A $57 daily commute

As I breathlessly await Tim's "great post" I decided to read the latest weekly update from Region Focus, published by my own Federal Reserve Bank -- the Richmond Fed (the fighting 5th District! [with apologies to S. Colbert]). This week it deals with congestion pricing, the idea that the price of driving on the roads might fluctuate like all prices (except those of 12 oz cans of soda in my building which, I'm told, haven't increased from $0.65 in the past 12 years -- put THAT in your bundle of market goods and measure inflation):

Northern Virginia is one step closer to using congestion pricing to address commuters' traffic woes. On March 2, the Metropolitan Washington Council of Governments received a detailed plan to build high-occupancy toll (HOT) lanes along a 56-mile stretch of Interstates 95 and 395. These lanes would have sensors that track the flow of vehicles, allowing for tolls to be adjusted as quickly as every six minutes.

Of course, this is way efficient. When the roads get crowded the toll would increase and, theoretically, reduce the number of drivers on the road (empirically too [too lazy to find the Swedish experiment link ... hoping that someone types it into the comments section]):

A road is available to everyone once it is built. Therefore, people tend to see it as "free," though their tax money likely paid for it in some way. Even when there's a toll, it normally costs the same regardless of how many other people are using it. Such arrangements usually aren't very good at determining the relative demand for road usage among various drivers.

A toll that varies by the level of traffic, on the other hand, should allocate demand more efficiently. When a road becomes really congested, access is restricted to only those who value it the most and are willing and able to pay a higher price. "People use it only when they need it," says Lee Munnich, a senior fellow at the University of Minnesota's Humphrey Institute of Public Affairs. He has studied the use of congestion pricing in Minnesota and other transportation policies.

...

For someone driving the entire length of the HOT lanes between Arlington and Massaponax, the tolls could amount to as much as $27.02 in the morning rush hours and $30.11 during the evening rush.

50 weeks per year, 5 days per week is 250 commuting days. In case you don't have MS Excel installed on your own computer, that's $14,255 or, if Tim is doing the math, about $755. Yikes. A $14k commute would make me consider (a) housing closer to DC or (b) a new job. See? Economics solves problems and sometimes efficiency sucks.

And, the cost of the daily commute would be higher with increasing demand (i.e., people).

Comments

[Dano]

Shouldn't equilibrium rents go up closer to the CBD in response?

Best,

D

[John Whitehead]

Dano,

Some people will move closer, some might move away ... not sure the overall impact on land prices.

[Dano]

I'm stating, John, that if there's demand closer in (for presumably already developed land and thus a latent demand for infill development) for dwelling units, equilibrium prices should rise as folks bid up rents, no?

Presuming this to be true, we already know rents are higher closer in to the CBD and a $14K saving right away might be impetus to move, but if equilibrium rents go up maybe not, and nondiscretionary trips are just a new revenue stream. This will instead force car-vanpooling, thus reducing the # of SOVs on the road.

Just a thought.

Best,

D

[John Whitehead]

Dano,

I'm saying that some people might get fed up with having to pay so much for the commute and move to somewhere with congestion but no pricing. This would depress land values close in to DC, offsetting some of the effect of people moving closer to their DC job.

[Dano]

Ah. I misunderstood your a) in your penultimate para.

Carry on.

And congrats to the Buckeyes (my consolation is gonna go see Michigan in the hockey playoffs Saturday!).

Best,

D