Congestion Pricing Is Just the Latest in Progressives’ Betrayal of the Regulatory State

Once upon a time, most ways into New York City were tolled. Then the original progressive movement hit. Progressive economists like Harold Hotelling argued persuasively that because the marginal cost of running another motorist over a bridge was near zero, there was no economic reason for which everyone who wanted to drive over the bridge should not be allowed to do so. The way to recover the vast fixed costs of bridge construction was not by charging a toll, but by extracting contributions from motorists that would not discourage them from using the bridge whenever they wanted to do so. And the way to do that was to tax them, regardless how much they actually used the bridge.

This solution to funding infrastructure construction — taxation combined with free access — was a regulatory solution, and not just any kind of regulatory solution, but a rate regulatory solution, because the government chose to set the price of infrastructure access: only you could easily miss it, because the government set that price at zero.

In this way, the original progressive approach to roads and bridges was not different from the progressives’ approach to markets of all kinds, which was to regulate terms of sale with social justice in mind. Thus the government in this period encouraged AT&T to recoup its own fixed costs by charging high prices to wealthy long-distance users, freeing the company up to provide local calling services, which were used more heavily by the poor, at very low rates. And the government forced the railroads to recoup more of their fixed costs from intercity routes used by the wealthy, even though competition would typically have held prices down for those customers, and to use the savings to charge lower prices to rural customers.

The progressives’ approach to regulating roads and bridges though a combination of taxation and zero price access was socially just, too, because of course it meant that city driving was free for everyone.

Then, for reasons that remain unclear, progressives seemed to forget what the entire regulatory project was all about, and in the stunningly short space of three years in the late 1970s, they collaborated with conservatives to tear down most of the regulatory state at the federal level. They deregulated the airlines, trucking, railroads, and natural gas. And in ensuring decades the federal government stopped regulating banking, and telecom rates as well.

One might have thought that the resurgence of the progressive movement in recent years would have led to a rediscovery of the original progressive model of price and quality regulation, but instead the movement has seemed time and again to mistake policies that the original progressives fought bitterly to overcome for progressive solutions to today’s problems. This has played out to a farcical extreme in the recent progressive love affair with the antitrust laws, which promote the unrestrained competition that the progressives fought so hard to overcome through the regulatory model.

And it is sadly in evidence now too in the progressive love affair with congestion pricing, which amounts to no more than reimposing the toll system that the original progressives fought so hard to take down. To be sure, the original progressives missed something important about roads: they congest, and they pollute. So Hotelling was wrong to assume that the marginal cost of allowing another driver to cross a bridge would always be near zero. That cost stays near zero until the bridge reaches the optimal level of congestion, after which point the cost of adding another car to the bridge is very high indeed.

But the solution to the problem of congestion isn’t to start charging users a price for access. That just takes us back to the bad old days when being poor meant you lost your right, even, to access that most quintessential of public spaces, the streets. The solution is to ration access to the streets using a criterion that isn’t tied so closely to wealth. And technology makes that easier to do today than it ever has been.

I’ve argued that one approach would be for the city to use a smartphone app to decide who gets access based on a combination of first-come-first-served and proximity to public transportation. You could log in from the comfort of home, the app would decide whether the city can accommodate you based on current traffic conditions and whether you are near a subway, and you would instantaneously receive an authorization to proceed or a request to go into town by other means that day. A colleague has suggested to me that those with jobs in the city should get priority.

Regardless how the rationing mechanism might be structured, the point is that price — and its sinister correlation with wealth — doesn’t need to play any role. Nor should it, unless you are so naive as to believe that those who are willing to pay more are always those who can put the streets to more productive use, rather than simply those for whom a dollar isn’t worth as much as it is to others, because they happen to have more of them.

What’s so troubling about the progressive embrace of congestion pricing is that progressives don’t seem to care about the classist consequences, setting today’s progressives rather starkly apart from the originals. Instead, today’s progressives view the price system as the solution not just to big city traffic, but climate change more generally — in the form of the carbon tax. What they don’t seem to understand is that there is no magic to price when it comes to rationing access to resources that are in fixed supply, like city streets, or air. Price is just another ration card, just another way of deciding who takes and who doesn’t. Only unlike other rationing mechanisms, price gives the rich priority.

Why would progressives ever opt, among the myriad criteria to use in sorting those who get to take and those who do not, to choose the one that selects for wealth? This approach may of course be self defeating — the gilets jaunes movement that almost toppled the French government consisted of poor people aggrieved by a gas tax aimed at fighting climate change, a tax that the government was forced to withdraw.

But even if reliance on price rationing doesn’t prove a political loser, it’s still socially unjust. Why should the poor bear the burden of saving the world’s climate? Yes, under carbon taxes and congestion pricing, the rich do end up paying, but they also end up getting to drive. The poor might end up better off, if some of the proceeds of the tax are redistributed to them, but they still won’t get to drive. Why? Because if they were to benefit so richly from redistribution of tax proceeds, or from exemptions designed to temper the effects of the tax, that they were still able to access the streets as much as the rich, why, then the carbon tax wouldn’t actually reduce emissions after all!

It is this sort of seemingly naive betrayal of the regulatory state, and the civic values that it stood for, by those who ought to be sticking up for those values, that makes the current progressive movement a shadow of the original.