Coyote Blog

Have you ever heard of government authorities making public statements around Valentine's Day to please conserve on roses since we are entering our peak demand season for them and rolling shortages could ensue?  No?  Never?  Well, the demand spike for roses on Valentines is much more dramatic than the demand spike for power on a hot summer day.  So why no urgent government messages for conservation of the former but constant ones for the latter?

Because the rose market is not heavily regulated.  Producers are free to manage their capacity without government interference, and, perhaps more importantly, producers are free to charge peak pricing in high demand periods.  In fact, prices for roses on Valentines go for a multiple of everyday pricing that a similar differential in a peak supply period at, say, a gas station would likely get the proprietor arrested for price gouging.  But we recognize that its tough to manage a business to supply all its capacity in one day of the year, and accept the higher pricing.  Why is it we can't accept the same facts of life in electrical generation, where capacity is orders of magnitude more expensive to manage than rose growing?

More from Llewellyn Rockwell at the Mises Blog and Lynn Kiesling at the Knowledge Problem

Quite a while back, I suggested that a better use for HOV lanes would be to charge money for their use, thereby creating a new revenue stream to increase future freeway capacity and beginning to experiment with peak pricing.

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 suggested that $1000 as the clearing price might be low.  For some workers and businesses, 20 saves minutes a day might be worth thousands of dollars a year.  Some wealthy people would buy it just because they can, or as a status symbol.  I observed that many people were buying hybrids in Washington DC solely so they could use the HOV lane, putting a price of at least $5000 (based on the hybrid's price premium over similar non-hybrids) on HOV lane use.  In this example, I posited an annual pass, rather than a toll, solely because we have not toll roads here and no infrastructure at all to support tolls and a customer based unused to paying them.

Apparently, Lynn Kiesling, the DC/Northern Virginia area may soon experiment with exactly this concept, charging a congestion-variable price for HOV lane use while giving a discount to carpools.  Apparently the idea already is in use in SoCal.