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Economists propose use of dynamic road fees for traffic control

In the current issue of Nature, economists Peter Cramton, Axel Ockenfels (both University of Cologne) and R. Richard Geddes (Cornell University) propose having drivers pay a dynamic fee for the use of roads. This would contribute to avoiding traffic jams and protecting the environment, the researchers argue.

Fees that respond to traffic volumes in real time and with site precision, taking into account factors such as vehicle type and exhaust emissions, can significantly improve traffic flow and contribute to reducing air pollution, they suggest.

The location of individual cars can now be tracked to within a few centimeters. This makes it feasible to measure and price road use in real time according to demand. If the price were set at the right level, enough car drivers would choose to drive at a different time or take a different route or mode of transport to cut congestion. Limited road space would be managed in a similar way to airfares, electricity, hotel rooms and train journeys. Uber already balances demand and supply of its cars through surge pricing.

Overall, dynamic pricing does not drive motorists away. It can double the capacity of a congested route in peak times by preventing traffic jams—just as managing fisheries can ease overfishing. Pollution and stress would decrease. The funds raised could be used to improve roads and public transport, and to reduce fuel and other taxes.

—Cramton et al.

The authors argue that fixed pricing schemes do little for congestion, because prices often do not change meaningfully with supply and demand13. A low price does little to mitigate jams at peak times. “A price that is fixed high to eliminate peak congestion would be as inefficient and unacceptable as having Thanksgiving airfares all year.

Traffic jams are not only annoying and time-consuming, they are also costly. In Germany, the economic damage caused by congested roads in 2017 totaled approximately €80 billion euros.

Currently, road users who cause traffic jams, damage the environment and even incur costs are paying just as much as those who are not involved. Without a toll, this means that the general public is subsidizing these road users. That’s unfair.

—Axel Ockenfels

A toll for road use would bring these costs to light and reduce congestion.

If the fee adapts to the volume of traffic and the situation on the road in real time, i.e. is more expensive at rush hour than around noon, everyone can choose the route that suits them best. This already works for navigation systems. Ultimately, this would reduce the load on main traffic arteries, improve traffic flow and reduce CO2 emissions.

—Peter Cramton

Technically, a dynamic road toll could already be implemented in real time today. Navigation and telecommunications systems, GPS data and apps can provide drivers with information and predict traffic volumes.

Of course, you have to develop a system that is an acceptable compromise between collecting personal data and protecting privacy.

—Peter Cramton

Modern cryptology could allow system operators to charge tolls without people having access to the data at all.

The authors do not believe that the toll would disadvantage people who cannot afford the tolls.

Pricing must be dynamic and offer options. Imagine pricing the left lane of regularly congested, multi-lane roads. A lower traffic volume on the left lane would be the result. This in turn means that the flow of traffic on the right-hand lane also increases. That way, everyone benefits.

—Axel Ockenfels

Resources

Comments

Paroway

"Imagine pricing the left lane of regularly congested, multi-lane roads. A lower traffic volume on the left lane would be the result. This in turn means that the flow of traffic on the right-hand lane also increases. That way, everyone benefits."

I'm not seeing how people in the right lane benefit.....anyone?

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