Date: October 1, 2020
Author(s): Michael Manville
Abstract
Can pricing roads really help reduce congestion? One way to answer this question is to ask if not pricing roads causes congestion. This essay makes that case, and does so by demonstrating the general principle that when goods are underpriced, shortages result, and congestion is essentially a shortage of road space. People react and adjust in many ways to shortages, but accurate pricing is the only reliable way to end a shortage caused by mispricing. I illustrate this concept with oil and gasoline price controls. In the 1970s, the United States inadvertently created a gasoline shortage by mispricing gasoline, and in response to that shortage made a series of increasingly complicated and largely ineffective adjustments. While today most people agree that these gasoline price controls were unwise, an analogous situation persists on our roads, which most people tacitly accept.
About the Project
In California, driving is cheap and housing is expensive, and both these facts impede the state’s progress toward sustainability, safety and affordability. Efforts to solve these problems, however, often operate on parallel tracks: bold plans to increase housing production say little about congestion, and plans to address congestion rarely discuss the housing crisis. While these omissions are often understandable, they create a situation where policy proposals to solve one problem often flounder on concerns about the other one. Proposals to allow more development, even near transit, encounter resistance from neighbors concerned that development will bring congestion. Similarly, proposals to price roads encounter resistance based on the concern that California is already extremely expensive, and people have to live far from where they work because of the housing crisis. Somehow this policy gridlock must be resolved, if California will meet its stated goals of reducing VMT, reducing emissions, and building millions of units of housing.