The Economics of Transportation

Last Thursday, I saw Kenneth A. Small, Research Professor and Professor Emeritus of Economics at the University of California, Irvine and Author of "The Economics of Urban Transportation" speak at the Public Affairs Forum hosted by the Federal Reserve of Atlanta. Mr. Small spoke about how congestion is imposing a heavy cost on urban economies and how the economic solution of congestion pricing will be the most effective in solving the problem.
Congestion pricing is a simple theory that puts a price on congestion paid by the people who contribute to it. Congestion pricing uses off-peak toll discounts and relatively higher peak tolls to encourage drivers to drive during less congested hours, carpool, vanpool or use public transportation. Mr. Small spoke of other ways of trying to deal with congestion, such as building new roads, regulating parking, or subsidizing public transportation, which he emphasized all play a role, but none on its own will have the same impact as congestion pricing.
He went on to talk about how Singapore and London implemented very successful congestion pricing programs and how the United States is starting to take notice. In London the impact of the scheme exceeded expectations. In the first year of the charge, traffic delays in London dropped 30 percent, journey time reliability increased by 30 percent and average speeds rose 17 percent.
Recently the United States created a federal program called Value Pricing Program to study the feasibility and to support pilot tests of variable tolls throughout the nation. New York City, under Mayor Bloomberg's administration, went as far as trying to institute the same program as London but was rebuffed by state legislators.
There was a lot of discussion about the politics of congestion pricing. Critical political and institutional issues include public opposition to any new taxes or fees, geographic and economic equality concerns, lack of regional transportation coordination and the lack of alternatives to driving alone during peak periods. Mr. Small’s did offer some advice to communities considering such a solution. He indicated that congestion pricing will require strong leaders as well as competent administration and tight enforcement. He also strongly recommended putting some if not all the money back into public transportation improvements. If this is done the benefits of congestion pricing will be felt across the spectrum.
I do believe that as we search for additional ways to pay for our transportation systems, these economic solutions to transportation will start to have more acceptance. If you want to read more about congestion pricing, check out these sources:

Alternative approaches to congestion pricing. Website of the Keep NYC Congestion Tax Free
Congestion Pricing: A Primer. FHWA. December 2006
Congestion Pricing: A smart solution for reducing traffic in urban centers and busy corridors. Website of the Environmental Defense Fund
Congestion Pricing-Paying Your Way in Communication Networks
Congestion Reduction Demonstration-USDOT Electronic Tolling/Congestion Pricing
Equity and Congestion Pricing-RAND Corporation 2009
Income-Based Equity Impacts of Congestion Pricing: A Primer. FHWA. December 2008
Policy Corner-USDOT Online TDM Encyclopedia: Road Pricing - Congestion Pricing, Value Pricing, Toll Roads and HOT Lanes-Victoria Transport Policy Institute Online TDM Encyclopedia: Vehicle Restrictions-Limiting Automobile Travel At Certain Times and Places Alternatives to congestion pricing
Road User Charging Schemes Worldwide. U.K. Commission for Integrated Transport
Transportation Research Board Committee on Congestion Pricing - US National Academies of Sciences, Transportation Research Board
Urban Partnerships-USDOT
Using Pricing to Reduce Traffic Congestion-US Congressional Budget Office. March 2009