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Highway Tolls and Congestion

March 15, 1987

Southern California has led the way in development of arteries for the movement of automobiles, but it has not been able to overcome continued serious congestion. The fundamental difficulty is seldom recognized. Automobiles are produced in the private sector and capitalism supplies many cars. Highways are produced by government, and this "socialism" does not appear to supply enough highways. But the socialism is not very sophisticated. As in the Soviet Union, prices are out of kilter.

The solution is to put scarcity prices (market-clearing prices) on highways, prices which vary with place and time--high tolls on a bottleneck road during the rush hour, low prices (or zero prices) on little-used local arteries in mid-afternoon. When produced on a large scale, electronic devices for charging and collecting tolls could be turned out at a feasible cost. The proceeds of tolls (above the cost of collection) would be used to expand the supply of highways.

After introduction, highway prices would be increased slowly to what would eventually be a very high level. The gradual increase would give people time to adjust. In this short run, tolls would reroute traffic from busy to less busy highways and streets, and tolls (varying with time of day) would shift traffic from rush hours to hours of lower utilization of the system. In the long run, high prices on highways and streets would lead to a massive relocation of households and enterprises. People would live closer to their work and recreation. Urban sprawl would be reduced and environmental problems would be eased.

The pressure on low-income people could be dealt with by appropriate increases in cash welfare benefits (when the free choice associated with money is desired) or by benefits in kind ("highway stamps") when free choice is not a concern.

Paul Sterling Hoag (Times, Feb. 1) proposed revision of obsolete planning and zoning laws so that people could walk between home and store, etc. "Why," he asks, "can't Los Angeles be rearranged for walking?" Land-use planners would be more successful in changing patterns of driving and walking, however, if they recognize the need to harness the material incentives of those who make decisions to drive and to walk. Until supply and demand in the interrelated private and public sectors are equalized through price, scarce highway resources will be allocated by queues on congested highways.


Visiting Professor

of Economics

UC Santa Barbara

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