I am seeing some critical comments on my latest column, mostly from people who are not reading it through, or in some cases they are making basic mistakes in economics. Let me start with part of my conclusion: I suspect that I could endorse a properly targeted version of congestion pricing for Manhattan, for instance,
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I am seeing some critical comments on my latest column, mostly from people who are not reading it through, or in some cases they are making basic mistakes in economics. Let me start with part of my conclusion:
I suspect that I could endorse a properly targeted version of congestion pricing for Manhattan, for instance, one that encouraged mass transit without discouraging density.
Many people are responding by making a version of that point and thinking it contradicts me. Here are a few basic facts about the current proposal:
1. The off-peak price is too high at $17, relative to $23 for peak.
2. There is an odd and unjustified discrete notch at 60th St, which will cause further distortions of its own.
3. There is no difference for cars passing through and cars with passengers spending money or doing something productive in lower Manhattan.
This is not the traffic congestion charge you should be looking to implement.
A second line of responses (Erik B. and Alex) suggests that the congestion charge will not lower the flow of humans into Manhattan. I am sorry, but demand curves slope downward! The resulting auto commute does become more predictable and regular, but that holds only because there are fewer trips and to some extent because trips are time-shifted. (Note that the small gap between the $17 and $23 prices suggests a small benefit from time shifting.) Fewer outsiders will benefit from Manhattan, and those outsiders will skew richer and older. The methods for improving the quality of the trip really do lower the number of trip-makers, probably both peak and off-peak. It is not going to mean higher or even constant throughput for vehicles or humans. (If you think it does, does that imply a big subsidy to car trips would get us to a carless city? There are some non-linear scenarios where a congestion charge boosts throughput, such as when otherwise no cars move at all in extreme gridlock. In reality, it seems cars are moving at about 12 mph in Manhattan.)
The actual possible gain — oddly not cited by the critics — is that a congestion charge might get a given visitor more effective time spent learning from Manhattan. Though do note an offsetting effect — the higher the traffic problem, the more you will make each trip to Manhattan a grand and elaborate one, and it is your externality-less domestic time in Long Island that will suffer all the more. So per person learning externalities from effective time spent in Manhattan could go either way, noting the number of visitors still goes down.
You might think such a congestion charge improves welfare (a sounder point than suggesting it will not have a standard price effect), but the whole point is that Manhattan density involves massive positive externalities, including for visitors and note that visitors also finance the externality-rich activities of the natives:
In some urban settings, the clustering of human talent is of utmost importance. Manhattan is the densest urban area in the US, and it succeeds in large part because it is so crowded. You want to be there because other people want to be there. Even though I don’t live there, I nonetheless benefit from Manhattan, both when I visit and when I consume the television shows, movies, music, and art works that come, either directly or indirectly, out of this urban environment. Manhattan also supports America’s financial center, many tech start-ups, and much more.
I don’t want Manhattan to be less crowded, even though it probably would make many Manhattanites happier and less stressed. I want Manhattan to be efficient for me and others, not just for the residents. If there is any part of America where ideas rubbing together lead to great things, it is Manhattan (and the Bay Area). Arguably, Manhattan should be more crowded, at least if we consider everyone’s interest. That militates against congestion tolls, even though such charges are usually a good idea.
The actually useful solution is to make mass transit, most of all the subway, a reliable and predictable method of getting around. Right now it is not. (I doubt if lowering the already low subway prices gets you much.)
If you look at visits into Manhattan, whether by car or not, they already face lots of implicit taxes. Those include poor roads, mediocre subway performance, high variance public infrastructure including on issues such as trash, pollution issues, some degree of crime, awful connecting infrastructure (NJ Transit anyone?) and much more. And yet Manhattan is one of the world’s very top TFP factories and we are already taxing entry in so many different ways.
It does not make good economic sense to impose higher yet entry fees into that TFP factory. Given that multiple externalities are present, the correct mix is to lower many different costs of entry and mobility (including within Manhattan), while shifting the relative use benefits toward mass transit and the subway. Density really does have positive externalities here, and we all know how much idea makers and distributors are undercompensated.
There are a few more threads of responses on Twitter. One is to note the noise and pollution costs of vehicles. That is relevant, but fairly soon we will have lots more electric vehicles, which should be encouraged. The tolls will become a revenue source that lasts forever and they will not be taken away, but the noise and pollution costs of the vehicles soon will be much lower.
Another thread is to argue that most of the people who drive will switch to mass transit if there is a congestion cost. Some will, but we are asked to believe that a) current traffic congestion is so awful, b) people put up with it anyway, and c) they nonetheless can be easily nudged into taking mass transit. That is an uncomfortable blend of views that fails to understand the initial motivations behind the car trips. There are plenty of people with young kids, or elderly relatives, or multiple packages, or multiple stops, or unreliable mass transportation for getting back home at the end of the evening. Many of those people cannot feasibly switch to mass transit and that is precisely why they put up with the bad traffic. Say you finish your Manhattan doings at 10:45 p.m., and have to get back to your New Jersey home in a timely and safe manner. The PATH train will work for some, but a lot of these people really do need cars to consummate the trip.
(It is a theoretically defensible argument to claim that this congestion tax is the only way of financing mass transit improvements. That may or may not be true, but if it is one should still “regret” the plan, which is not the attitude people are taking. And are there guarantees this will lead to a refurbishment of the subway? It has proven remarkably difficult to improve the system, and that is with rising NYC budgets. Another argument that might work is if non-car visitors so hate seeing cars in Manhattan that the net human inflow, due to auto trips, goes down rather than up. Do note however that the car trips are still helping to finance retail and cultural infrastructure that attracts the non-car visitors, so don’t just take complaints about cars at face value. Furthermore this car hatred factor also should become less serious as we transition to electric vehicles.)
On net, do you think our most important cities should be more or less dense? If you support YIMBYism, which surely does make traffic worse, have you not already answered that question? So either become a NIMBY or — better yet — be a little more consistent applying your intuitions about the net positive externality from Manhattan density. A simple way to put the point is that an export tax on your TFP factory is unlikely to be the best way to reduce congestion.
Economics, Law, Uncategorized