President Trump has begun to act quickly on the promises he made during the presidential campaign. One position he has taken but he has not yet acted on is his desire to terminate the New York City congestion pricing experiment. However, it is in the nation’s interest for President Trump to refrain from taking this action and to give households and firms the time to make all their important adjustments to congestion pricing and reveal its large socially desirable effects.
By increasing mobility, congestion pricing could enable consumers, workers, and firms to make much better use of their time and resources and could revitalize multiple sectors in the economy, as well as the entire economy. If President Trump terminates the experiment in NYC, he would foreclose valuable knowledge about the benefits of congestion pricing, which could lead to its adoption in congested urban areas throughout the nation.
Distance prevents people and goods from being in two places at once, limiting the quality and productivity of people’s lives and an economy’s performance. For example, a person cannot be at home and run a firm’s shop floor; a family cannot be at home in the Northeast and on vacation in Florida; materials used to build a new car cannot be in a foreign country and in an American automobile assembly plant; and the like. Distance has a cost that often cannot be overcome by the communications system.
The purpose of a transportation system is to reduce the full cost of distance, which includes out-of-pocket costs, the costs of travel time and the unreliability of travel time, and the costs of injuries, fatalities, and damaged goods resulting from accidents enroute. And because many economic activities cannot be performed until people and freight overcome distance, the cost of distance includes efficiency and productivity losses in an economy’s labor, urban, industrial, and trade sectors.
By reducing the cost of distance, an improvement in a transportation system can immediately benefit both travelers and shippers. As people and firms change their behavior to take advantage of the opportunities that have become possible because a transportation system has improved, multiple sectors of the economy can become more productive.
NYC set up a congestion zone located at 60th street to the southern tip of Manhattan, where vehicles must pay $9 a day to enter the congestion zone at peak hours. Buses and trucks pay more, low-income drivers pay less, emergency vehicles, school buses, and vehicles carrying people with disabilities pay nothing.
The reports on the initial effects of NYC congestion pricing align with expectations. The tolls have benefited travelers and shippers who are willing to pay them to save travel time. They also have changed the behavior of travelers and shippers who wish to avoid paying the tolls because their cost exceeds the value they place on the time savings. Thus, they use different modes such as transit, change their departure times to avoid traveling in the congestion zone during peak hours, or travel less in the zone. Their actions caused nearly a 10% decline in the vehicles entering the zone.
As an additional benefit, by reducing a motorist’s exposure to other vehicles, the decrease in congestion has resulted in significantly fewer vehicle crashes and injuries compared with the same time period a year ago.
Notwithstanding the initial favorable evidence, the costs and benefits of the NYC congestion pricing experiment should be assessed only after consumers and firms have made several important responses to less congested roads. First, faster and less onerous commutes will enable workers to be more productive and reliable. At the same time, both workers and employers will be able to expand their respective searches for new jobs and employees and achieve better workplace matches that increase productivity.
Second, people will be better able to cluster in dense locations to share intellectual and artistic ideas and increase productivity. Urban land use also will improve because people can improve their tradeoff of commuting and housing costs by moving away from the city center to less expensive homes with more space without significantly increasing commuting time. In addition, firms will be able to move to less expensive production locations without affecting their product distribution.
The potential for congestion pricing to enable people to change jobs and residential locations suggests that people who may be hurt initially by congestion pricing, such as taxi drivers who lose business, also could change jobs and residential locations so they are no worse off and possibly better off.
Third, evidence shows that highway congestion has contributed to an “arms race” with people buying larger cars that increase the severity of accidents. Thus, congestion pricing could improve safety for all motorists and pedestrians by influencing people to switch to smaller vehicle sizes.
Fourth, the industrial sector will become more productive because faster and more reliable deliveries will enable firms to reduce inventories because they will be less concerned about the possibility of stockouts.
Finally, the foreign and domestic trade sectors that affect consumption in New York will improve because the full cost of shipping goods will decline, enabling consumers to benefit from greater price competition between domestic and foreign producers and from greater product variety and quality.
Benefits will grow if other U.S. cities, which are closely monitoring the NYC experiment, adopt congestion pricing. For example, if both New York and Boston adopt congestion pricing, passenger and commodity flows between the two cities would be subject to less congestion and fewer travel delays. Firms in both cities could therefore reduce their inventories and consumers in both cities would benefit from lower transportation costs and commodity prices.
Because it could take several years for consumers and firms to adjust their behavior to the improved road system, it is essential for President Trump to commit to maintaining congestion pricing in NYC. Any uncertainty means that households would be unlikely to move to another residence and workers would be unlikely to change jobs to take advantage of less congested roads because of concerns that congestion would return to its previous level after the tolls were terminated.
Importantly, there could be a huge payoff to the nation if President Trump were patient and allowed the NYC congestion pricing experiment to generate evidence that congestion tolls could produce widespread economic benefits. If congestion tolls could have that effect, the public would realize that autonomous vehicles could produce similar effects, but because autonomous cars, trucks, ships, buses, trains, and planes could travel at faster speeds and improve safety, compared with their non-autonomous counterparts, they would produce much greater economic benefits. This realization could create nationwide enthusiasm that overcomes the technophobia and self-interest that currently threaten timely adoption of autonomous transportation technology.
