The Future of Roadway Pricing

The need to find a better way of managing public roads in metropolitan areas is painfully apparent to many Americans each morning when they drive to work.

It is easy to conclude that the U.S. has made a series of wrong-headed choices about how to finance its all-important metropolitan roadway systems.  The results of these mistakes are ubiquitous and take several forms.

We have insufficient roadway capacity where it is most needed, as evidenced by severe traffic congestion on many critical roadway links in important metropolitan regions during increasingly long portions of the day.

We are chronically unable to build new roadway capacity to keep up with demand, to the point that blindly chanting “we can’t build our way out of congestion” too often replaces serious discussion of how to overcome obvious capacity shortfalls.

We insist on “saving money” in government operating budgets by reducing needed roadway maintenance, which causes roads to wear out faster and reduces long-term capacity.

To move beyond these mistakes, transportation policy makers must recognize the potential of recent technological breakthroughs that enable effective, market-oriented roadway financing systems that can dramatically improve how the U.S. manages, maintains, and pays for existing metropolitan roadway systems.

In simple terms, technology can now allow access to metropolitan roadway capacity through the same kind of marketplace mechanism traditionally used to distribute access to a host of private sector goods and services.

We can charge motorists directly for access to each roadway in a metropolitan area without requiring them to stop or slow down. Prices can be based on the distance they travel on that roadway and can be differentiated based on the “popularity” of each route as measured by the number of vehicles per hour traveling on them.

Prices can also be differentiated based on vehicle type, so trucks and other heavy vehicles that cause more wear and tear on pavement pay higher prices than small vehicles that cause less wear. Charges can be adjusted frequently to reflect changes in the number of vehicles traveling on a roadway.

Frequent price adjustments can also be used to guarantee motorists a certain minimum average speed on a particular route. Charges can be raised or lowered to maintain a target maximum number of vehicles on the roadway.

Intelligent use of these new technologies narrows the often considerable gap between a roadway system’s theoretical capacity and its functional capacity by using the classic economic principle of using price to control the demand for scarce resources.  It also results in better service for all roadway customers in a metropolitan area.

Note the term “customers.”  A customer is a willing buyer of what you have to sell at the price you are charging. What makes someone a willing buyer is a personal judgment about whether the value they are getting is greater than the price charged.

Suppose a driver can use two different lanes to reach their destination.  One lane charges a price per mile but promises an average speed of 60 mph.  The other charges nothing, but moves at less than 10 mph.  If the driver is on their way to an important business meeting and can’t afford to be late, they may decide that the value of time saved by using the priced lane is greater than the cost.  But if they are simply making a discretionary trip to the mall, they may opt to use the fee one and put up with the additional travel time.

Put simply, roadway pricing lets you create value for drivers by offering them shorter travel times for high-priority trips.  Drivers determine the priority of their trips, making personal judgments about which are the most important and how much they are willing to pay to reach their destinations faster.

Using price to distribute travel demand rationally at and raise resources for roadway maintenance?   Now that would be something to write home about.

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