Roads and Peak Pricing

Todd Zywicki at Volokh has an interesting post on what is driving hybrid car purchases in certain cities.  While certain segments are driven by environmentalism and fuel economy, the real boom in certain cities has come with the legal change in some cities allowing single persons in hybrid cars to use the carpool lanes.

"'I'd say 95 percent of the people who buy a Prius say it's to get into HOV,'" said Jay Taye, sales manager at Ourisman Fairfax Toyota. "'They talk about the tax break and the HOV, and once in a while they say they prefer it for the gas mileage as well.'"

By the way, he links an absolutely dead-on article about public transit in the Onion here called --"Report: 98 Percent of Commuters Favor Public Transportation For Others"

The link between the Onion article and the Washington Post story referred to by Zywicki is that what people really want is a fast commute in their car, and they are willing to pay for it.

Several years ago, I sent in a proposal to the Arizona Dept. of Transportation for their new HOV lanes in the Phoenix area, though I never got a response back.  I suggested that HOV lanes probably did not really increase carpooling, since they probably just shifted vehicles that would have already been carrying 2+ people into the faster lane.  Why should I get this artificial subsidy of a dedicated lane when I am driving my kid to a soccer game but not when I am driving myself to do productive work?  Either way, the lane is not changing my behavior.

Anyway, I suggested that instead, AZ DOT should create a number of special passes for exclusive use of the HOV lane.  The number of passes should be set as the largest number that could be issued while keeping the HOV lane moving at the speed limit at rush hour.  Maybe 5000?  Anyway, they would have the stats to set the number, and it could be adjusted over time.  I proposed that they then auction off these passes in a dutch auction once a year.  I posited that the clearing price might be as high as $1000, thus raising $5,000,000 a year that could be used for other transportation projects.

I have friends that said I was crazy, that no one would spend $1000.  Back then, I argued it in two ways.  First, thousands of people in town spend not $1000 but tens of thousands of dollars, in the form of purchasing a nicer-than-basic-car, to make their driving experience better.  In those terms, to the Mercedes or Lexus owner, $1000 was nothing and in fact the price might go higher.  Second, if each pass holder saved 15 minutes per commute, or 30 minutes per day over 250 work days, they would save 125 hours of their time each year.  Bidding just $1000 for this would mean that people would have to value their free time (since commuting generally comes out of free and family time) at $8 an hour.  I certainly value my free time at a MUCH higher rate than this.

This article cited above effectively adds another data point to what people might pay.  To buy a Prius, they are spending at least $5000-$10,000 more than a similar car that can't go into the HOV lane, and probably even more when you consider features they may be giving up to have the car.   

Today, I would bet that the clearing price for 5000 such passes may be $3000-$5000, thus increasing the annual revenue to the city/state as high as $25,000,000.

By the way, though it is a bit different than what I am suggesting, the best related plan that I know of that has actually been executed succesfully is congestion pricing in central London.

UPDATE:  Dang, reading up further in Volokh, Zywicki anticipated my post with a similar one here.


  1. Highway:

    I've commented on some of these issues at times (on my blog), and the underlying parts haven't changed at all. There's also the continual 'transit vs. roads' issue, where everyone wants more transit, but mostly for the other guy, and of course we don't want any sort of realistic pricing scheme for trips by transit.

    Personally, I'm a big fan of congestion pricing, maybe not so much for an area like London's, but for toll roads. The biggest problem is that tolls are not set high enough to really discourage people from overloading a road.

    I'm not so sure about your idea of the passes for roadway usage. I see 2 problems with it: at 5000 issued, you'll have a LOT of empty pavement, and you would still have the possibility of congestion in the lane (yes, I know, it sounds oxymoronic). Generally, 2000 vehicles per hour per lane is a best case estimate, although it can get higher with more aggressive drivers (less space between cars at highway speeds). If you have one lane each way, you'll have approximately 20 hours a day that each lane is just totally empty, and you still have the possibility that 3000 people would show up in the same hour to use the road. Since the premise of your pass is that you are trying to guarantee some minimum level of service (D - Congested but still flowing), when it gets clogged, you'll have some unhappy people.

    That's why I like the realtime congestion pricing a bit better. It also allows people who don't want that service every day to decide if they need it for a special occasion. Sometimes you have an important meeting that you HAVE to get to, but the rest of the year it doesn't matter.

    There's no reason that multiple systems can't be used, and the class warfare that's used to shout down the 'lexus lanes' and toll roads doesn't sway me at all. People don't pay enough for roadway usage either. I'd love to see gas taxes go up to meet all roadway expenses. I wouldn't mind every road being a toll road. That's also in line with the real pricing of transit. Then we'll see what people really want.

  2. Kendall Helmstetter Gelner:

    I have also wished for the ability to buy HOV passes for myself, however I see a number of problems...

    The first one is enforcement. Already today I see a number of single driver cars using the HOV lanes, this includes totally enclosed HOV lanes with no way out! While police do patrol at times, people are still not deterred.

    Having some people with the ability to legally use the HOV lane as single drivers makes enforcemnet more difficult, and probably also increases the need to patrol the HOV lanes for violators that may feel it's easier to fool people if they look like anyone else who has paid for a pass. So, there is a hidden cost to such an effort. Possibly you could address this with transponders but that would only work well I think if all HOV users were required to use them (another cost).

    The second issue is one of public opinion - there might well be asignificant number of people outraged at the thought of people being able to "buy" roads all for themselves while poor people have to suffer in traffic. I don't agree with that opinion but you can see where elected officials would be nervous about bringing that kind of classist accusation down on themselves.

    I would also love to see speed-rated licences where people who paid for extra training could have higher speed limits than other people, but it has similar issues in addition to the problem of traffic travelling as disparate speeds (though I think that is really a problem already).