Autos and Highways Three issues: Congestion, Air Pollution, and Accidents http://aistigave.hit.bg/Logistics/ I Congestion: Equilibrium versus Optimum Traffic Volume A. Demand for Urban Travel Demand curve shows for each trip cost how many travelers will use the highway Marginal benefit curve – for each traffic volume, how much the marginal traveler is willing to pay for the highway trip B. Private Trip cost – sum of monetary cost and private time cost of an individual Have monetary travel cost (fuel, etc) Time cost – opportunity cost of travel time Congestion externality: each additional driver slows traffic and increases travel time for all other drivers Equilibrium vs. optimum External trip cost – monetary value of the congestion externality (evaluated by the opportunity costs of increase in travel time when traffic volume increases) Social trip costs = sum of private trip cost and external trip costs Each individual uses the highway if marginal benefits (as measured by demand curve) > private trip costs Traffic volume = 1600 Optimum number of drivers is when marginal benefits= social trip cost Traffic volume = 1400 Drivers ignore their impact on others Trip Cost Social trip cost Private trip cost $9.14 $5.48 Demand = marg. benefit 1,400 1,600 Vehicles per lane per hr Policy response – Congestion Tax Congestion tax to internalize the externality created by too many drivers Congestion tax of $4.34 (9.14-4.80) would make the private trip cost=social trip cost and the equilibrium number of drivers would fall from 1600 to 1400. Trip Cost $11.40 Social trip cost C Net gain from congestion tax A Congestion Private trip cost 9.14 Tax = $4.34 5.48 B 4.80 Demand = marg. benefit 1,400 1,600 Vehicles per lane per hr Four ways a congestion tax can decrease traffic volume Modal substitution – choice bus, carpool, metro Change time to off-peak – go at a less crowded time Change routes to one that is less crowded Location choice – move closer to work or find job closer to home. Benefits and costs Costs more to drive now Time on highways decrease as lower traffic volume Net impact depends on what happens to the tax revenue collected (4.34*1400=$6,076) Could substitute congestion tax for gasoline tax to pay for highways Could redistribute to all citizens (highway users and non-users) Peak versus Off-Peak travel Tax must vary by time (rush hour or not) and space (congested or not) Want peak-period congestion tax to be higher In San Francisco – need 65 cents per mile on urban highways, 21 cents on suburban, and 17 cents on fringe. Off peak charge 3-5 cents. Twin Cities: average 9 cents – would decrease volume by 12% on average and 25% on most congested roads. Implementing and experiences How to collect the tax is big problem Toll booths slow roads-create even more congestion VIS – vehicle identification system – send bill at end of month Debit devise – decreases as car passes checkpoint Singapore – Area Licensing III Alternative to Congestion Tax A. Gasoline Tax: increase cost of all auto travel No incentive to switch times or routes Need to charge $9.55 per gallon to have impact B. Parking tax – switch to other modes If impose on peak drivers, may change time No incentive to live closer Employers should stop subsidizing parking C. Capacity expansion/traffic design Widen highway to increase capacity Trip costs decrease, volume increases More people may decide to drive Alternative to Congestion Tax cont. D. Subsidize Mass Transit Decrease relative cost of transit people may switch Autos are underpriced due to external cost May underprice transit and increase ridership above optimum level if subsidize Congestion tax most efficient to solve traffic volume issue IV. Congestion and Land-use Patterns Increased commuting costs determine the slope of the residential bid-rent function- shift from R0 to Rc (assume no redistribution of tax revenue) Congestion tax increases cost of commuting- $ residential bid-rent will be steeper Pay less at all distance away from the city Gap gets bigger with distance as tax gets larger Congestion tax – more compact city as people want shorter commutes Ro Rc distance Congestion and labor market B. Urban labor market Net welfare gain to city residents if highway volume decreases – increases attractiveness of the city- people move to this city Increase in labor supply causes wages to decrease Firms demand more labor as wages fall Lower wages and larger workforce City with congestion tax may grow – improves efficiency of transportation network and relative attractiveness of city. V. Autos and Air Pollution Cars emit pollution – “greenhouse gases” Causing global warming 2/3 of carbon monoxide emissions 2/5 of nitrogen oxide Clean Air Act (1963 plus amendments) legislated decreases in emissions States use vehicle inspections; parking restrictions and “cash” for old cars programs to achieve emission decreases A. Effluent fees Drivers base travel decisions on private trip costs (PTC) but PTC<Marg. Soc. Costs (MSC) due to emissions People drive too many miles and drive cars that pollute too much How can we internalize this externality – make drivers pay for the pollution they create Install monitoring devices on every car to measure emissions Expensive – must be other methods to charge for pollution Methods to implement One time pollution tax on the car Based on lifetime emissions and the cost per unit emission Car buyers would pay more for cars that pollute more – demand cleaner cars Gasoline tax – increase private cost of auto travel and decrease miles driven Everyone pays the same whether clean or dirty car Tax between $0.60-1.48 Transit subsidies Subsidize mass transit – pollution per passenger is lower Decrease costs so more people will ride If subsidized cost of transit<MSC – may have too much transit riding Question of whether the air quality benefits dominate the resource costs VI. Auto Safety Accidents kill and injure people 10.7 million accidents in 2005 Half a million fatalities (62,000 pedestrians) Leading cause of death for 1-24 years old Accidents disrupt traffic flows and lead to congestion Government has set safety legislation requiring certain safety features. Head restraints, padded dashboards, seatbelts, shatterproof windshields, airbags Do they “work”? A. Effect of Safety Regulations Safety regulations decreased # of fatalities by about 30% (BENEFITS) Response of drivers to safety regulations: Theory of risk compensation: Drivers may feel “safer” and drive more reckless and cause more collisions (COSTS) B. Optimum Speed When someone crashes, less likely to get injured badly at lower speed Higher speed increases the probability of crashing Expected crash cost = probability of crashing*total cost of the crash Expected cost of crash decreases at every speed with the safety regulations – so people are “reckless” Original Marginal Cost $ Marginal Benefit Marginal Cost A with safety regulations B 44 46 48 50 52 54 56 Speed Miles per hour Optimum Speed and Safety Regulations Graph Analysis Marginal benefit – how much time do you save by going faster Marginal cost – the increased expected accident cost: more accidents at higher speed and worse injuries With safety regulations – marginal costs shift down to right Initially, MB=MC at point A After safety regulations, people feel like cost has decreased so new point where MB=MC at point B C. Net effect Collision rates were higher following the implementation of safety regulations Pedestrian death rate were higher Death rate for pedestrians and bicyclists are inversely related to number of safety features Drivers in safe cars take more risks and endanger others Overall though, deaths decreased by 30% Smaller Cars and Safety Small cars are good cuz use less fuel and cause less air pollution Take up less space on street and highway- less congestion and fewer parking problems But are also less safe – so are benefits>costs? Travel in small cars more dangerous for drivers/passengers Less lethal for pedestrians and bicyclists Small cars okay in 1 car accidents (137,000 fatalities in 2005 due to hitting fixed object) Need to drive more cautiously to avoid collisions Summary 3 most popular trips b/w suburbs (40%); within central city (33%); suburb to central city (20%) 4 of 5 workers commute by car, truck or van Drivers base travel decisions on private not social costs so too much driving Congestion tax internalizes externality Need to impose a pollution tax on new cars so people will pick cleaner cars.