Modern-day ‘tragedy of the commons’ Can Government Reduce Urban Traffic Congestion?

 No one likes to be stuck in traffic. But here we are, stuck in traffic, inching forward meter by meter and wondering if there are any alternate routes that could get us to the destination faster. Why is the government not taking any measures? To answer this question, it is important to understand that urban traffic congestion is not just a pervasive problem but a complex economic issue. Let’s see how microeconomic concepts can explain the problem of traffic congestion and the interventions to effectively solve it.

Urban traffic congestion: through the lens of economics

Traffic congestion arises because roads are, what economists call, common resources. Anyone can use roads; we cannot exclude anyone from using them. However, the use of the road by one person reduces the road space available for another person. This means that roads have the rivalry characteristic. Economists call such resources, which are non-excludable and rival, common resources. Now imagine if such a resource is available to us, how are we going to use it? We would think that the road is there, freely available, so why not use it? This pretty much explains the reason behind traffic. Because roads are freely accessible, people acting individually overuse them, leading to congestion. This is what economists call the ‘tragedy of the commons’. Traffic congestion is the modern-day tragedy of the commons.

In addition, traffic congestion is also an example of negative externality and market failure. Negative externality is a term economists use to explain a situation where someone’s actions impose costs on other individuals who are not directly a part of the action. Our decision to drive creates traffic and air pollution, which costs someone else their time and clean air, reducing their welfare. In economic terms, this represents market failure where the free market fails to allocate resources efficiently. This provides a rationale for the government to intervene to solve the problem of traffic congestion.

How should the government intervene?

One way in which government can reduce traffic congestion is by investing in infrastructure and road networks. Constructing new roads can provide viable alternatives to the public. But here’s the catch, investing in road networks is like a black hole (Plane, 1995). Better and wider roads make it easier to travel leading to even more increased use of cars and further congestion as argued by experts like Bansal and Graham (2023).

A more creative approach to reduce congestion is introducing a price on driving, more specifically implementing congestion pricing schemes. Under such schemes, drivers are charged a fee for driving on congested roads during peak hours. The idea behind these schemes is to make drivers rethink their decision to drive on busy roads during peak times to avoid unnecessary travel and reduce congestion. For example, in Manhattan Central Business District (CBD), 90000 vehicles enter in a day, with traffic peaking at around 7:00 a.m. as shown in the figure below. In CBD, a $23 fee could cut down the travel by 27500 cars a day (Barron, 2022). How does this scheme work?

Source: Traffic Mobility Review Board, 2023

Congestion pricing forces drivers to consider the costs of damages done to others through congestion and thus, internalize the negative externality (Singh, 2019). It encourages substitution away from cars to bicycles, taxis, public transport and other forms of transport, reducing congestion on roads. It also has additional benefits including improved air quality and increased government revenue that can be used for public welfare. The working of congestion tax is shown in the following figure where $C amount of tax reduces the number of cars from Q1 to Q2.

Mechanisms of a congestion tax

However, not everybody is a fan of the scheme. Charging people to use roads adversely affects people whose livelihoods depend on cars and puts a disproportionate burden on people with low incomes, making it regressive. A minimum wage worker will have to pay about 22% of his income in the form of the congestion charge in London (Alassaf, 2015). Who would like to pay such a high charge for using roads, right? Thus, convincing people remains the most difficult aspect of implementing these measures (Altshuler, 2010). Interestingly, the New York congestion tax mentioned above failed primarily because of public opposition to the peak and off-peak charges and the distortionary impacts of the tax (Cowen, 2023). According to Gu et al. (2018), four factors influencing the acceptability of the scheme are privacy, complexity, equity, and uncertainty. So, governments should adopt a clever approach to balance these aspects and improve public acceptability of such schemes.

What else can be done?

Apart from making drivers pay to drive during rush hours, there are other regulatory ways to ease traffic. This includes improving public transport which can increase its usage and reduce congestion on roads. Improving road connectivity will decrease the reliance on specific routes and make traffic dispersion more efficient. Moreover, constructing cycle lanes can enhance the flow of traffic while making commuting safer for cyclists. Another way to discourage the use of personal vehicles is to make parking more expensive and limited. Lastly, AI-driven traffic control systems and other technology-based solutions also have the potential to improve traffic management.

Final thoughts

Urban traffic has become a significant issue in our daily lives. Economic ideas including market failures, negative externalities and the tragedy of the commons help us understand the issue. It is crucial that the government implement policies like congestion pricing to address the problem. To ease the traffic further and improve quality of life, regulatory and innovative policies are also required.

Thus, the next time you are travelling down a road with heavy jams, think of the complex work of integrating economics, technology and government policymaking to solve the problem. After all, who knows, if we tried harder, the day without congested roads would cross our way sooner than we expected.

What do you think is the best method to reduce traffic congestion? Below the results we got before pre-publishing the post. 

References

Alassaf, M. (2015). Congestion charge and its alternatives. Masters. California State Polytechnic University.

Altshuler, A. (2010). ‘Equity, pricing, and surface transportation politics’, Urban Affairs Review, 46(2), pp. 155-179. Available at: https://doi.org/10.1177/1078087410378487 (Accessed: 09 April 2024).

Bansal, P., and Graham, D.J. (2023). ‘Congestion in cities: Can road capacity expansions provide a solution?’, Transportation Research Part A: Policy and Practice, 174, p. 103726. Available at: https://doi.org/10.1016/j.tra.2023.103726 (Accessed: 09 April 2024).

Barron, J. (2022). The Pros and Cons of Congestion Pricing in Manhattan. The New York Times. Available at: https://www.nytimes.com/2022/08/25/nyregion/congestion-pricing-manhattan.html (Accessed: 09 April 2024).

Cowen, T. (2023). Why the NYC congestion pricing plan is bad. Marginal Revolution University. Available at: https://marginalrevolution.com/marginalrevolution/2023/07/why-the-nyc-congestion-pricing-plan-is-bad.html (Accessed: 09 April 2024).

Gu, Z., et al. (2018). ‘Congestion pricing practices and public acceptance: A review of evidence’, Case Studies on Transport Policy, 6(1), pp. 94-101. Available at: https://doi.org/10.1016/j.cstp.2018.01.004 (Accessed: 09 April 2024).

Plane, D.A. (1995). ‘Urban transportation: policy alternatives’, in Giuliano, G. and Hanson, S. (eds.) The Geography of Urban Transportation. New York: Guilford Publications.

Singh, A. (2019). ‘Congestion pricing in developing countries-a case study’, International Journal of Research and Analytical Reviews (IJRAR), 6(1), pp. 692-701. Available at: https://doi.org/10.6084/m9.doi.one.IJRAR1BLP104 (Accessed: 09 April 2024).

Traffic Mobility Review Board. (2023). Congestion Pricing in New York: A toll structure recommendation from the Traffic Mobility Review Board. Available at: https://new.mta.info/document/127761 (Accessed: 09 April 2024).