Congestion Pricing

TLDR: Congestion is a negative externality and is taxed in Utopia.

Prerequisites: None

Roads, as they exist in most places, are a common good. They are free for anyone (with a car/license) to use, but each person on a road reduces the availability of that road to other travelers. In extreme cases the road becomes choked with vehicles, forcing long queues that can then start choking nearby roads and perhaps even result in gridlock. Anyone who has driven in downtown New York, Tokyo, Mexico City, or various other cities in India, Russia, and elsewhere can appreciate the problem.

New York City

As with any common good, the underlying dynamic is that each user imposes an external cost on other people, without imposing a corresponding cost on themselves. For an excellent, albeit quite long and abstract perspective on these kinds of problems (and related evils), I strongly recommend Meditations on Moloch by Scott Alexander. But congestion isn’t quite as bad as many common good problems (like air pollution) because it’s self-limiting.

Imagine there’s a nice park that’s free to the public, in the middle of a dense city. On the weekend lots of people go there to relax, but as more and more people start showing up, the green hills and light woods gradually turn into crowds. The benches are constantly full, and there’s no room to bike or play games. As a result, many of the people decide that going to the park on the weekend isn’t so great. Fewer people thus show up, and an equilibrium is reached where there are lots of people in the park, but the average person there is still having a pretty-good time.

Can we really do better? What if we built another park?

The strategy of building more will often bring up the subject of induced demand: the dynamic where a congested roadway will spur someone to build another road or expand what currently exists, but instead of making the roads more free and clear, the expanded capacity immediately fills up with more motorists. It seems likely that if the city park were expanded, the expanded park would possibly be just as full as the smaller park. People who talk about induced demand often imply that there’s some kind of failure here; the relevant Wikipedia page starts with a quote from city planner Jeff Speck, who described induced demand as “the great intellectual black hole in city planning, the one professional certainty that every thoughtful person seems to acknowledge, yet almost no one is willing to act upon.”

But parks are made to be enjoyed and roads are made to be driven on! Ignoring issues of pollution and noise, having more drivers on the road is broadly good! The relevant metric for a road is not the average speed of the vehicles on that road (are highways “better” than urban streets?) but rather the total amount of value that the road adds to each person in the area. If we have the choice between a clear and open road that gives $10 of value to 100 people, or a slow, congested road that gives $2 of value to 550 people, we should choose the congested road!

Does this mean that Central Park is doomed to be crowded, and Manhattan is doomed to be a traffic nightmare? Perhaps! But it’s still possible to do better, regardless of the level of congestion.

Central Park

Efficient Allocation of Common Goods

Imagine that three people are walking through the woods when they come upon a rare mushroom that can be used for medicine. All the travelers see the mushroom at the same time, and the mushroom can’t be cut into pieces without ruining it. What should they do?

The default option is for them to scramble for it and fight to take it for themselves. This is a terrible option for many reasons, but it’s worth paying attention to as a disagreement point – the option that results if people fail to cooperate.

Another natural option is to randomly allocate the mushroom. This is a pretty good start! There’s a strong element of fairness in the way that each person has the same chance of getting the prize. But we can do better.

Let’s say that one of the people, Alice, has a mother who is dying from an illness that the shroom could cure. Bob has joint pain that the shroom could alleviate, and Carroll has no good use for the mushroom at the moment, and would just save it for some later date. It seems very bad if Carroll randomly gets the mushroom and then Alice’s mom dies, and only slightly less bad if Bob gets the mushroom.

Perhaps Bob and Carroll should simply agree that Alice has the highest need, so the mushroom should go to her. But this produces weird (and bad) pressures on people, as a way of dividing resources. For example, if there are two people with sick relatives, it encourages those two people to compete for sympathy and play up how they have it so much worse than the other person. Furthermore, if there’s a venture that might yield resources (like starting a business), those who are most productive (and thus not very needy) are discouraged from participating.

Instead, we can have Alice show that she cares more about the mushroom by paying for it. As long as the people have a shared unit of currency, Alice can buy the mushroom off of the winner of the random process, ensuring that the person with the highest need gets the good, while compensating the others so as to keep the incentives in the right place. (Even better: Alice can buy the shares of the mushroom lottery before it is randomly allocated. This allows both Bob and Carroll to be compensated, instead of randomly having one of them get nothing.)

The big problem with congested roads is not that they’re congested, but that they’re congested poorly. Imagine a similar situation to the mushroom, but for a boat that only fits two people. Alice needs to get to the other side of the river as fast as possible, Bob really wants to visit the other side of the river, but doesn’t particularly need to rush, and Carroll is just looking for some way to occupy her time. Clearly Alice and Bob should get on the boat, and Carroll should find some other thing to do. In a world where Carroll happened to get on the boat first, the boat would have the same number of people on it, but it would be inefficiently allocated.

What is needed is a way of making sure that people who drive on roads during hours of peak demand, or who visit parks on the weekend, or whatever, are compensating others for using the scarce resource. If no compensation is provided, the resource will be allocated inefficiently and everyone will be worse off. (Those who are priced-out are better off because they receive money from those who aren’t.)

Utopian Roads

My best guess is that Utopia has most roads built and maintained by governments. The road network can be expanded by private roads (particularly common in rural areas), as long as those roads conform to government standards. Freedom of movement is critical to a free society, and there’s too much risk of exploitation otherwise.

One of the standards enforced on the roads (public and private) is a tracking system. All vehicles have a radio transponder installed (in addition to license plates) that identifies their owner, and each major intersection has a detector that tracks vehicles as they move from one road to another. Vehicle owners pay a regular fee based on which roads they’ve traveled, and when.

Roads take damage from cars driving across them, so there’s a fee that scales up based on distance traveled and the weight of the vehicle.

Roads also make noise which can bother nearby people, so there’s another fee that scales up based on how much time is spent on the road, how noisy the vehicle is, what time of day it is, and on what the surrounding area is like. A motorcycle driving through a dense residential area at night would incur a heavy fee, while an electric car driving through an industrial district during the day would pay nothing.

Finally, there’s a fee that scales up based on the expected number of displaced drivers — people who would use the road if it were more clear. When a road is uncongested (even if there are vehicles on it), this fee is $0. But as a road begins to be packed, the fee increases dramatically. As with the noise fee, this fee scales based on the amount of time spent on the road, further disincentivizing traffic jams. In urban areas, where the number of displaced drivers can be very high (perhaps higher than the number that could fit on the road, even!), congestion pricing warnings are issued by signs, encouraging people to take trips at other times of day or use public transit.

When a person’s fee is calculated and issued, they’re given online access to a full explanation of where it came from, including line-by-line entries for each road. A high-level summary explains where their biggest costs are coming from, and gives tips on how to lower their bill. Collective data is anonymized and provided openly for the public on government websites, including in real-time. Third-party tools like navigation software can take pricing into account and inform drivers of expected fees, or reroute to reduce congestion.

Some of the money collected from fees is then used to maintain and build roads and other transportation options, or given to the owners of private roads. Motorists are generally in favor of buses, trains, and walkable districts, as such things reduce the number of expected displaced drivers on the congested roads that they drive. (Buses, trains, et cetera also use congestion pricing – being nearly free in off-peak hours, and becoming expensive during prime commuter periods.)

Much of the money, however, is given back to those who live nearby. Little old ladies who shop during the middle of the day get a regular dividend for not displacing other drivers. Those who work odd shifts or weekends get a little perk. Even people without cars are paid out of the collective pool, so as to incentivize people to lean into public transit, telecommuting, and other means of reducing the congestion burden on their neighborhoods. This also means that people tend to be more in favor of having large roads built near their houses — assuming of course that they expect those roads to be used.

In Utopia there is traffic, but far less per capita. Cities are denser, and vehicles are significantly more expensive to drive there. Long-distance travelers and trucks almost always avoid driving through city centers. Most vehicles are quieter, and public transit is common.