Why Economists Hate Congestion

by Adam Baylin-Stern

June 24, 2015 – Hate traffic? You’re not alone.Economists hate it too and probably for all the same reasons you do.It costs all of us the one thing we can never get back: time.On a personal level, that’s the gut-wrenching feeling of walking in fifteen minutes late to your 9 am meeting (while everyone watches).Or begging the daycare to hold on for just a little longer because, really, you’re almost there.  On a societal level all that anguish and lost time adds up to lower productivity.

Quite literally, time is money.And we pay for it in more ways than one.

It makes the products we buy more expensive (think about all those transport trucks idling on the highway).It pollutes our air, which raises our health costs, increases GHG emissions, and it leads to more car accidents.

It is hard to think of a less efficient, less productive use of time and resources than sitting in traffic.And while that drives normal human beings crazy, it’s enough to make economists lose their minds.

Or at least focus their minds on finding an economic solution to what is clearly an economic problem. Other approaches—more roads, bigger roads—have been tried, and failed.

In fact, evidence suggests those things just exacerbate the problem.

What would an economist do? If you want less of something, you put a price on it.

As it turns out, congestion pricing has shown more promise than any other approach in reducing urban congestion in cities across the world.

Dynamic solutions to congestion

 

But let’s talk about what it means to actually price congestion. Most people think: road tolls, and sure that’s one option. However, traffic congestion is a dynamic problem—it’s about both place and time. So you need a solution that’s dynamic too and there are lots of approaches that can work. For example:

City center pricing: vehicles are charged for entering the downtown core during certain times of day (this has worked effectively in London, England).

HOT lanes (High-Occupancy Toll): drivers can choose to pay a toll to drive in a less congested lane along the highway (usually an HOV lane, converted to allow for access by paying low-occupancy vehicles).
Distance travelled charges: Simply put, those who drive more pay more.

Monitoring can be done by satellites or even through new GPS technology (in Germany, for example, trucks are charged for highway use with a GPS system).

Yet what works in one place will not necessarily work in another. Cities are designed differently. They have different geographies, governance systems, and even cultures.

Nowhere is that more true than in Canada. One thing our big cities do have in common, however, is a congestion problem. Vancouver was rated the 3rd worse congested city in the world! Toronto ranked 9th, and Montreal 12th.

The need for new policies, ecofiscal policies, to help address this issue is clear.

Congestion pricing teaser

Over the past few months, the Ecofiscal research team has been talking to city leaders and experts across the country to gain insight into what Canadian policy options could look like and what local details matter the most for designing smart approaches for our diverse cities.

Here’s a little teaser of some of the interesting and important things we’ve learned so far:

One of the biggest challenges to congestion pricing in every city is public support. Good, transparent communication is probably one of the most important factors in getting effective policy in place.

Reducing road congestion is a key objective (and urgent issue) in many Canadian cities. But the revenue generation that accompanies congestion pricing can also be an important policy “driver” (sorry for the pun).

The most important things is for cities to be clear on what their number one priority is: to reduce congestion or to raise revenue? Doing one might mean compromising somewhat on the other.

Cities are really different and those differences—of geography, of governance structures, and even of culture—really need to shape the approach cities take to pricing congestion.

We still have a long road ahead of us before making concrete recommendations to help get policy moving (those puns just don’t stop). But, as we head into summer, or as they call it here in Canada, construction season, we wanted to let you know that we’re working on this issue.

That may not make you feel a whole lot better as you’re sucking in fumes on the 401. But at least know you’re not alone. We’re fed up with congestion too, and looking for an exit up ahead.