How to end traffic congestion

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From: Dan Kohn (
Date: Mon Feb 28 2000 - 16:47:12 PST

In the last two weeks I've been to Boston, Atlanta, Charleston, DC, London,
and Paris and am now on a flight back to Seattle, and all this traveling
gives me a lot of time to think about traffic. Not net congestion, of
course, but the kind that can cause a trip from downtown London to Heathrow
to take over an hour.

Now, please don't talk about how any kind of cool new auto-driving
technology will help things, because it will be decades before the legal
liability issues are resolved for any sort of technological solution.
Building more roads doesn't help because people just move farther away. HOV
lanes are completely unrealistic in today's work world, where factory shifts
are nearly a thing of the past. So, the answer has to lie in the world of
economics, and specifically in the sub-branch of political economics.

Traffic congestion causes enormous costs on all of us in terms of the time
we're stuck unproductively in a car. And yes, cell-phones and NPR make our
car time more productive, but this is clearly not our optimal activity, as
evidenced by the fact that we don't keep sitting in our cars on arriving
home. Many of us who are stuck would pay others to get off the road, but
there is no mechanism to do this. The real problem, though, is one of
political economy. Most people would see variable rate toll pricing (the
obvious way to charge for the congestion one causes) as a tool to allow rich
people to drive whenever they want to, with no benefit to them. This
situation has been denigrated as "Lexus lanes".

Economics says that to eliminate the externality of congestion costs, you
could internalize the costs by creating a market to incentivize drivers to
schedule their day in a way that doesn't create congestion costs for others.
The real solution has to be a political one, though, because people need to
accept that congestion costs and toll costs are being fairly allocated.

So, here's the idea. Take a stretch of road that already has an E-Z Pass
system installed, like the Dulles Tollway. Announce that pricing will be
dynamically adjusted to keep the road basically free from congestion. That
is, prices could go up from the standard quarter to $10 or $20 or more when
the road gets crowded. You would want to do some sort of averaging over the
previous 30 minutes to avoid having outrageous instantaneous price spikes.

The key, though, is that people who use the road off of rush hour would
receive a negative toll price: they would get paid for not having driven
during rush hour. The negative toll price would fluctuate as well, to
approximately equal the revenues brought in by the positive tolls. And, you
wouldn't institute this just for E-Z Pass customers. You'd actually be
handed a dollar (or whatever) by the tollbooth operator when you drive
through. Although, your license plate would need to be recorded, and the
roads would allow you to receive money back only once per day but would
require you to pay the going price (if it's positive) each time you came
through. Otherwise, someone could go through a short section of toll road
one way and circle back using back roads.

Places like the NJ turnpike have tried differential pricing by time, but the
peak pricing has been less than 200% of the average ($0.50 vs. $1 doesn't
get people's attention). Congestion pricing (where you're aiming for zero
congestion) says that the price should keep going up until enough people are
persuaded to take a different route home or change their schedule. And in
this plan, people may very well be willing to pay those high prices because
they know that if they waited just an hour or so that they could actually
make money back rather than paying it out. So, it becomes a simple question
of opportunity cost.

Also, note that this scheme is not just a redistribution of wealth from rich
people in a hurry to those who can't afford the peak toll rates. Congestion
is an externality that makes all of us poorer. Thus, eliminating it should
create enough economic value to make nearly everyone better off -- everyone
can get home without any congestion and those who are inconvenienced by
changing their schedules are paid for it. Of course, the plan would work
even better if people could get paged or use a WAP browser with the current
traffic/pricing conditions (they'd be synonymous), but there are all kinds
of optimizations one could look at it.

The key thing is to get a test going, and to work the presentation of the
concept to win over people to the idea.

                - dan

Daniel Kohn <>
tel:+1-425-602-6222  fax:+1-425-602-6223 

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