Paying to Drive on City Streets

Filip Palda (footnote 1)

In 1996, William Vickrey won the Nobel prize in economics. He was a socialist who believed in the virtues of making people pay for what they use. His research into the economics of transportation came down to this: "In no other major area are pricing practices so irrational, so out of date, and so conducive to waste as in urban transportation." It's a verdict with which economists from the left and the right agree. Unfortunately, few other people see it this way, even though most of them suffer from "free" access to city streets. This suffering is known as the traffic jam. What's wrong with traffic jams and how can we solve the problem?

In traffic jams we learn to despise humanity, and mistrust the benefits of cooperation. Look what happens when you play the good citizen in such a jam. Suppose that you realize roads would be better with fewer cars on them, and decide to pull off at the next exit and wait 30 minutes parked at the curb. The space you have just freed is now open to someone zooming down the next feeder ramp. He will not see or understand your sacrifice, and will slide into the slot you have liberated. We know from the science of psychology that behaviour is reinforced by positive feedback. There is no such feedback in the traffic jam. You cannot target your help to deserving people, and you get no thanks.

Consider the flip side. You join traffic that is flowing slowly and is on the verge of jamming. You get on the expressway and slow 1,000 cars behind you by a second. This works out to 16.7 minutes of time lost for others. Your cost is minimal. And you don't see the victims, which could include a mother on her way to the delivery room, a student on the way to exams, and a senior on his way to the emergency room. So it's easy to tell yourself what you are doing is okay. Inconsiderate behaviour thrives without negative feedback.

Perhaps it is time we reconsidered the golden rule, a guide for many religions and philosophies over the centuries, which also acts as an ecological rule: do unto others as you would have them do unto you. In other words, act as if you were taking into account the cost your use of resources imposes on other people.

In an anonymous, fast-moving society, the golden rule suffers. Nobody knows what others are up to, so that social sanctions and rewards on which the rule is based do not come into play. After a while people who obey the rule get tired of being fed on by the anonymous violators, and you get a free-for-all. It's like the meal I share with 100 people on a common tab. If I hold back, I only save 1/100th of the expense. The remaining savings are spread on the others. If I indulge, I only pay 1/100th of the cost. Which is why, in such situations, the result is an unwanted feast. One way to control the feast is to make everyone pay the cost he imposes on others. In other words, charge him as he eats. This is what user fees are all about. A user fee is a way of imposing the golden rule on thousands of people who don't know each other, and who have no fixed relations among each other. The price you pay should be equal to the damage you do to all others by taking a piece of that environment for yourself.

This is how user fees for roads would work. They would force trucks to use off-street facilities for loading and unloading. Although trucks make up 20 percent of urban travel, they contribute more than their share to congestion. US economist Edwin Mills suggests that a truck driving downtown at rush hour imposes $30 of costs per hour on others. Currently, trucks do not need to worry about these costs because they do not pay them. A study of Toronto's city centre found that 19 percent of freight vehicle stops were made in front of buildings with good off-street loading facilities, but less than 10 percent of these trucks made use of the facilities. They could not be bothered because of the mild inconvenience of going off the street. A golden-rule toll of $30 an hour would make off-street loading bays a popular place.

Similarly, a user fee would also force private individuals to ask themselves whether they really need to be on the road. The fee would sift serious users from users who could wait an hour, travel an hour earlier, or resort to other modes of transport. We sift and sort users like this when it comes to electricity, telephones, and, in some jurisdictions, water use. Roads deserve the same treatment. Given the validity of the golden rule, why do we allow the abuse of city streets to go unchecked?

Fifty years ago, pricing streets was not an issue, as cars were few. Even if you had wanted to, you could not have charged prices; the technology was not there. This started changing in the 1950s, just at the time user fees were becoming a necessity. LA had built giant "freeways" that were anything but free. Toronto built its giant expressways then. All to no avail. The more roads that were built, the faster they seemed to fill, like the Hydra, the Greek beast that grew several heads for every one that Hercules cut off.

Economist William Vickrey wrote a series of brilliant articles on how to kill the Hydra. He proposed new technologies that would allow cities to charge drivers. His methods were visionary and have now become reality. He proposed that one could attach a transmitter to each car. For every block the car drove, the transmitter would come across a radio beam that would add a notch to the car's counter. The device would log each mile travelled, and the time of travel. Drivers would then bring their logs to a record office where they would pay. Electronic billboards in the town would advertise the minute-by-minute price of travelling down the streets. There would be a base price calculated as the driver's share of the costs of building and maintaining roads. If traffic was getting crowded, a second tier would be added to the price and would rise until congestion eased. Based on the cost, drivers could decide either to go back home and take the trip to the bookstore later, or decide that their dentist's appointment was too urgent to miss. Prices would act as a mechanism for coordinating people, so that the roads would only be used at rush hour by people with the greatest needs.

Vickrey's ideal has crept into a few cities. Trondheim in Norway has 12 toll plazas through which cars must pass if they want to get downtown. Billing is electronic, and automatic. Highway 91 in California guarantees a free flowing ride and varies prices to keep its promise. Highway 407 in Toronto is a showcase for toll roads in Canada. These are the exceptions. The rule is the mayhem we know in all major Canadian cities.

Our resistance has to do with habit. We are used to free streets. It is difficult for politicians to introduce a price into this setting. The price reminds people they are paying every time they use the service. Consider the unpopularity of the GST. Politicians find it much safer to hide the cost of streets in the price of gasoline, and give us the impression that use of the streets is free. We have resisted user fees because we are rightly suspicious of politicians. No one wants to open another pocket into which politicians can dig their fingers.

The result of our reluctance is not just overcrowded streets. It is an overbuilding of streets, subways, and monorails. Subways have been built to relieve congestion on city streets. Instead, they have had about the same effect as building a new lane on a highway. It fills up instantly at rush hour, and is nearly empty the rest of the time. Some people who used cars switched to the subway, but they just cleared space for other people to use their cars. Public transit does little to solve the chief crime of the rush hour, which is a failure to ration travel on roads to those who need it most.

Transit has a role. The greatest subways were built by private enterprise and thrived until government took them over. They would come into their own again with street pricing. With such pricing only people who really loved the car or needed it would drive at rush hour. People who needed to travel but were not particular about taking the car would take the subway. People who did not need to travel but liked the car could wait until after rush hour. Pricing city streets would make the subway profitable, would cover the costs of building and maintaining streets, and would sort people into the most efficient time slots.

Pricing may be fine, but what ensures us that we are going to get the right price? Isn't it possible that politicians will charge more for the first-tier maintenance cost than they should? Yes, especially because there is not much competition in politics. This allows politicians to charge a "monopolistic" price. So instead, we should privatize the street system, just as the French have privatized water systems. Even though there can be only one operator, you can have an auction at which the lowest base-price bid wins. So paying for streets is not a simple matter of sending people a bill. We need the technology in place to do it right, but we also need the right controls on who is going to charge the prices.

Will cities ever charge for using their streets? It is hard to say. In Quebec, the trend has been away from charging for roads. Tolls on major bridges to Montreal disappeared in the 1980s. In Toronto an experiment is beginning with highway 407, but it does not look like spreading to all city streets. What blocks our acceptance of tolls is a lack of knowledge. We have too little information about who will win and lose, and little assurance that government will reduce gasoline taxes by the amount that tolls increase. In spite of these obstacles, interest in pricing city streets will grow. As we become more productive and our time rises in value, the benefits of putting order into our streets will outweigh doubts we have about paying directly for their use.

Footnotes

1. This article is a shortened version of the speech given by the author to the Montreal Student Seminar on Public Policy Issues on March 14, 1998.  Back to top

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