I should have made this point, too: Our failure to congestion price our roads really screws up our decisions on increasing capacity.
When roads are congestion-priced, the revenue tells us when we need more capacity. On this, see this (pdf):
One important feature of congestion prices is that they not only discourage usage when congestion is present, but they also generate revenue for capacity expansion. Indeed, it has long been recognized that under certain conditions the optimal congestion prices for a fixed amount of capacity will automatically generate the appropriate amount of revenue to finance capacity expansion.
This means that when optimally priced road generates a stream of surplus revenue, it is time to add more capacity -- and the "right" amount of new capacity (assuming constant cost per unit of capacity) will be whatever the surplus revenue pays for.
If we priced things right, we'd know when to invest in rail. Take I-35 through central Austin. If congestion pricing produced a huge surplus (and it would), we could invest that money in additional capacity. We could then decide whether new roads or rail would give us the best return on our investment. Since increasing road capacity on I-35 would require tearing down neighborhoods or building a triple-decked highway -- both prohibitively expensive -- I'm confident that commuter rail would be the way to go. In either case, we would have a firm understanding of the economic return from the investment.
