, partly under the pressure of tight budgets almost everywhere.  But journalists can muddy the waters by describing congestion pricing as either exploitative or punitive.

Last month, I was invited to contribute to a Sydney Morning Herald thinkpiece on the subject.  My contribution, the second of four pieces here, emphasises that congestion pricing is not about paying for congestion, it's about paying to avoid congestion.  The core point:

Suppose you announce that you'll give away free concert tickets to the first 500 people in a queue. You'll get a queue of 500 people. These people are paying time to save money.

Other people will just buy a ticket and avoid the queue. They're choosing to pay money to save time.

Today, we require all motorists to wait in the queue. When stuck in congestion, we are paying for the road space in time rather than in money.

Shouldn't we have a choice about this? Why are we required to save money, a renewable resource, by spending time, the least renewable resource of all?

Unfortunately, the Sydney Morning Herald framed the whole piece with the question, "Should motorists pay for the congestion they cause?"    The implication is that congestion pricing is punitive, that some citizens believe that other citizens should be punished for their behavior.  The question seems designed to sow misunderstanding and inflame rage.  To their credit, none of the four expert responses — even the one from the auto club opposing the congestion charge — really took this bait.

So there's a problem with the terms congestion charge and congestion price.  The terms sound like "paying for congestion," when the truth is the opposite, we're being invited to choose whether to spend money to avoid congestion.  A more accurate term would be congestion avoidance price or even better, congestion avoidance option.  But those are too many words. 

Should we call it a decongestion price

Real congestion pricing is about giving free and responsible adults a set of options that reflect the real-world geometry of cities.  The core geometry problem is this:

  • Cities are, by definition, places where lots of people are close together.
  • Cities are therefore, by defintion, places with relatively little space per person.
  • Your car takes 50-100 times as much space as your body does.
  • Therefore, people in cars consume vastly more of the scarce resource, urban space, than the same people without their cars — for example, as pedestrians or public transit riders. 
  • When people choose whether to drive, they're choosing how much scarce urban space to consume.
  • If urban space is to be used like any other scarce resource, its price needs to be deregulated so that it is used efficiently. 

Congestion pricing is a form of deregulation.  It is the most libertarian concept imaginable.

There's another way to mess this up, and that's the term "congestion tax."  Here's the New Zealand Herald

Aucklanders may be levied to drive through increasingly congested streets in the absence of Government funding of the region's "strategic aspirations".

A paper released by Local Government Minister Rodney Hide before Auckland's first spatial plan due out in 11 days suggests raising revenue by charging motorists to drive around the Super City at peak times.

Hide makes clear that this isn't a congestion price intended to reduce congestion.  It's just another tax, intended to raise revenue.  So just to be clear: If it's congestion pricing, there are public transit (and bike-ped, and casual carpool) alternatives that enable people to get where they're going.  The congestion price cordons on the CBDs of London and Singapore work because there's abundant public transit to those places, so relatively few people absolutely have to drive into them.  The San Francisco Bay Bridge tolls have a congestion-pricing value because there's both abundant transit and casual carpool options for avoiding them. 

If, on the other hand, you're in a place where there's no reasonable alternative to driving — such as large parts of Auckland — then anything  that suppresses driving will suppress travel, and that means it will suppress economic activity.  And if you're just taxing economic activity, then this is really no different from sales taxes, Goods and Services Taxes (GST), or income taxes. By taxing economic activity, you're suppressing something that government and society should be encouraging.  That's not a libertarian idea; quite the opposite.

19 Responses to watching our words: congestion charge or price or (shudder) tax

  1. In Brisbane March 17, 2011 at 4:53 am #

    Does it have to be cordon tolls?

  2. Cap'n Transit March 17, 2011 at 6:05 am #

    When you say “no reasonable alternative to driving,” you’re ignoring the transportation-land use cycle. Making driving harder will encourage transit-oriented development and the development of transit itself, which will lead to alternatives to driving.
    If the alternative to congestion pricing is starving the transit system to build more roads, that’s not a reasonable option.

  3. Tom West March 17, 2011 at 6:18 am #

    I like “decongestion charge”, because it (correctly) implies that the aim of teh charge is to reduce congestion.
    With these charegs (whatever their name), there is always an assumption that transit has sufficient capacity to absorb the mode shift generated by the charge… which is not always the case. (Of course, you can go down teh route of London, which allocated the money from its congestion charge to extra bus services).

  4. Stuart Donovan March 17, 2011 at 6:32 am #

    I can understand the journalists perspective, even if it is sensationalist.
    People who decide to drive in congested conditions do not consider the external costs their choice imposes on other people, particularly the costs of congestion. This misalignment in interests arises because when you sit in queued traffic you do not consider the extra delay you cause to people behind you.
    As a result, too many people decide to drive in congested conditions, which creates a prima-facie case for government interventions that can internalise these costs into people’s decision-making, usually via a charge that makes it more expensive to drive at peak times.
    You are right on one important level though – people who continue to drive will benefit from reduced congestion and improved reliability (esp. less scheduling delays). What was a cost (i.e. time wasted) becomes a transfer (i.e. government revenue). The benefits of time-of-use road pricing schemes therefore depends on how efficiently revenues are both collected and spent (i.e. what projects they fund).
    I see no reason why time-of-use road pricing could not be revenue neutral and/or voluntary. A voluntary scheme would just offer multiple road pricing plans. High-cost flat rate all-day? Or variable peak/offpeak tariff? Let people choose, but price the plans so as to encourage people to switch over from flat all-day rate (i.e. fuel taxes) to peak/offpeak tariffs.
    P.s. In terms of language, I think “time-of-use” road pricing is a better way to describe these schemes. That is, we are just changing the way that we charge for using roads so that our price signals are more aligned with the economic costs of the decision to drive.

  5. Alex B. March 17, 2011 at 6:35 am #

    I definitely like the wording of decongestion pricing.
    When my nose and sinuses are stuffy, I take a decongestant.
    When my roads are stuffy, I should do the same.

  6. John March 17, 2011 at 7:00 am #

    I have noticed the term “value pricing” used to refer to congestion pricing sometimes. People like value. This may be a good term to use.

  7. M1EK March 17, 2011 at 7:10 am #

    WRT your last paragraph, it’s STILL not true that it’s a bad idea to impose congestion pricing just because it would impact all trips – because reducing unnecessary trips is still an option (for instance, maybe retired folks shopping for groceries would decide to time-shift).
    The real problem with congestion pricing is that outside a few dozen cities, only one or two of those in the USA, businesses would just decamp to suburban office parks rather than have their executives and employees ‘suffer’ the charge.
    For instance, it is suggested quite frequently here in Austin by people who don’t have a lot of experience with suburbanites – but there are already existing strong DISincentives to locating private businesses in the core (far higher taxes, far worse traffic) – and so most private businesses don’t locate there already. We have miles of awful suburban strips with transit-hostile office parks available closer to the residences of employees living in one sprawl direction from the core to choose from (of course, the execs would and always do choose the direction THEY live in). Those few private employers that remain in the core can easily be picked off if you make it even a little bit ‘worse’ for them.

  8. Hamilton Transit History March 17, 2011 at 8:16 am #

    Simple rebranding suggestion:
    congestion avoidance price = fast lane fee

  9. Kenny March 17, 2011 at 4:12 pm #

    But isn’t there a libertarian motivation for both ideas? Market-oriented thinkers believe that markets are the best way to allocate scarce goods, provided that there are no externalities to the transactions. When there are externalities, one way to restore efficiency is to internalize them, either by subsidizing activity with positive externalities or taxing activity with negative externalities. Congestion pricing has this effect, as well as the effect you mention, of rationing by price rather than time.
    Of course, the two different justifications may end up proposing different prices. On the “internalizing externalities” approach, you should calculate how much the time of other people is worth, and how much of it is wasted by each additional car in the center city, and then charge an amount based on that. (You should probably also include the cost to the public of hospital bills for air pollution and crashes.) This approach would charge for use of any center city roads.
    On the “pay for decongestion” approach, you should just set aside some amount of the street for paid travelers only, and then charge whatever you need to get basically frictionless travel (and no more). I suppose the cost of this travel would probably depend on how much of the road is set aside for paid travelers, as opposed to the ones that want to pay in time.
    It’s not at all clear to me that these would be the same price. But they both have a kind of libertarian justification.

  10. Jarrett at March 17, 2011 at 4:21 pm #

    Kenny.  I'm definitely advocating the latter.  The former sounds like "social engineering."  The latter is charging a price for a thing of value.  Jarrett

  11. Danny March 17, 2011 at 6:50 pm #

    In my opinion, it doesn’t need any rebranding…but then again I am a pessimist on the value of branding concepts.
    A while ago I worked with a company that produced a retail security technology that was flying off the shelf so fast that they couldn’t keep up (and neither could any of their competitors). Their solution (after much convincing), was to raise prices and communicate to all of their customers that they were no longer purchasing a product, but rather the capacity to produce that product. They had a fixed capacity for their plant, they only agreed to sell the capacity that they could produce and not anything more. As a result, they were the only company that could deliver anything on time, resulting in a certain company named WalMart abandoning negotiations and resorting to paying market prices. If you know anything about WalMart, you would know there is something special about that.
    Nobody needs to be scared about proposing congestion pricing. What they need is an honest answer. You don’t get there by trying to convince libertarians that your preferred solution is the libertarian one. You get there by admitting that you have a capacity problem on your roads, and that paying for that capacity is a much better way to allocate it than the hellish free-for-all that it currently is. And yes, people will love it once they try it.

  12. GMichaud March 17, 2011 at 7:57 pm #

    Congestion pricing, Libertarian, Conservative, Socialist, they are all words. I don’t think the creative process should be bowing before words. They are distractions from the real strategic goals of transit.
    I realize London has handled congestion pricing fairly well (not sure about Singapore). And yes it is a transit system that handled the move from cars to trains and buses. The density of the population is also a factor. (In fact I’m not convinced congestion pricing would work in less dense cities, are there any place where it does?)
    Congestion pricing is useful in some cases, but before getting bogged down I would look for ways to improve and market the transit system. Design a welcome experience for people in their daily movements.
    In other words make it so users prefer transit over sitting in congestion. What does the pubic need to see to get them out of their autos?
    There is no question of the many hidden costs of the auto. I’d rather just try to create a better mousetrap rather force people out of their autos.
    I’d also be careful working with concepts and ideas while trying to figure out political leanings beforehand. I know politics are a reality, but urban ideas that have conviction, power and stature should be persuasive to a wide range of political leanings.

  13. Clarence Eckerson Jr March 17, 2011 at 8:31 pm #
    There IS a lot of new talk and interest.

  14. JMH March 18, 2011 at 1:44 am #

    I’ve beeen uncomfortable with the idea of such a decongestion charge for awhile, and reading your post has very much helped me realise why, so thank you.
    Decongestion charging is a strongly regressive form of government income. When you choose as a driver to wait in congestion – or not – you’re losing time (in hours), the economic value of which depends on your hourly wage:
    Economic sacrifice = hours lost x hourly wage
    When you switch to a decongestion charge, the economic sacrifice is fixed:
    Economic sacrifice = decongestion charge
    Which hits the poor proportionally much harder. I’m not in-principle opposed to a properly formatted congestion charge. Perhaps the value of a car could be used as an easily-measured proxy for income, and the congestion charge set at some percentage of that value. That percentage could then be set to whatever value results in the ‘acceptable’ number of cars on the road.

  15. Dexter Wong March 18, 2011 at 1:49 am #

    Ah, but what about the person who claims that congestion pricing is infinitely better than improving transit? The person who claims that public transit is irrelevant, that the choice is purely between paying to save driving time and longer driving time because you cannot afford the charge?

  16. Alon Levy March 18, 2011 at 12:39 pm #

    Singapore not only handled congestion pricing well, but also instituted it before there was any rapid transit. Road pricing by itself raised bus speeds, making transit somewhat more competitive, but the subway was built a decade later.

  17. Joshua March 19, 2011 at 3:21 pm #

    Interesting discussion, though I think it’s quite telling that congestion pricing (or whatever one wishes to call it) always seems a lot more popular with transport experts than with the general public. I’m not sure whether that’s because of the particular words used, or whether it’s because people might prefer to pay in time than in money for sitting in congestion.
    Most congestion pricing schemes internationally seem to have been implemented in a way that is on top of existing road pricing measures (fuel taxes). I imagine that the public generally perceives them as revenue gathering exercises for this very reason. However, if you undertook road pricing as an alternative to fuel taxes you probably end up with efficiency/privacy etc. issues – but greater political acceptability.
    Fundamentally though, there’s a political question to consider. Is it acceptable to have a road pricing scheme that prices the poor off the roads to create more room for the rich? Because, in a nutshell, that’s effectively what road pricing/congestion charging/decongestion charging s.

  18. J B March 22, 2011 at 7:29 pm #

    @Joshua, I would rather a system where ONLY poor people are subsidized rather than everyone. Even if that’s impossible, it’s likely in many cities that most poor people take public transit downtown rather than drive themselves, so the poor are unlikely to be affected.

  19. Rob March 23, 2011 at 11:13 pm #

    Why why why do we assume that it’s a good and right thing to set a price for everything else that’s scarce and valuable other than use of public rights of way? We do that for other things we value because it’s a way to get the supply and demand balanced out effectively – both by reducing demand in case of scarcity and providing investment when supply needs to increase.
    The soviets gave away bread for the same reason we give away road use – and the poor waited in line and found empty shelves. (I’m certain the elite found other solutions – as they do for transportation here, buying million dollar condos downtown or moving their head offices to the suburbs). At some point nobody benefits from allowing unmanaged overconsumption.
    I agree though that if you’re selling something, you need to stress the value you’re providing, not the payment.