An iron law of economics states that demand always expands beyond the supply of free goods to cause congestion and queues. Drivers caught in traffic jams on the freeways in and around major cities of the world regularly run afoul of this law.
Road congestion imposes large hidden costs on drivers by increasing the time and fuel required to travel from home to work and airports, to visit friends, and enjoy restaurants and other entertainment. Traffic in many nations increased enormously during the past couple of decades as gasoline prices fell, cars became more fuel-efficient, and families became richer. In New York, Los Angeles, Chicago, and most other American cities, roads have become jammed in both directions between the center and surrounding areas during rush "hours" that last throughout most mornings and afternoons. I now allow two hours during congested periods to get to O'Hare International Airport from my Chicago home, a trip that takes less than 35 minutes in light traffic.
The value of the time and fuel lost in 1994 to congested traffic in American cities has been estimated by the Texas Transportation Institute. Their calculations, which ignore pollution costs, assume 1 1/4 drivers per car and that time in traffic has an average value of $11 per hour per person. The cost of heavy traffic exceeded $75 billion, with the Los Angeles area leading at $9 billion annually and New York at $8 billion.
Congestion in European and Asian cities is even greater than in the U.S. The average speed at peak times in many cities is less than nine miles an hour, and the time, fuel, noise, and pollution cost of road congestion in Europe is said to be worth more than $100 billion per year.
METER READER. A vastly better solution than building additional highways through dense urban areas would be to charge for the right to use congested roads with electronic toll collectors (ETCs). These collectors meter cars that have radio transponders affixed to them as they pass through designated areas. The transponders emit an automatic vehicle I.D. that generates a toll for each customer's account as the vehicle passes an ETC.
Everyone could be required to have transponders on their vehicles, the way homes have meters to record gas and electric bills. Drivers who fail to install transponders could be tracked down, since ETCs can capture license-plate images. Monthly bills could itemize accumulated tolls, or toll charges might be deducted automatically from prepaid smart cards loaded into these transponders. A private company is already using electronic meters and transponders to charge cars that use a major road near San Diego, Calif.
HEADACHE RELIEF. Electronic tolls are user fees that would provide revenue to cities pressed for funds because of narrow tax bases. Yet unlike taxes, these fees might be welcomed by drivers if they saved time, fuel, and human energy by alleviating traffic jams.
Although electronic tolls have been growing rapidly in some countries, their flexibility in reducing traffic congestion has not been realized. Tolls could vary with the time of day and day of week, the degree of traffic congestion, the traffic lane used--"express" lanes could be more expensive--and with other sophisticated traffic criteria. ETCs usually exist alongside conventional toll booths, which often themselves cause traffic bottlenecks, especially during peak times. Instead, electronic toll collectors should replace toll booths, and they can be placed at bottlenecks and other crucial traffic positions along all major highways and other roads.
I believe road traffic is much more sensitive to price than is commonly believed. A German study suggests considerable response to fees imposed on cars entering one city during peak traffic periods. Road-user charges imposed by electronic meters would induce some people to change their work, living, and shopping patterns. Commuters who value their time highly might be willing to pay stiff fees during congested periods, but retirees and young persons with cheaper and more flexible time would alter their driving patterns to avoid costly surcharges. Some would consider shifting to buses and commuter trains. More trucking companies would opt to deliver goods during late evening and other cheaper periods to bypass costly tolls during peak times. Neighbors would carpool, and families might move closer to work to reduce toll charges.
Most governments pay little attention to the sizable hidden time and other costs imposed by the horrendous traffic congestion in their metropolitan areas. Electronic tolls can relieve these bottlenecks and also provide revenue, a win-win situation for all.