22 June 2012

The politics of traffic congestion

Jay Wetmore sent these interesting observations:

I recently attended a forum at the Humphrey School of Public Affairs at the University of Minnesota, titled, "The Future of Transportation Finance: Who Will Pay?" The forum [video link] was hosted by former Congressman James Oberstar who is still heavily engaged in public policy and transportation issues. He gave a good performance and it is easy to see why he has been such a powerful figure during his very long public service career.

His framing of every issue though brought to mind the cliche that, "To a man with a hammer, everything looks like a nail." I'll rephrase that in honor of the congressman to: To a man with political power, everything looks like a collective action problem.

The first panel included; Oberstar, the CEO of the American Association of State Highway and Transportation Officials, the CEO of a railroad, a consulting engineer, and an employee of a state Department of Transportation (DOT). The consulting engineer is an advocate of tolling as a method for pricing congested roads, and the DOT employee is an expert and advocate for funding highways using a Vehicle Miles Traveled (VMT) method, that could include congestion pricing.

Based on the presentations, and the reactions to them, I doubt there will be a new federal transportation bill any time soon. It will be up to the "various" states to develop workable policies. I use the term workable because I don't think most people consider the current methods of funding roads or choosing construction projects to be optimum.

My own beliefs are that while many people consider roads to be a "Public Good" roads are neither non-rival nor non-excludable. This means providing roads requires different policies than providing for the Common Defense. Where roads are uncongested, they are a Club Good and should be managed as such. Where roads are congested they have all of the characteristics of a Private Good. Roads may be considered a Collective Good. We currently have many interconnected roadway sub-networks that are robustly interconnected to form a very large network. This network complies with Metcalfe's Law which makes it very valuable and difficult to duplicate (or compete with) using other systems such as rail transit.

Because many people see roads as, "Too important to be left to private ownership," * managing roads as a series of regulated monopolies - similar to other network utilities (electricity, gas, cable TV, telephone, water, sewer, etc.) is a concept worth exploring.

The second panel consisted of: a DOT Commissioner, the Executive Director for the US Chamber of Commerce, the worldwide account manager of a package express delivery company, the President of a state trucking association, the Executive Director for a transportation providers lobbying group, and an advocate for transit. So this group at least included a couple of representatives for transportation users. This group however, was devoid of new ideas and generally supported the status quo, but with more funding. This group included Rent Seekers and Free (or nearly free) Riders. The Chamber of Commerce representative and the package freight delivery service representative seemed to me to be more understanding of the positive externalities provided by a robust transportation network and seemed supportive of paying for performance.

In honor of this group, I'll modify the cliche to: To a lobbyist, everything looks like an opportunity for rent seeking.

The political problem** of concentrated benefits and diffuse costs is certainly evident in our transportation system. Jim Oberstar gave examples of several projects that he asserts represent projects of national interest, but given the costs and traffic figures he cited it I would make the case that they are projects of regional significance that can be funded by the beneficiaries of the projects.

Highways are mostly funded from user fees, and those user fees are generated at the local level, so I don't see efficiencies gained by sending those fees from the local level, to the national level, to be redistributed to the local level.

Over the last several decades a number of concepts to price roads have been implemented around the world. Singapore first instituted a congestion pricing cordon around its central business district in 1975. London and Stockholm are other large cities that that use a cordon system. In general cordon systems are expensive to operate, but they do reduce congestion.

Managed Lanes were first implemented in the United States on State Route 91 in Orange County, California [PDF]. Variable toll rates are used to keep some of the lanes in a free flow condition, allowing motorists a choice between higher time costs versus higher monetary costs. A number of refinements have been made on more recent Managed Lane projects including real-time pricing and money-back guarantees if the advertised time savings are not realized. It is interesting to note that at free-flow conditions the lanes have a much higher capacity than congested lanes have, so managed lanes often improve the performance of adjacent unmanaged lanes.

One of my favorite methods of increasing roadway capacity, in terms of people moved, is Casual Car Pooling. Known as "Slug Lines" in the Norther Virgina suburbs of Washington D.C., Casual Carpooling is a spontaneous organization, without government support, where individuals form car pools in real time at a number of popular locations. Other locations where this phenomenon occurs include the Oakland Bay Bridge in California and the Katy Freeway in Houston, Texas. There are several smart phone apps that are extending this model. Zimride is one of the latest start-ups to gain notoriety

The last management innovation I will mention is the granting of long-term concessions to private companies to manage roadways. The use of concessions only came to the United States in the past decade, but had been used internationally previously. The best known of these is the Indiana Toll Road Lease. The concession, granted in 2006, gives a consortium of private companies the responsibility to operate and maintain the toll road in accordance with an extensive contract specifying performance metrics and providing maximum toll rates. The state of Indiana collected an up-front fee of almost $4 billion dollars from the consortium for the privilege of operating the road. It will be interesting to see how the Indiana Toll Road performs relative to toll roads operated by governmental and quasi-governmental agencies over a period of 20 or more years.

Bottom Line: We have several transportation systems (for physical objects) that both compete with and compliment each other. These include, highway, railroad, air, water, and pipelines. Using the political process to grant subsidies and pick winners and losers tends to reduce the efficiency of these complex systems.

*Though I disagree. The long stalemates in passing federal transportation funding bills - this is a historical pattern - makes me think that the political process has failed and that roads are too important to be left to political whims.

** Or opportunity - depending on your outlook.

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