In her column on congestion pricing, Emily Badger exhibits the unquestioning acceptance of the legitimacy of the price system that lamentably characterizes so much work by progressives today. She argues that because driving has a cost, drivers should be asked to pay that cost through congestion pricing, and she suggests that our current system, in which driving in the city is free, was the uneconomic product of lobbying by the car industry. Hence the title of her column: The Streets Were Never Free. Congestion Pricing Finally Makes That Plain.
In fact, the elimination of bridge and road tolls that took place alongside the popularization of the automobile sat on a sound economic foundation: when the marginal cost of adding another driver to the roads is low, you should encourage as many drivers to use the roads as possible. Charging a price for access discourages use, and therefore unnecessarily limits the number of drivers on the roads.
Accordingly, argued Columbia economist Harold Hotelling in 1938, the proper way to pay for the cost of building and maintaining bridges and roads is to make people pay for them regardless how much they use them — because that way the price won’t limit use — and the only way to do that is to pay for roads and bridges through taxes, rather than by charging tolls. Of course, traffic was not a thing unknown to economists in the early 20th century. But they thought cities would eliminate congestion by building more and bigger roads — expanding supply to meet demand — not by rationing supply, and the efficient way to do that was again by paying for bigger roads through taxes and granting drivers access to them for free. The car industry may have helped the process of de-tolling along, but it was sound economics.
For the time. What everyone missed was that there are more costs to roads than just those of their creation and maintenance: they also destroy the climate, by enabling energy-inefficient driving, as opposed to energy-efficient public transportation. And it turned out that roads simply could not be built big enough to eliminate congestion. So it was not efficient to maximize the number of drivers after all, and the marginal cost of allowing an additional driver onto the roads was therefore not always near zero.
That has led Badger, and the climate movement more generally, to the conclusion that we should have been charging a price for access to roads all along. But that does not follow at all. As Badger points out, congestion and climate concerns make driving a scarce resource, meaning that no matter how high the price charged for access to the resource, more cannot be brought online. So the price system here isn’t needed to stimulate supply; the only work it would do is to winnow down demand to match the fixed level of supply of the resource. That in turn makes price here no more than a rationing mechanism.
And not a necessary one at that. For there are an infinity of ways to ration scarce resources. By birth year. By height. By how early you wake up in the morning. Etc. Price rations based on wealth, and that’s why progressives interested in solving the congestion problem should reject price as the means to that end.
Badger seems unaware that there are alternatives to the price system when it comes to rationing. She observes that:
If we had that problem with other kinds of infrastructure or commodities, we’d charge people more for them. If airline tickets were particularly in demand, their prices would go up. If there were a run on avocados, grocers wouldn’t respond by keeping them as cheap as possible.
All true, but those are all markets in which the goods in fixed supply are sold by private enterprise. Of course private enterprise will use price to ration access, because rationing with price is profitable. But roads and bridges are owned by governments, and governments both have goals other that profit maximization — such as ensuring that everyone has access to basic infrastructure, regardless of wealth — and other ways than price of raising revenue — such as through the tax system. Why is the behavior of markets in the face of shortage a good model for the way governments should behave in the face of shortage?
Moreover, in all the markets Badger mentions, higher prices are capable of calling forth greater supply. When airline prices rise, new airlines enter the market. When avocado prices rise, Mexico sends more avocados. But we aren’t trying to encourage private firms to flood the market with other ways to drive to work. We just want to limit use. We don’t need price for that.
In the information age, non-price approaches to rationing are easier to implement than ever before. I’ve argued that New York should just create an app to grant access to roads during busy periods, routing users to public transportation when congestion is bad. But that doesn’t have to be the only way. A little imagination and attention to technological alternatives could certainly reveal more.
But what we don’t need is unquestioning acceptance of the neoliberal playbook as the solution to our climate problems, or the sacrifice of our values — like the civic value of equal access to public space — that the playbook requires.
To her credit, Badger does seem concerned about the classism of charging for access to the city. But the solution she suggests, subsidized rates for the poor, just can’t work. Any subsidy that truly puts the poor on an equal footing with the rich will defeat the purpose of congestion pricing, by failing to price drivers out of the market. The utilities that subsidize rates to the poor, to which Badger points as a model, don’t use their rates to ration access, as congestion pricing would do, but rather use their rates to cover the fixed costs of maintaining the utilities, so the utilities don’t mind if the subsidy increases demand. Congestion pricing advocates often suggest that the class consequences of congestion pricing can be solved with an administrative tweak; but these tweaks work only to salve guilty consciences.