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Thread: The latest captive market: commuters

  1. #1
    Cyburbian Dharmster's avatar
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    The latest captive market: commuters

    Pearlstein is one of the Washington Post's smartest (if not the smartest) columnist. I love his columns and this one as usual is right on target:

    The Latest Captive Market: Commuters

    By Steven Pearlstein
    Friday, December 29, 2006; D01



    It's time to tackle the hot topic on everyone's mind this New Year's weekend -- congestion pricing.

    Maryland and Virginia are moving ahead with a form of congestion pricing on the Beltway and Interstate 95. In exchange for building additional lanes, contractors will be allowed to collect tolls that will vary by the minute. When traffic is heavy, the price will rise to whatever level is needed to keep the express lanes flowing. When demand is low -- presumably at times when traffic is flowing smoothly in the normal lanes -- the price will fall to near zero. Under most scenarios, buses and carpool vehicles will travel free.

    Recently, the staff at Metro used congestion pricing to design a fare increase meant to raise an additional $64 million a year for the bus and subway system. On average, that would work out to a 14 percent fare increase. The plan would impose the biggest increases on peak-hour subway commuters who use the 19 busiest stops in the downtown core.

    Economists love these schemes because they use "market mechanisms" to allocate "scarce resources." But a lot of non-economists, who don't spend much time worrying about allocative efficiency, think them unfair and unnecessarily complicated.

    In the case of the highway schemes, many people are uncomfortable with the idea that basic public services, once available to everyone regardless of income, will now be allocated on the basis of ability to pay. If more capacity is needed, why not add lanes the old-fashioned way, by having government pay for them and letting everyone use them?

    Several problems there.

    First, history is pretty clear that adding lanes doesn't relieve congestion for long. More capacity simply invites more cars, either by stimulating additional housing development or luring transit and carpool riders back into their cars.

    Second, pigheaded voters in Maryland and Virginia have been unwilling to raise gasoline or other taxes to pay for the highways they claim to want. So the next-best alternative is to get private contractors to finance highway expansion in exchange for a stream of future toll revenue. At the least, these "Lexus lanes" will provide some temporary relief while speeding the commutes of bus riders and carpoolers at no cost to them. And given the alternative, isn't it better to impose tolls on those who can best afford to pay them -- along with ordinary folk who occasionally have the urgent need to get home in time to drive Tammy to soccer practice?

    In fact, congestion pricing has proven successful not only for managing highway congestion but also for relieving crowded downtown areas like those of London and Stockholm. Mayor Michael Bloomberg of New York has flirted with this idea for Manhattan. And it's something this region needs to consider for downtown and even Tysons Corner, once the Metro extension is completed.

    The criticism of Metro's fare plan is that it would penalize people who can't readily change when and where they work. Skeptics ridicule the notion that people are going to commute before dawn or get off the subway at Rosslyn and hoof it downtown.

    In fact, Metro planners have no illusions about subway fares as an instrument of behavior modification. They realize that most people won't change their commuting patterns in the short run.

    Instead, Metro approached the problem as any business would, looking for the best way to raise money to cover higher operating costs while causing the fewest customers to defect to the competition -- that is, to drive.

    One calculation showed that even if parking fees and fares go up, the cost of parking at a Metro lot and commuting in would still be about 70 percent of what it would cost to drive downtown and park.

    Experience further shows that the passengers who are least willing or able to defect to other forms of transportation are those who commute downtown from the suburbs at peak times.

    Based on those analyses, Metro planners concluded that the best strategy would be to skew the fare increases to their captive suburban peak-hour commuters. Fare hikes would be lower for the more price-sensitive, off-peak passengers. They'd also go easy on "reverse" commuters who work in the suburbs, where lower parking fees make commuting to work by car a more attractive alternative. Bus fares would go up only modestly on average, in the hope that some passengers who now ride the subway for short distances might switch to buses during peak hours.

    The idea of charging a premium for peak-hour commuters to crowded stations also makes economic sense if you consider the capital costs associated with adding capacity.

    The subway system is approaching its limits during peak commuting hours on certain lines (Red and Orange) as they pass through the downtown core. What that means is that adding capacity soon won't be a simple matter of buying a few more cars and hiring a few more train operators. Rather, it will involve the enormous costs of making stations bigger to accommodate longer trains, or digging tunnels for express trains.

    This raises a different fairness issue. Is it fair to ask all passengers to pay for expensive new capacity that is required only to handle downtown commuters for a few peak hours? Or is it fairer to put the bulk of that burden on those who will benefit from the new capacity?

    There is no right answer to these questions -- it depends on whether your goal is to maintain market share for public transit, align fares with costs, or try to use fares over the long run to alter people's behavior. The best approach is probably a mix of all three.

    As I see it, Metro planners are on the right track, though perhaps they ought to use a narrower window for peak hours. In the future, perhaps they should set fares according to the actual cost of service, rather than distance traveled. And it may be worth considering different fare levels for each line, with lower fares to boost ridership on underused lines and higher fares to dampen peak-hour demand on lines nearing capacity.

    Then again, we could just follow the New York City model and charge a flat rate, say $2.25, for any ride at any time. But what fun would that be?

    Steven Pearlstein can be reached atpearlsteins@washpost.com.

  2. #2
    Cyburbian safege's avatar
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    I originally intended to post this on the future of cities thread, but decided to put it here instead.

    On a local morning news program, the anchor made a lame joke about taking a helicopter to work, and avoiding all the traffic. The traffic reporter, never one to be known for a sense of humor, itemized the costs to run a traffic helicopter. This made for bad TV, even by morning news standards.

    The future of transportation, it seems to me, is a conflict between unfettered freedom to commute by yourself (status quo), and three trends that effect more than just transportation.

    The first trend is employee compensation. Legacy automakers needed to cast off pensions and health care benefits, freight train haulers have taken a five man crew down to one, and State DOT's, as well as most of government is feeling the pressure to be creative.

    The second trend is currently called alternative energy sources, but energy cost is a better way to look at it. Mass transit wins this race, and electric modes, such as light rail, and overhead suspended light rail create the most energy bang for the buck.

    The third trend is automation. Today, sensors on freight rail lines detect objects on the track, set the speed of travel along the route, and cost less than 1/100ths of what it did just a few years ago. The NYC subway is automating, and current light rail built at grade, in traffic areas, may find they are obsolete, in concept, and in design.
    Psychotics are consistently inconsistent. The essence of sanity is to be inconsistently inconsistent.
    -Larry Wall

  3. #3
    Breaking news: Politicians discover the law of supply and demand, catch up on two hundred years of common knowledge.

  4. #4
    Cyburbian btrage's avatar
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    Quote Originally posted by jaws View post
    Breaking news: Politicians discover the law of supply and demand, catch up on two hundred years of common knowledge.
    Why is he allowed to post statements like these? It's an obvious attempt to enflame people.
    "I'm very important. I have many leather-bound books and my apartment smells of rich mahogany"

  5. #5
    Cyburbian Dharmster's avatar
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    I don't know if is designed to enflame. I'd say it will spur some discussion. As we move towards pricing mass transit based on demand, you'll see more and more conflicts between those who want to to implement economically efficient pricing versus those who view mass transit as a public good. The reality is we need to do a little of both, but to say that we need to keep flat fares is as Pearlstein said "no fun".

  6. #6
    Cyburbian safege's avatar
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    Quote Originally posted by btrage View post
    Why is he allowed to post statements like these? It's an obvious attempt to enflame people.
    At first, I thought Jaws was complimenting my little post. Two seconds later, my ego had landed.

    Psychotics are consistently inconsistent. The essence of sanity is to be inconsistently inconsistent.
    -Larry Wall

  7. #7
    Quote Originally posted by btrage View post
    Why is he allowed to post statements like these? It's an obvious attempt to enflame people.
    Because it's true.

    The very idea of public goods is anti-market, and therefore it should be no surprise that anti-market consequences, shortages, should appear. Short of admitting their own irrelevance, there is nothing that any elected politician will do about it. You can only treat everyone equally by making everyone suffer equally.

    The alternative is to reduce demand to available capacity by raising prices, thus pricing enough people out of the service to balance supply with demand, and that is of course brazenly anti-egalitarian and anti-democratic. It's also the only way that makes things work.

  8. #8
    Cyburbian Dharmster's avatar
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    Quote Originally posted by jaws View post

    The alternative is to reduce demand to available capacity by raising prices, thus pricing enough people out of the service to balance supply with demand, and that is of course brazenly anti-egalitarian and anti-democratic. It's also the only way that makes things work.
    Ahhh.. jaws is onto something. In the case of Metro, they are facing a deficit of $118 million for fiscal year 2008 (which beings July 1, 2007). Metro's total operating subsidy (federal, state, local) is on the order of $500 million. They basically had two options, an across the board fare hike that was estimated to decrease riderhsip by 6 percent or a targteted (differential) fare hike that would have decreased ridership by only 3 percent. It makes eminent sense, except to those traveling during the peak to core stations who will pay a lot more. They are of course exercising their rights in a democratic society to cry foul. Let's hope the WMATA Board analyes the issue like staff and does the RIGHT thing instead of the politically expedient thing.

  9. #9
    Cyburbian safege's avatar
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    Do you mean a price structure like Minneapolis ?

    http://www.metrotransit.org/buyPass/transitFares.asp

    The park n' ride express buses are packed, I take one of them.
    Psychotics are consistently inconsistent. The essence of sanity is to be inconsistently inconsistent.
    -Larry Wall

  10. #10
    Cyburbian Dharmster's avatar
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    Quote Originally posted by safege View post
    Do you mean a price structure like Minneapolis ?

    http://www.metrotransit.org/buyPass/transitFares.asp

    The park n' ride express buses are packed, I take one of them.

    No difgerent. WMATA has always had distance based fares. There is a peak and off peak (applies outside of 5:00 AM to 9:30 AM and 3PM to 7PM) that overlays the distance based strucure. The management proposed increase involves increasing only the peak, and then overlaying a core "congestion" charge at downtown stations only during the peak. Off peak fares are left untouched to preserve as much discretionary ridreship as possible.

  11. #11
    Cyburbian njm's avatar
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    I love how so many of Dharmster's articles reference the "successes" that Stockholm has experienced.

    Congestion pricing there was only tried for 10 months, and nearly all the revenue was used for increasing mass transit. Now that a new center-right government has taken over the parliament, the congestion pricing will be reinstated, but with 100% of the money going to road construction outside of the congestion zone; most of the additional transit has been discontinued (as of today), which means that those traveling into the city will have less transit, higher capacity roads leading to the city, but no improvements within. Intuition says that this will create more congestion at the edge of the city, which is primarily parkland in Stockholm. While I can't say that it WILL be a catastrophe, I don't know that it will be as successful as people anticipate. Furthermore, the list of exemptions from the taxing system continues to grow and some companies chose to reimburse their employees driving corporate vehicles, resulting in a small change in driver behavior.

    I know the London system has also had some hiccups, including that a lot of congestion has been shifted from within the city proper to the first ring as people drive further to avoid paying the tax.

    I'm not saying that congestion taxing can't be part of a solution... but it certainly isn't the panacea that many pro-market folks make it out to be.
    What luck! A random assemblage of words never sounded less intelligent.

  12. #12
    Cyburbian Dharmster's avatar
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    Quote Originally posted by njm View post

    I know the London system has also had some hiccups, including that a lot of congestion has been shifted from within the city proper to the first ring as people drive further to avoid paying the tax.
    London is responding to this problem by expanding the zone to include a much larger area starting next month. More information can be found on the Transport for London website:

    http://www.tfl.gov.uk/tfl/cc-ex/index.shtml

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    Cyburbian njm's avatar
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    ...which will just push the congestion farther out and cause people to drive even further to avoid the congestion zone. (I was aware of this expansion--a former roomate lives 2 'blocks' from Liverpool St. Station. This change has been in the works for 2-3 years.)

    Without a way to either efficiently move more people around the outside of the zone, a mega-sized non-taxable thruway (with no exits), or incentives for people to live close to where they work, congestion pricing will just move the bottlenecks the same way that lane construction does.

    The idealist in me would want more people to use transit (or walk), but the pragmatist knows that only a minority of people in Western nations (my experience in Sweden supports this, too) believe that an automobile is not necessary.
    Last edited by njm; 01 Jan 2007 at 7:33 PM.
    What luck! A random assemblage of words never sounded less intelligent.

  14. #14
    Cyburbian Dharmster's avatar
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    Quote Originally posted by njm View post
    ...which will just push the congestion further out and cause people to drive even further to avoid the congestion zone.
    There will be one free North-South route and the main route to/from the West (the A40) will remain free.

    See the map:

    http://www.tfl.gov.uk/tfl/cc-ex/pdfs...p-6-Master.pdf

  15. #15
    Cyburbian njm's avatar
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    Quote Originally posted by njm View post
    Without a way to either efficiently move more people around the outside of the zone, a mega-sized non-taxable thruway (with no exits), or incentives for people to live close to where they work, congestion pricing will just move the bottlenecks the same way that lane construction does..
    Those through routes were gridlocked before they became the non-taxable roads (i.e. when I was in London 2 years ago.) I really doubt that they will be any better once the zone is expanded.
    What luck! A random assemblage of words never sounded less intelligent.

  16. #16
    Quote Originally posted by njm View post
    ...which will just push the congestion farther out and cause people to drive even further to avoid the congestion zone. (I was aware of this expansion--a former roomate lives 2 'blocks' from Liverpool St. Station. This change has been in the works for 2-3 years.)

    Without a way to either efficiently move more people around the outside of the zone, a mega-sized non-taxable thruway (with no exits), or incentives for people to live close to where they work, congestion pricing will just move the bottlenecks the same way that lane construction does.

    The idealist in me would want more people to use transit (or walk), but the pragmatist knows that only a minority of people in Western nations (my experience in Sweden supports this, too) believe that an automobile is not necessary.
    Once everything is priced correctly, there will be no place for congestion to be pushed to.

    People will make the choices and the changes that suits them: drive and pay, or take the train, or move, or change jobs, or change their habits in any way they want. But there will be no more congestion.

  17. #17

    Elitism Strikes Again

    Quote Originally posted by jaws View post
    Once everything is priced correctly, there will be no place for congestion to be pushed to.

    People will make the choices and the changes that suits them: drive and pay, or take the train, or move, or change jobs, or change their habits in any way they want. But there will be no more congestion.
    Sounds like a true elitist. Are you going to select the correct price? Once you have all of the wealthy people moving into the elitist city that you've created and everyone else moving out, won't you still find some other problem that they've created?

    A good example is an owner of a small business that can't deliver large items on a train or a bus as needed. So you're going to make him pay a huge expense to use his car. I used to run a business where I had to deliver newspaper racks to different parts of the city. Try doing that on a bus or train.

  18. #18
    Cyburbian iamme's avatar
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    Quote Originally posted by rdaman View post
    Sounds like a true elitist. Are you going to select the correct price? Once you have all of the wealthy people moving into the elitist city that you've created and everyone else moving out, won't you still find some other problem that they've created?

    A good example is an owner of a small business that can't deliver large items on a train or a bus as needed. So you're going to make him pay a huge expense to use his car. I used to run a business where I had to deliver newspaper racks to different parts of the city. Try doing that on a bus or train.
    He isn't advocating having a bureaucrat set the 'correct price', that is already what has been happening for far too long. Empty country roads and a spot on the freeway are usually priced the same, 0$. Why would wealthy people automatically move into the city if people had to pay for what they use? Are you saying something about the desirability of suburbs and that they're only desirable if they can externalize their costs?

    Your small business would have the same options available today, UPS, a company vehicle, or foregoing delivery. Why does paying for the roads you use mean everyone HAS to get on a bus or train? That conclusion is a bit reactionary, don't you think.

  19. #19
    Quote Originally posted by rdaman View post
    Sounds like a true elitist. Are you going to select the correct price? Once you have all of the wealthy people moving into the elitist city that you've created and everyone else moving out, won't you still find some other problem that they've created?

    A good example is an owner of a small business that can't deliver large items on a train or a bus as needed. So you're going to make him pay a huge expense to use his car. I used to run a business where I had to deliver newspaper racks to different parts of the city. Try doing that on a bus or train.
    A small businessman who must hire three employees instead of one because all his deliveries are stuck in traffic is not helped by people who hate the fact that society is hierarchical.

    To economize means to allocate resources to their most productive use. Elites are the most productive, therefore they will always have a bigger cut, no matter how hard you try to make things equal. It's best to let them have it and make everything more productive in return.

    The alternative to elitism isn't equality, it is waste. It is a highway turned into a parking lot where cars consume fuel for no reason, and people waste precious time and suffer stress for no reason. Most of all, it is lost capital that is not reinvested in adding supply, which would result in goods becoming more affordable.

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