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This podcast on congestion pricing was really good. Good in the way that it clarified some unique aspects of the problem in my mind that I hadn't previously understood. Primarily, one issue is that there is no mechanism for the money acquired from the people willing to pay to access to road to end up compensating the people who choose not to use the road because of the price. For many other goods, this isn't as big of an issue. If there is a shortage of apples, it's good to allocate them to the people most willing to pay, but the other folks don't feel as much like they just lose out entirely. There are probably plenty of folks willing to bring a plethora of oranges to the market, and while they're not the same, I mean, eh?
Whereas, having more roads is valuable to people. So if the default solution is "just add a congestion price; that'll fix the problem; don't need more roads; screw the people who can't afford it", it's going to be tough. Those people still really want roads and access to them. They probably can't just go buy a close substitute. Their only real hope is to lobby the government to build more roads, but if the accepted solution is "just add a congestion price; that'll fix the problem", then it'll be more difficult to actually accomplish that (after all, the 'problem' was 'solved' by the congestion price!).
The hypothetical ideal would be if we could magically take the money gained from congestion pricing and give it to the marginal consumers who will now choose to not drive because of the price. That would provide them some compensation for their loss that could replace the hopelessness of wanting to lobby for more roads, which would greatly ease the tension/discontent (it would make the political fights over building/not building new road capacity less contentious, because there would be less of a cliff in loss-of-value), while still allocating road usage as efficiently as possible. Unfortunately, IIRC, the podcast basically left this point with, "...and we have no idea how to actually implement something like this," and I agree. Simply slapping a congestion price on it might be the least bad solution that we've currently tried/figured out, but the nuance here leaves room for hope that we can devise something better.
They are compensated as long as the money is spent on something that benefits them. It could be spent on some public service, given back as a rebate, or used to lower taxes.
The money can be given back in a targeted way. It could be given to poor drivers such that no one won't be able to afford the congestion charge and everyone will be better off.
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Totally disagree. If you think it's an injustice if some people aren't willing or able to provide valuable enough labor in the labor market to entitle them to consume enough scarce goods and services, then we can have a social safety net. But it's economically incoherent to argue that the specific dollars that we collect when we auction off access to a fundamentally scarce service (even if it's a government provided service like roads) need to be handed to people who don't use the service.
I'm 100% on board with not screwing with the price signal in an effort to try to redistribute wealth (if you've ever listened to EconTalk, you should be convinced of that), but this isn't that.
The core observation is that when I sell a scarce good, say an apple, to you, I'm giving something up - the ability to use the apple. But what I'm getting in return for giving that up is money. That's what makes it an exchange.
In this case, that two-sided thing isn't happening. The people who are giving up the ability to use a scare resource are not getting something in exchange for it. It's weird, because the process is being mediated by a gov't who gets to 1) set the quantity of roads, and 2) set the one-sided price for them. So, it's simply not an actual exchange that follows the normal principles.
Instead, the people who are giving up their ability to use the roads view it as purely an imposition of government choice to force them off the roads, with no benefits (only pure costs) coming their way. Does it need to be the specific dollars that are collected by the congestion tax? Not necessarily. But further fundamental theorizing needs to happen to figure out how to structure the system so that all parties are properly incentivized to desire that the gov't build the efficient number of roads and charges an efficient price for it. Without these incentives done properly, we've already botched the price signal's ability to regulate the number of roads/price for them (it becomes a matter of pure political power), without even having the motive of trying to redistribute wealth! We're already causing the very problem that you're now desperately trying to avoid!
They aren't giving up the ability to use the roads any more than you'd be giving up the right to eat an apple by not purchasing the apple.
Should the apple industry be taxed so that the proceeds can be specifically distributed to people who have chosen not to purchase apples?
They could view it any number of ways, but idiosyncratic views don't make good policy arguments.
That's because it's possible to not purchase the apple.
Roads are not entirely funded by congestion taxes placed on road users, even in this scenario. You can't avoid paying for the road.
The government also used eminent domain to build the roads, which is inherently a non-market activity, and its police powers to control road usage, and central planning to decide where to build the roads. Apple sellers lack this power, and we only give the government the power to do this as part of a bargain which includes the government letting us use the roads.
So? Eminent domain and government funding is used to construct shipping ports. That doesn't mean you get to dock your motorboat in it.
Can commuter trains not collect fares? Their tracks were laid with taxpayer funds on land taken by eminent domain.
I didn't say I oppose toll roads per se. Commuter trains may collect fares. But it's legitimate to complain about a cost structure for commuter trains, that it isn't for apple sellers.
The answer is pretty similar for ports: Sure, the government may restrict use of the port. But the standards for what restrictions are appropriate are different from the standards for things run by markets.
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In your scenario, whence my right to eat the apple in the first place? It doesn't even make sense to talk about "giving up" a right that never existed.
No. The apple industry is giving up their use of apples in favor of money, so their incentives are properly aligned.
Whence your right to use a congestion-priced highway without paying the congestion price?
If the State decided tomorrow to impose mandatory searches of your person and effects as a condition of using the search-priced highway, whence your right to use a search-priced highway without paying the search price?
Probably the same place as my right to fly on a commercial airplane without paying the search price, unfortunately.
I suppose it probably made more sense for me to actually just continue, but it felt like a nice moment in the conversation to pause and hear a response. Your joke would have been well-timed in-person; it is much-appreciated!
In any event, to continue on to my point, if you used to have the right to use the highway without paying the search price, and now they impose a search price on use of the highway, I think one is perfectly entitled to claim that they have 'lost' a right, and that this loss has come without any compensation. In fact, imposing the search/congestion price is a loss for the people who choose to pay the price, too! The difference is that they valued the use more than the price.
So, where should compensation go? I imagine one might impulsively argue that we should somehow compensate the people who pay the congestion price, because of their loss. I'm not really sure about that. I don't think that we should necessarily just go around compensating everyone for their loss in response to every government policy.
Instead, I think there are two factors that I think should drive our thinking for how we build a framework to do this well. First, there is in a real sense a transfer of benefit from the people who choose to stay home to the people who choose to drive. As you said yourself, "Highways reach a congestion inflection point where each additional car results in less throughput (fewer people-miles delivered per hour) and that's a classical tragedy of the commons." That person who chooses to stay home provides actual value to the person who chooses to drive, in the form of a reduced travel time. Purely theoretically, some amount of the congestion tax paid provides value to the user just in terms of the road, itself, while some amount of the congestion tax paid provides value to the user in terms of causing others to not drive, saving them time. Ideally, we could figure out how to actually price "not driving", but trying that directly may run into the same problems as other "offset strategies". I'm really not proposing a specific solution here; just observing that there is a tension/problem yet to be solved.
The second factor, as I mentioned above, is that we should try to devise a scheme that ultimately incentivizes both an efficient number of roads being built and an efficient price being charged. Frankly, I'm not sure we're doing very well even on the latter, but one-sided congestion pricing is absolutely trashing the likelihood that we can ever accomplish the former. I really don't even have much of an "ideal" here... just that I think we have more work to do than just slapping made-up prices on things and calling it good.
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