Last Thursday, the Government shut the door on the idea of road pricing for Auckland, saying that it would prefer to undertake “a year-long negotiation with the council on an agreed 30-year programme focusing on reducing congestion, and boosting public transport where that reduces congestion.”
The following day, the road/infrastructure lobby undertook a bit of a media blitz pushing for more construction. As part of that, we got sent this press release from the Auckland Chamber of Commerce:
12 June 2015
Auckland – defined by congestion
The Auckland Chamber of Commerce strongly supports the initiative of Government to seek a negotiation with Auckland Council on an agreed 30-year programme focusing on reducing congestion, and boosting public transport where that reduces congestion.
Michael Barnett, head of the Auckland Chamber was responding to news reports that Transport Minister Simon Bridges and Finance Minister Bill English have sent Auckland Mayor Len Brown a letter proposing a negotiation and ruling out allowing Auckland to bring in motorway charges to help fund transport projects.
“The Auckland business community overwhelmingly agrees that immediate action to address the City’s transport congestion is required,” said Mr Barnett.
In short, congestion is bad. Really bad. It’s a crisis deserving immediate action… in the form of a year-long talk-fest between local and central government.
Of course, it’s difficult to find reliable empirical evidence that Auckland’s congestion levels really are that bad. Average commute times are a cruisy 25 minutes – well below many other cities. NZTA research has found that the actual cost of congestion is neither (a) largely a monetary cost for businesses or (b) anywhere as large as people claim. While people like to claim that congestion costs “billions” annually, a more realistic figure is $250 million. The one source that does claim that Auckland has world-beating congestion, the TomTom index, has serious methodological flaws.
Nevertheless. Even though its empirical basis is shaky, the Auckland Chamber of Commerce’s recommendations for projects are not crazy. In fact, they seem to be on Auckland Transport investment radar already:
A good outcome from Government and Auckland Council working together would be a package of fast-tracked projects aimed at:
- Improving public transport services’ reliability and frequency
- Getting as much use as possible out of the transportation system we have
- Removing parking from major arterial routes to create more usable road space.
- More high occupancy lanes to encourage a reduction of sole occupancy cars.
- Strengthened integrated traffic management covering arterials and motorways.
- Expanding park and ride facilities at main trunk rail and busway stations.
But even if the ideas are sensible, “fast-tracking” them will be expensive. We simply can’t build everything at once. Even if Government was willing to give Auckland Council more tools to raise revenue – which is unlikely given its refusal to consider road tolls – capacity constraints in the civil engineering business would make it hard to do much more.
To its credit, the Chamber seems to recognise this and agree that we need to prioritise use of our scarce resources:
“Good leadership is about partnership,” said Mr Barnett. “It is about understanding that we have limited resources, so we must learn to prioritise correctly,” he concluded.
Which leads me to my point. If congestion is such a big problem, why don’t we use congestion pricing to make sure that we’re prioritising use of our road network efficiently?
I find it very strange that business groups aren’t more enthusiastic about this idea. If congestion is really as bad as they say it is, why aren’t they loudly advocating a policy solution that would actually address it? (Road-building doesn’t work.) Surely freight companies and construction firms would benefit from the resulting reductions in traffic, even if they had to pay a bit for them.
In my experience, congestion pricing is one of those ideas that virtually all economists agree on. It’s like free trade in that regard – there might be some disagreement about the fine details, but most agree that it’s a good idea. But it hasn’t gotten as much attention in other quarters.
So here, for example, is William Vickrey, who won the Nobel Memorial Prize in Economics for his pioneering work on the topic:
Known among economists as “the father of congestion pricing,” Professor Vickrey sees time-of-day pricing as a classic application of market forces to balance supply and demand. Those who are able can shift their schedules to cheaper hours, reducing congestion, air pollution and energy use — and increasing use of roads or other utilities. “You’re not reducing traffic flow, you’re increasing it, because traffic is spread more evenly over time,” he has said. “Even some proponents of congestion pricing don’t understand that.”
He has admitted that his ideas have sometimes not been well received by those who set public policy because, “People see it as a tax increase, which I think is a gut reaction. When motorists’ time is considered, it’s really a savings.”
And here’s urban economist Edward Glaeser commenting that more megaprojects aren’t the best fix for transport issues:
Infrastructure investment only makes sense when there is a clear problem that needs solving and when benefits exceed costs. U.S. transportation does have problems — traffic delays in airports and on city streets, decaying older structures, excessive dependence on imported oil — but none of these challenges requires the heroics of a 21st century Erie Canal. Instead, they need smart, incremental changes that will demonstrate more wisdom than brute strength…
IMPLEMENT CONGESTION PRICING: We should expect drivers to pay for more than just the physical costs of their travel. We should also expect them to pay for the congestion that they impose on other road users. If you have a scarce commodity, whether groceries or roads, and you insist on charging prices below market rates, the result will be long lines and stock outs, like those that bedeviled the Soviet Union decades ago. Yet U.S. roads are still running a Soviet-style transport policy, where we charge too little for valuable city streets. Traffic congestion is the urban equivalent of a stock out.
So what can be done about all this? How could we actually reduce traffic congestion? Turner explained that the way we use roads right now is a bit like the Soviet Union’s method of distributing bread. Under the communist government, goods were given equally to all, with a central authority setting the price for each commodity. Because that price was often far less than what people were willing to pay for that good, comrades would rush to purchase it, forming lines around the block.
The U.S. government is also in the business of providing people with a good they really want: roads. And just like the old Soviets, Uncle Sam is giving this commodity away for next to nothing. Is the solution then to privatize all roads? Not unless you’re living in some libertarian fantasyland. What Turner and Duranton (and many others who’d like to see more rational transportation policy) actually advocate is known as congestion pricing.
And here’s the OECD in its latest country report on New Zealand:
A just-released OECD economic survey blames years of under-investment in infrastructure for the city’s roading problems. It calls for a mix of tolls and congestion charges to alleviate peak-hour traffic pressure and help fund new roads and more public transport.
“Placing a cost on travel during peak periods could incentivise drivers to travel at different times (off-peak), if they are not required to be on the roads, or could encourage more carpooling and use of public transportation,” the report says.
In short, if you’re worried about congestion, you need to take congestion pricing seriously. There are undoubtedly reasons why we may not want to implement congestion pricing, ranging from technical feasibility to equity concerns. But in my view it’s ridiculous for business groups and politicians to get all up in arms about the issue – and promptly rule out one of the few realistic solutions.
What do you think about congestion pricing?