Public Policy Variable Pricing as Term Paper

  • Length: 12 pages
  • Sources: 10
  • Subject: Transportation
  • Type: Term Paper
  • Paper: #14420067

Excerpt from Term Paper :

Some small discounts in pricing is applied to anyone who purchases these day passes in advance, in bulk, but by and large users pay as they enter and use the roadways in central London (Santos and Shaffer 166-169; Litman 2).

Within the first year, there were already impressive effects in London. Travel speeds were measured to be 21% faster than before the pricing scheme was implemented. Congestion was reduced by 30%, the volume of traffic decreased by 15%, and there was a total reduction in travel times by 15% (Santos and Shaffer 169). Factoring in the rather significant startup and maintenance costs for the first year -- in excess of five hundred million pounds -- the pricing scheme still had a net profit of fifty million pounds, which was shunted back into improvements for mass transit (Santos and Shaffer 177).

These benefits are significant, especially since such dramatic gains were made within the first year of implementation. However, there are some characteristics of the London system that are considered suboptimal. As mentioned, this is not a variable pricing scheme, and thus cannot take into account distances traveled, different times of the day, or factor in different congestion levels in different parts of the city. Overhead for the technology required was also high, and London's public transit network was not equipped to meet the increased demand that resulted from the program (Litman 4).

Despite these deficiencies, the success of London's system has been impressive. Though the program was widely criticized before implementation, the public has since widely accepted it and the benefits it affords the public. The system's feasibility, simplicity, and transparency all come together to reduce public backlash (Santos and Shaffer 179). Overall, the London program, though not a fully functional variable program, has been an important success in its ability to reduce congestion levels and win public support in the process.

Experiments with the Public in Stockholm, Sweden

Unlike London, Stockholm chose a more sophisticated system to monitor roadway usage and limit congestion. Whereas London planner favored a more simplistic, one-size-fits-all approach, Stockholm designers embraced the capacity of technology to produce a truly variable pricing system. Using transponder boxes, laser detectors, and a network of cameras at twenty-three tolling points, cars are instantly identified and billed based on their specific location and the time of day (Abboud and Clevstrom B1). The Swedes began their congestion control program as a seven-month trial starting in January 2006 at a cost of $500 million. Drivers entering the city between 6:30AM and 6:29PM were charged between $1.25 and $2.50 each time they entered or exited, with a max charge of $7.50 for a day. Charges were automatically deducted from the bank accounts of individuals who used transponders to monitor their movements, while others could pay on a day-to-day basis. People who tried to evade payment had their bills forwarded to the Swedish tax authority (Heshner and Puckett 617-618; Abboud and Clevstrom B1).

The benefits to the city of Stockholm were as immediate as they were in London. There was an increase of public transportation use by 6%, reduced traffic volumes by 22%, and a 14% decrease in exhaust pollution (Abboud and Clevstrom B1). Public support, which was lackluster before the program began, increased somewhat during the experiment but only to between 50% and 60%. However, this slim degree of public support was enough for legislators to pass a bill that will make the variable roadway-pricing scheme a permanent reality in Stockholm starting in August of 2007. Some changes will be made to the prices incurred, the penalities for nonpayment, and the types of vehicles that will be given exemptions ("Stockholm Congestion"). However, for the most part, the new pricing scheme will be based on the seven-month experiment that was a technical, if not political, success. Only time will illustrate whether or not public resistance to the variable pricing scheme will increase to the point that the program is fully rescinded.

Plans for the Future in New York City, USA

In New York City, finding a way to implement congestion pricing has been called the "holy grail" of urban planning (Neuman B1). Congestion has become a major problem in Manhattan and finding an effective means to control it has been the focus of a number of groups and individuals. The success of London's weekday pricing scheme has been hailed as proof that a similar system could be implemented successfully in New York City. Interest in a congestion pricing scheme that would charge the most trafficked areas at the busiest hours has increased significantly with demonstrations in London and Stockholm that such plans are technically and politically feasible (Schaller; Chan).

In New York City, advocates of congestion pricing have point out clogged streets are costing the city as a whole an estimated $12 to $15 billion every year. That is in addition to environmental costs like increased pollution, as well as the economic problems already mentioned as problems for all congested cities (Neuman B1). The obvious benefits of a pricing scheme would be smoother traffic flows, reduced delays, reduced pollution, and increased bus speeds. One leading proposal is quite similar to the system in place in London. The 840,000 cars entering New York City south of 60th Street everyday would be subject to a $7 weekday charge via ANPR technology, with some variability and exemptions. The money raised by this effort would be funneled back into the public transportation system (Chan).

Unfortunately for advocates, there is still significant public opposition to this plan, certainly more so than in London and possibly more than in Stockholm. Opponents fixate on the effect this will have on commuters traveling from outlying boroughs such as Queens and Brooklyn. Critics argue that congestion pricing amounts to an unfair tax on those commuters who are ill equipped to pay for it. The Queen's Chamber of Commerce estimated -- using questionable data -- that a system similar to the one in place in London would result in 40,000 fewer people entering Manhattan at a cost of $2.78 billion in lost productivity. Of course, the evidence from London does not support this conclusion, as London only saw a 2% drop in visitors, not the 14% the Queens Chamber predicts (Neuman B1; Schaller). Regardless, the fact that conclusions would be fabricated in this fashion speaks to the depth of political opposition to any proposal to implement this a congestion pricing system in New York City. The benefits that such a system could confer are outweighed in the public's mind by perceived costs to businesses and individuals, a "right" to drive freely, and fears that the technology required could be used to invade one's privacy.

Conclusion: The Merits of Variable Pricing to Control Congestion

What is most important in any decision to implement a congestion-pricing scheme or rely on traditional methods to increase roadway capacity is the benefit that is given to the public and to the system by the decision made (Cervaro 146). The reality is that growth of major urban areas, as well as the volume of traffic on the roads, is increasing at a rate faster than new infrastructure construction. The traditional response to simply expand capacity to meet demand has not been effective. There is no reason to believe that it will eventually become effective (Lindsey and Verhoef 1).

On the other hand, congestion pricing is an efficient, clear, and universally understood means for encouraging socially efficient choices by attaching a financial cost to limited resources (Lindsey and Verhoef 1). The economic benefits of such a plan are undeniable, as they have been amply proven in both London and Stockholm. Cities can expect to be given a significant new revenue stream that can be ideally earmarked for public transportation projects. In the process, by increasing costs of resources, demand will predictably fall for those resources and limit congestion. The benefits of reduced congestion are numerous and have already been discussed in significant detail. The costs of such a system are largely a matter of perception, and not technology or economics. While overhead for these systems can be high, the case of London proves that even after a single year, the system can operate on a net gain. Concern over these congestion-pricing systems is a function of public misunderstanding or fear that the "tax" will not confer a tangible benefit. In order to demonstrate that the pros of congestion pricing far outweigh the cons, public and political education to rectify this misunderstanding must be made a priority.

Works Cited

Abboud, Leila and Clevstrom, Jenny. "Stockholm's Syndrome: Hostages to Traffic, Swedes Will Vote on High-Tech Plan to Untangle Snarls with Tolls." Wall Street Journal 29 Aug. 2006: B1.

Cervero, Robert. "Road Expansion, Urban Growth, and Induced Travel: A Path Analysis." APA Journal 69.2 (Spring 2003): 145-163.

Chan, Sewell. "Driving around Manhattan, You Pay, Under One Traffic Idea." The New York Times 11 Nov. 2005. 23 Apr. 2007

Hensher, David a. And Puckett, Sean M. "Congestion…

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