Congestion, envy and equity

The Central Texas Regional Mobility Authority plans to add two lanes to MoPac between Lady Bird Lake and Parmer Lane.  The cool part of the plan is that it intends to use dynamic congestion pricing — i.e., the toll will fluctuate as necessary to keep traffic in the the tolled lanes flowing at 50 mph.   The six existing lanes will remain free.

This is how we ought to add new capacity.  It will make everyone better off.   The people who choose to pay the toll will be better off because they value the time savings more than the cost of the toll.  Bus commuters will be better off — they might be the biggest beneficiaries, in fact — because they will get a suddenly much shorter commute for (I presume) the same bus fare.  Drivers who continue to use the free lanes will endure slightly less congestion, even if it’s just a narrower period of peak congestion.  Finally, taxpayers, if not better off, will be no worse off because they won’t have to pay for the extra capacity.  The capacity will be paid by those who value and use it.

Everyone will not only better off compared to the status quo, but . . . and this is the key point . . . they’ll be better off than if the two new lanes were free.   Adding two free lanes would reduce congestion, too, but they would reduce congestion less than two new tolled lanes.  Tolling congested lanes increases their capacity.  A congestion-priced lane can handle 1,800-2,000 cars per hour; an unpriced lane during peak congestion will handle less than half of that.  Somewhat counterintuitively, perhaps, charging for a congested lane is a sure way to get more cars through it.

Obviously, drivers happy to pay the tolls to skip congestion would be worse off if the new lanes were free rather than tolled.  Bus riders who would lose out on a faster commute would be worse off if the new lanes were free.  Taxpayers stuck paying for capacity that they might not value would be worse off if the new lanes were free.   But, because tolling lanes increases their capacity, even the drivers who would not use the toll roads anyway would be worse off if the new lanes were free.  They would have to contend with more congestion.   

Congestion pricing is a no-brainer.  So I was puzzled when Ben Wear raised the equity angle in a companion column.   After pointing out that all drivers would benefit from the congestion reduction from the new lanes, he concluded:

Undoubtedly however, those with money will be able to use the variable-price lanes more often than those on a budget.

It may become something of a spectator sport for those caught in MoPac congestion to count the number of Lexuses, Mercedeses and Escalades that fly by in the express lane.

It ain’t necessarily fair. But in the words of John F. Kennedy (who certainly could have afforded to use this lane), life is unfair. And it will help pass the time.

It’s strange to complain about fairness when everyone will be better off with new tolled lanes than new free lanes.  

But it’s especially strange to complain about fairness because, once the lanes open, the only people on MoPac who will be causing a net social loss will be the drivers in the free lanes.

 This is basic congestion theory but most people still don’t get it.  When you enter a congested highway, your mere presence inflicts a cost on everyone else.  Every car behind you is delayed just a little bit, maybe only a few seconds each, but the delay affects a bunch of cars.  Getting in everyone else’s way imposes a social cost.

There’s not a lot a driver can do about that today.  We can’t even say for sure what cost each driver is imposing on everyone else.  But once the toll lanes are built, we’ll know.  We’ll know because the congestion cost each driver imposes on his fellow drivers will be approximately equal to the price of driving in the congestion-free lane.  That’s one of the quirks of the economics of congestion — it turns out that the cost of congestion a driver imposes is equal to the congestion-clearing price.

Once the toll lanes are built, drivers will have a choice.  The people who enter the tolled lane will be precisely the drivers willing to pay the cost of their congestion.  The toll lane will allow them to pay that cost and get out of the way of everyone else.

The people who don’t pay the cost are people for whom, say, 15 minutes in time savings isn’t worth the $3 toll or whatever it turns out to be.  That’s most people, presumably.  But saving 15 minutes is worth something to them.  If you value the time savings at $1, you would incur a $2 loss by taking the tolled lane.  But you will impose a $3 loss on your fellow drivers if you stay in the free lanes, because we know the cost of your congestion is equal to the toll.  Staying in the free lanes produces a net social loss of $1.

Congestion is socially-sanctioned selfishness.  It’s ok only because everyone does it.  But if we’d get used to thinking in terms of costs we’re inflicting on everyone else, there’d be less moaning about those paying for the cost they’re imposing while we mooch our way down the free lanes.