City Observatory recently republished their commentary on a report (released earlier this year) called Who Pays for Roads. I missed their original post, so this is new to me.
The report and commentary are all about the mispricing of roads/driving and the fallacy that “user fees” (gas taxes, tolls, and so on) are enough to completely cover the costs associated with driving.
I have been a vocal supporter of road pricing and/or congestion charges here in Toronto, and so I’d like to share two pieces from their commentary.
The first is this paragraph, which talks about how mispricing leads to demand issues (i.e. traffic congestion):
The conventional wisdom of road finance is that we have a shortfall of revenue: we “need” more money to pay for maintenance and repair and for new construction. But the huge subsidy to car use has another equally important implication: because user fees are set too low, and because, in essence, we are paying people to drive more, we have excess demand for the road system. If we priced the use of our roads to recover even the cost of maintenance, driving would be noticeably more expensive, and people would have much stronger incentives to drive less, and to use other forms of transportation, like transit and cycling. The fact that user fees are too low not only means that there isn’t enough revenue, but that there is too much demand. One value of user fees would be that they would discourage excessive use of the roads, lessen wear and tear, and in many cases obviate the need for costly new capacity.
And the second is this chart, which shows the cumulative net subsidy to highways in the US from the late 1940’s:
The point of all this is that when you subsidize something it’s because you’d like to see more, not less of it. So why then are we even surprised by the crippling traffic that plagues our cities? We are doing a lot to encourage exactly that.
When I was a kid I remember my parents having something called a “Perly’s” in their car. It was basically a map book and it was the best thing around.
You would start by looking at a big grid of the city and then you’d find the specific area you were looking for and then flip to that page. If you were on the road a lot for work, a Perly’s was a mandatory addition to your car.
Things have obviously come a long way since then. It could take you a long time to find the street you were looking for in a Perly’s. I remember doing that from the passenger seat. Now our phones do that for us and if the connection makes us wait for more than few seconds, we get irritated.
But we’ve also moved beyond just static maps.
The other morning I was driving out to the suburbs and I saw this road sign telling me that – given current traffic conditions – it was going to take me 15 minutes to get to HWY 427.
the traffic jam by Phoebe Eve on 500px
In 1968, Garrett Hardin wrote an article where he coined the term: the tragedy of the commons. Hardin was an American ecologist who was obsessed and concerned with the prospect of human overpopulation.
In his article, the term tragedy of the commons was used to describe a situation where individuals – all acting independently and in their own self-interest – actually end up behaving in a way that is detrimental to the larger group and that negatively impacts some sort of common resource.
Just in case, here’s another definition via Investopedia:
An economic problem in which every individual tries to reap the greatest benefit from a given resource. As the demand for the resource overwhelms the supply, every individual who consumes an additional unit directly harms others who can no longer enjoy the benefits. Generally, the resource of interest is easily available to all individuals.
So what would be an example of a tragedy of the commons?
You may not have thought of it in these terms, but I bet you that everybody reading this blog has experienced one.
I will give you two examples.
1. The first is that of electricity consumption.
In most condominiums, there are two types of ways that electricity gets billed and paid. Either the whole building gets one bill (master metering) or each individual resident gets a bill (submetering).
In the case of master mastering, each resident’s consumption isn’t tracked and so nobody knows who is consuming what. But in the case of submetering, each individual resident only pays for the electricity that they use.
Not surprisingly, the data shows that submetering can cut electricity consumption by 10 to 30%. That’s because it creates a 1:1 relationship between usage and cost. There’s now a strong incentive to conserve.
With master metering, there isn’t a 1:1 relationship between usage and cost. The additional burden/cost of consumption actually gets shared by everyone else in the building. And since each individual is looking to maximize their own benefit, they lose the incentive to conserve. As a whole, this makes the entire group worse off.
2. The second example is that of congestion on public, un-tolled roads.
In most cities, public roads are a resource that is “easily available to all individuals” (to use Investopedia’s terminology). They are basically free. The marginal cost of driving another kilometer to work on a road is basically nothing (other than a bit of gas and some time).
What this does is create a situation where individuals – in their pursuit of maximum individual benefit – start to overload the road. Everybody just wants to get where they need to go and there’s no incentive to conserve the resource (i.e. the road). Once again, the result is that the entire group becomes worse off.
That’s why building more road rarely/never works. You’re simply increasing a resource that is easily available to all individuals. What we should instead be doing is looking at submetering our roads (i.e. pricing our roads). It’s been proven time and time again to reduce road congestion basically overnight.
I had never heard of the term tragedy of the commons before today, but I like it a lot. So the next time you’re stuck somewhere in traffic, you can now scream to yourself: What a tragedy of the commons!
City Observatory recently republished their commentary on a report (released earlier this year) called Who Pays for Roads. I missed their original post, so this is new to me.
The report and commentary are all about the mispricing of roads/driving and the fallacy that “user fees” (gas taxes, tolls, and so on) are enough to completely cover the costs associated with driving.
I have been a vocal supporter of road pricing and/or congestion charges here in Toronto, and so I’d like to share two pieces from their commentary.
The first is this paragraph, which talks about how mispricing leads to demand issues (i.e. traffic congestion):
The conventional wisdom of road finance is that we have a shortfall of revenue: we “need” more money to pay for maintenance and repair and for new construction. But the huge subsidy to car use has another equally important implication: because user fees are set too low, and because, in essence, we are paying people to drive more, we have excess demand for the road system. If we priced the use of our roads to recover even the cost of maintenance, driving would be noticeably more expensive, and people would have much stronger incentives to drive less, and to use other forms of transportation, like transit and cycling. The fact that user fees are too low not only means that there isn’t enough revenue, but that there is too much demand. One value of user fees would be that they would discourage excessive use of the roads, lessen wear and tear, and in many cases obviate the need for costly new capacity.
And the second is this chart, which shows the cumulative net subsidy to highways in the US from the late 1940’s:
The point of all this is that when you subsidize something it’s because you’d like to see more, not less of it. So why then are we even surprised by the crippling traffic that plagues our cities? We are doing a lot to encourage exactly that.
When I was a kid I remember my parents having something called a “Perly’s” in their car. It was basically a map book and it was the best thing around.
You would start by looking at a big grid of the city and then you’d find the specific area you were looking for and then flip to that page. If you were on the road a lot for work, a Perly’s was a mandatory addition to your car.
Things have obviously come a long way since then. It could take you a long time to find the street you were looking for in a Perly’s. I remember doing that from the passenger seat. Now our phones do that for us and if the connection makes us wait for more than few seconds, we get irritated.
But we’ve also moved beyond just static maps.
The other morning I was driving out to the suburbs and I saw this road sign telling me that – given current traffic conditions – it was going to take me 15 minutes to get to HWY 427.
the traffic jam by Phoebe Eve on 500px
In 1968, Garrett Hardin wrote an article where he coined the term: the tragedy of the commons. Hardin was an American ecologist who was obsessed and concerned with the prospect of human overpopulation.
In his article, the term tragedy of the commons was used to describe a situation where individuals – all acting independently and in their own self-interest – actually end up behaving in a way that is detrimental to the larger group and that negatively impacts some sort of common resource.
Just in case, here’s another definition via Investopedia:
An economic problem in which every individual tries to reap the greatest benefit from a given resource. As the demand for the resource overwhelms the supply, every individual who consumes an additional unit directly harms others who can no longer enjoy the benefits. Generally, the resource of interest is easily available to all individuals.
So what would be an example of a tragedy of the commons?
You may not have thought of it in these terms, but I bet you that everybody reading this blog has experienced one.
I will give you two examples.
1. The first is that of electricity consumption.
In most condominiums, there are two types of ways that electricity gets billed and paid. Either the whole building gets one bill (master metering) or each individual resident gets a bill (submetering).
In the case of master mastering, each resident’s consumption isn’t tracked and so nobody knows who is consuming what. But in the case of submetering, each individual resident only pays for the electricity that they use.
Not surprisingly, the data shows that submetering can cut electricity consumption by 10 to 30%. That’s because it creates a 1:1 relationship between usage and cost. There’s now a strong incentive to conserve.
With master metering, there isn’t a 1:1 relationship between usage and cost. The additional burden/cost of consumption actually gets shared by everyone else in the building. And since each individual is looking to maximize their own benefit, they lose the incentive to conserve. As a whole, this makes the entire group worse off.
2. The second example is that of congestion on public, un-tolled roads.
In most cities, public roads are a resource that is “easily available to all individuals” (to use Investopedia’s terminology). They are basically free. The marginal cost of driving another kilometer to work on a road is basically nothing (other than a bit of gas and some time).
What this does is create a situation where individuals – in their pursuit of maximum individual benefit – start to overload the road. Everybody just wants to get where they need to go and there’s no incentive to conserve the resource (i.e. the road). Once again, the result is that the entire group becomes worse off.
That’s why building more road rarely/never works. You’re simply increasing a resource that is easily available to all individuals. What we should instead be doing is looking at submetering our roads (i.e. pricing our roads). It’s been proven time and time again to reduce road congestion basically overnight.
I had never heard of the term tragedy of the commons before today, but I like it a lot. So the next time you’re stuck somewhere in traffic, you can now scream to yourself: What a tragedy of the commons!
Have you ever wondered how they come up with those time estimates?
There are a few ways to do it. But here in Toronto along the Gardiner Expressway and Lake Shore Boulevard it’s done using your mobile phone. Phones have unique network identifiers called MAC addresses. And when they try and connect via Bluetooth or Wifi they actually send out their MAC address.
So what happens as you’re driving along is that your phone’s MAC address is being picked up at various locations. And since the distance between these various reception points is known, it’s pretty easy to determine how fast you’re traveling. That’s how they come up with those time/traffic estimates.
This data is anonymous but, in theory, the city also knows if people are speeding when the traffic is light.
This same technology is being used by many retailers and shopping malls to track how people move through their spaces. It’s used to see, among other things, which merchandising strategies are working and what synergies one might be creating (or not creating) with the tenant mix.
But getting back to traffic, there are obviously ways to collect traffic data without any additional physical infrastructure.
As I was about to leave the suburbs and head back downtown, my phone somehow knew I was about to do that (perhaps because I was stopped at a Starbucks near the highway) and so it decided to tell me this:
It wasn’t the best notification to receive on my phone, but I was impressed nonetheless. This traffic data is collected using GPS data transmitted from mobile phones using Google Maps, Apple Maps, and so on. Clearly we’ve come a long way since the days of manually leafing through a thick Perly’s.
At the same time, it feels like we are still pretty far away from solving the problem of urban congestion. Every big city in the world is grappling with this issue.
Part of the problem, I think, is the belief that there’s some sort of silver bullet – more highways, a magic smartphone app, and so on – that will enable everyone to be able to drive around in their own car by themselves. I don’t believe that’s possible in big cities. And the sooner we get away from that toxic thinking, the quicker we’ll solve this problem.
Have you ever wondered how they come up with those time estimates?
There are a few ways to do it. But here in Toronto along the Gardiner Expressway and Lake Shore Boulevard it’s done using your mobile phone. Phones have unique network identifiers called MAC addresses. And when they try and connect via Bluetooth or Wifi they actually send out their MAC address.
So what happens as you’re driving along is that your phone’s MAC address is being picked up at various locations. And since the distance between these various reception points is known, it’s pretty easy to determine how fast you’re traveling. That’s how they come up with those time/traffic estimates.
This data is anonymous but, in theory, the city also knows if people are speeding when the traffic is light.
This same technology is being used by many retailers and shopping malls to track how people move through their spaces. It’s used to see, among other things, which merchandising strategies are working and what synergies one might be creating (or not creating) with the tenant mix.
But getting back to traffic, there are obviously ways to collect traffic data without any additional physical infrastructure.
As I was about to leave the suburbs and head back downtown, my phone somehow knew I was about to do that (perhaps because I was stopped at a Starbucks near the highway) and so it decided to tell me this:
It wasn’t the best notification to receive on my phone, but I was impressed nonetheless. This traffic data is collected using GPS data transmitted from mobile phones using Google Maps, Apple Maps, and so on. Clearly we’ve come a long way since the days of manually leafing through a thick Perly’s.
At the same time, it feels like we are still pretty far away from solving the problem of urban congestion. Every big city in the world is grappling with this issue.
Part of the problem, I think, is the belief that there’s some sort of silver bullet – more highways, a magic smartphone app, and so on – that will enable everyone to be able to drive around in their own car by themselves. I don’t believe that’s possible in big cities. And the sooner we get away from that toxic thinking, the quicker we’ll solve this problem.
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