Giving Compass' Take:

• Jonathan D. Hall estimates the benefits from tolling and uses his model to evaluate the aggregate and distributional effects of congestion pricing.

• Could congestion pricing improve the conditions in your area? How can public opinion be influenced on this issue? 

• Learn about how New York became the first city in America to approve congestion pricing. 

In the 98 years since economist Arthur Pigou introduced the idea that adding tolls could alleviate traffic congestion, horse-drawn carts have given way to automobiles, and congestion in the United States has grown to consume 42 hours per urban commuter annually. Commuting is reported to be the least pleasant activity in the day, and all this extra time spent in traffic wastes fuel, causes additional pollution, and leads to serious health problems. Because of the seriousness of these costs, addressing traffic congestion has become a leading issue for cities around the world.

Notwithstanding these pressing concerns, governments remain hesitant to turn to tolling to alleviate traffic congestion in large part because of the perceived wisdom that adding tolls hurts many, if not most, road users. As one voter put it, “Turkeys don’t vote for Christmas—and motorists won’t vote for more taxes to drive.”

The distributional consequence of tolling is the focus of a large amount of literature. I build on this literature and show it is possible for a carefully designed toll applied to a portion of the lanes of the highway to generate a Pareto improvement (an improvement that helps everyone) even before the revenue is spent. Generating a Pareto improvement before using the revenue is valuable because while in principle there exists a set of transfers such that congestion pricing helps everyone, it is difficult to implement such transfers. However, whether it is possible to obtain a Pareto improvement without using the revenue depends on the distribution of traveler preferences, and furthermore, being able to price some portion of the lanes does not guarantee it is possible to price an economically meaningful portion of the lanes.

Read the full article about evaluating the consequences of congestion pricing by Jonathan D. Hall at Cato Institute.