Tuesday, July 14, 2015

Pricing is informative to the consumer and supplier

We do not know how many new roads we need because the self adapted statistics are blocked. Under this conditions, highways will always be clogged as there is no price information to maximize efficient use of highways.
Robert Krol gets it: Congested highways are a fact of life in most cities. Politicians in Washington agree that if we want to improve our ground transportation system, we need to spend more on infrastructure. They seem to think we can build our way to free flowing urban highways. Much of the debate has centered on how to finance the additional spending. The U.S. Chamber of Commerce and the American Trucking Association support raising the federal gasoline tax. Senators Rob Portman (R-Ohio) and Chuck Schumer (D-N.Y.) have suggested using a portion of corporate tax revenues to fund highway construction.
Raising the federal gasoline tax or using corporate tax revenues will not solve our highway congestion problems.
Given that most highways in the United States are toll free, overuse is to be expected. The only way we can determine whether or not we need to build more highways is to charge drivers who travel during peak hours. These charges or prices reflect the value drivers place on using the highway. These pricing signals can then be used to determine whether it makes economic sense to build more highway capacity. When the value drivers place on using a highway exceeds the cost of additional lanes, more lanes should be built.
Although current federal law prohibits charging tolls on existing interstates, states may apply for permission to charge tolls on new lanes. This has occurred on a limited basis in Southern California. Variable tolls have been used outside the United States to successfully reduce congested highways. Before we spend more on highways, we need to change how we price highways.
Congress could pass legislation that allows states to charge congestion tolls on all interstate highways, and these revenues could be used to reduce fuel taxes, lowering the burden this new tax would impose on drivers. Or the revenues could be used for highway maintenance and construction. Most importantly, by pricing roads correctly, we may actually find that we don’t need to spend more on highways.

No comments: