Is reducing negative externalities a positive externality? (Or on Biking and Vikings)

A comment on a recent post on suggested that bicycling has positive externalities, and thus we (society/government) should subsidize it. The same argument applies to many things for which government subsidy is requested, including large stadiums for professional sports teams.


Zeroth, bicycles are not public goods. Bicycles are both excludable (with locks when not ridden, by the rider when ridden) and rivalrous (my riding prevents you from riding it), and are thus private goods. Bicycle lanes may be public goods, since we don’t generally have effective mechanisms to exclude people who do not pay from using bike lanes (unless we register and tax bicycles, and enforce this, which is difficult with present technologies given their long and open nature) nor are bike lanes generally congested. The facility such lanes parallel may in fact be congested (rivalrous), and thus the demand for the space they use may be rivalrous – this usually varies by time of day.

First, bicycling has lots of benefits for bicyclists, otherwise they would not choose to ride their bike. So there are private benefits. (Similarly, professional sports teams are already profitable.)

Second,  based both on theory and evidence, the provision of bicycle infrastructure increases bicycle use and thus private benefits. (Similarly, a new stadium will increase attendance or ticket prices at a sports event.)

Third, what a bicyclist would do it they are not bicycling is not obvious. Perhaps they would walk, or ride transit. Perhaps the trip would not be made (most trips are not work trips, most bike trips are at least in part recreational). Does more bicycling actually result in fewer people using other modes? The classic (logit) mode choice model implies that it does, though the shares are not 1:1, so we cannot assume that each bicyclist would otherwise drive. The IIA assumptions (Independence from Irrelevant Alternatives) implies that if bicycling were somehow to disappear, bicyclists would use other modes in the proportion they have today, so maybe 60% of bike trips would switch to auto driver. More sophisticated models can may be able to answer this question more accurately.

To the extent that fewer people drive or ride transit, at the margins additional bicycling reduces the negative externalities of those other modes (congestion, pollution, noise, etc.). (Similarly, what a fan would do were they not attending and spectating at a football game is not obvious. There would be at least some other leisure activity consumption.) I don’t believe that is sufficient to claim them as positive externalities for reasons discussed below.

Externalities: Definitions

[For a primer, See: Khan Academy on Positive Externalities.]

Economics makes a distinction between Technical vs. Pecuniary externalities. Pecuniary is the SAT word for relating to money, and the term Pecuniary Externality covers cases where Alice’s presence in the market raises costs for Bob.  If we have an upward sloping cost curve, as we move along  the demand curve to the right in quantity, the equilibrium price rises. Alice’s presence in a market (where variable costs are rising more than average fixed costs are falling) raises prices for other consumers (all the Bobs).

The Vikings’ presence in Downtown East drives up land rents for others. This Pecuniary externality is not what we are concerned about. Instead we are concerned about Technical Externalities, where my presence in the market creates an impact on someone who is not in the market.

For instance the noise and congestion from the Vikings game lowers the property value of nearby residences. A bike trail in my back yard may lower my property value. Taking lanes from cars for a bike lane may increase congestion in the remaining car lanes.

Just about any action has positive and negative effects on others who are not party to the transaction. In the absence of regulation, parties try to internalize the benefits and  externalize the costs. The positive externality argument has been used to justify subsidizing many different goods and services.

What is our baseline? 

The Polluter Pays Principle says the baseline is no negative externality. When there is a negative externality, the polluter must pay a tax (a Pigouvian tax) equal to the cost of the externality to society. If reducing the externality can be done for less cost than the tax, the polluter will of course do that.

If instead society is subsidizing someone to not pollute, for instance by giving them a property right in the pollution they are already creating (such as a cap-and-trade program, or congestion credits), we are reducing the negative externality, but systematically distorting incentives all around. We are changing the baseline from no pollution to the existing amount of pollution. We are in a sense giving a property right to existing polluters to continue polluting (congesting) the amount they want , and the victim of the pollution is  required to pay them to stop. While Coasian bargaining suggests we would wind up with the same efficient equilibrium (if we can ignore transaction costs), this will provide a poor set of incentives, especially if the polluter can game this system to increase their initial endowment by maximizing initial pollution in a way that is easily reduced for the polluter, but not obviously so to the pollutee.

Currently cars do not pay for the pollution, congestion, noise, or unsafety they produce.

Is there a dual problem?

If the Polluter Pays Principle is our operating logic for negative externalities, what is the mirror or dual for positive externalities: The Positive Spillover-er is Subsidized Principle? The person or organization who creates positive spillovers (positive externalities) for society which they cannot themselves internalize, should be subsidized.

Assuming we could actually determine this (i.e. assuming perfect information), and that transaction costs were very small (i.e. we could implement it) this might make some sense. Those two assumptions are at odds with how reality often works. Nevertheless, it is certainly used as a rationale for public subsidies for certain things like parks, schools, transit, bike lanes, NFL stadiums, even roads.

Unlike negative externalities which we clearly do not want, no one (or not everyone) necessarily asked you to create a positive externality.

  • If we subsidize to induce the positive externality – then we are asking.
  • If we subsidize to reward the positive externality – then we are thanking, and implying an implicit incentive for future Spillover-ers. But these  are different cases (before vs. after) with different results.
  • If it doesn’t occur to society to incentivize you or thank you, but instead if you are demanding a subsidy  because of the benefits you provide that the rest of us don’t (at first, or ever) see, that is another case still.

There are few cases where everyone benefits, and fewer where everyone benefits the same amount. A Vikings stadium benefits place A and businesses there in large part at the expense of place B and businesses there. In short, most of the benefits are transfers, and while there may be a net social increase, there are winners and losers and the winners do not actually compensate the losers.

Internalize it

While the Negative Externalizer has no incentive to capture their externality, why can’t the  Positive Externalizer capture the positive externalities? The Vikings, for instance, could have moved to a location [Arden Hills] where they put all the parking, hotels, shops, and restaurants on site, and the  only spillover would be name recognition and municipal pride in a team so great they consistently bring home national championships regularly for the metro area they purport to represent. By moving to (staying at) a smaller site in the city, they cannot capture all of the excess spending by stadium-goers, which instead spills-over to neighboring blocks in downtown, enriching nearby landowners and their tenants, and indirectly increasing the tax base (so it is said).

So what is the difference between a request for more subsidy for  bike lanes vs. more subsidy for a professional sports team?

Roads, and wide linear infrastructure in particular, are notoriously hard to privately build without government consent or granting of eminent domain powers. Stadiums as point facilities are much simpler. A new network of bike lanes divorced from existing networks of rail and road infrastructure in a built-up area is impractical. In contrast, a new network of bike lanes in a private master planned community built upon a green field is readily accomplished.

In the absence of master planned communities replacing administratively obsolete cities cursed with an excessive division of property, a practical solution in the messy city needs to be identified.

Is the good undersupplied when paid for by direct beneficiaries?

Would we get fewer or smaller football stadiums when the Vikings pay for it instead of the public, and would the public thus lose benefits. One could hope. Certainly the Vikings have gamed the system to get a huge reward for little investment.

Many goods have positive externalities over some range of quantity, but are not necessarily undersupplied once fully deployed. Network externalities are an example. My use of the cell phone network makes it more valuable for others. My taking the bus makes bus transportation more valuable for others (See Mohring Effect). Similarly, my taking flights out of Minnesota makes air travel more convenient for others in the long run, as more flights will be supplied through Minneapolis, and hubs provide greater connectivity.

That doesn’t necessarily mean that the public should subsidize my cell phone, bus trip, or  flight even though I provide this externality I cannot capture myself. The private benefits are large, and after a certain point, public subsidy would not actually induce more consumption since the consumption is at the maximum level economically feasible. This is certainly close to true for cell phones  where networks were subsidized privately rather than publicly. (There has obviously been significant public subsidy in the aviation sector, though today it is mostly privately funded). It is widely debated for public transport.

How you do the subsidy matters

We can subsidy the consumer directly, but giving them cash or tax credit. Alternatively, we can subsidize supply, lowering the cost and thereby inducing more demand. These have very different effects.


Do Two Wrongs Make A Right? Do Two Minuses Make  A Plus?

So back to the original question: Is a reduction of negative externalities from another mode (a benefit to society as a whole, if not necessarily to each member) a positive externality of biking?

Without immediately answering, we can say that, if a reduction of a negative by subsidy is a positive, it is a “second-best” solution. The first best solution is to reduce externalities directly by taxing them so as not to distort incentives and to discourage over-consumption directly. However, as wikipedia says: “In theory, at least, it may be better to let two market imperfections cancel each other out rather than making an effort to fix either one.” The imperfections in this case being the negative externalities that are not internalized, and the subsidy for a mode that might reduce those externalities.

Classic economic examples imply that it is a positive externality. One random website writes: “If you walk to work, it will reduce congestion and pollution, benefiting everyone else in the city.” which is about as analogous as you can get. Yet something rings wrong.

The underlying logic is that “negative” implies the minus sign, and if we reduce a negative we are adding (two minuses make a plus in math even if two wrongs don’t make a right). From a simple welfare economics perspective, you will get the same Net Present Value either by more biking because you subsidized biking or you taxed non-biking.

NB: You will not necessarily get the same Benefit/Cost ratio, since negative externalities are a cost and positive externalities are a benefit, and the subsidy is a cost (to the government), and a benefit (to the traveler) and tax revenue a benefit (to the government), and a cost (to the traveler).

However, as we noted above, everything has tons of indirect effects. Lifecycle analysis often look at these. When thinking about externalities, we need to distinguish between direct and indirect effects. To illustrate, when driving a car, tailpipe emissions are a direct externality. You may have purchased the car in a market transaction. The car was manufactured in a factory. The factory also had emissions. Are the factory emissions a negative externality of driving a car? If they are, how about the emissions of the steel factory? How about the emissions of the worker who drove to the steel factory? How about the emissions of the food truck that supplied the steel worker’s lunch? How about the emissions of the clothing factory that produced the shirt which was on the back of the driver of the food truck?  If we accept the auto factory, we have no basis not to accept  everything else in society, since the entire economy is a connected network. The usual rule in economic analysis is that we look at direct effects, not indirect effects mediated by market transactions. In this way we can focus on real effects and avoid double counting.

Thus reducing negative externalities of driving because you walk to work may be a wonderful thing, but contra our random internet website it is not a positive externality of walking any more than the negative externality of the emissions of the factory worker driving to the shoe factory which supplied you with shoes. And any positive externalities of bikes should be associated with those direct effects of bicycling, not the indirect effects of other avoided things, nor should they be offset by the negative externalities of bicycle manufacturing and distribution.

I am not sure I can identify any direct positive externalities of bikes that are not mediated. Perhaps people like to look at bicyclists, who provide a positive aesthetic externality. (Actually, people do like to look at unicyclists, which is why circuses can charge money). Maybe bicyclists are healthier, and reduce claims on publicly subsidized health care. (A. This is not a direct positive externality since it is mediated by the health insurance market, and B. I am not sure this health claim is actually true, especially after considering safety and injury and deeply breathing in the toxic emissions of cars – health effects are context dependent, and what would be true if everyone biked is not true if most do not. See e.g.: Hankey et al.).  Bikes are good, but they are mostly good because they are good for bicyclists. Like other transportation modes, they should be funded primarily by user fees. Only if that is not feasible should other sources of funding be considered. [Recognizing of course, that since other modes are not fully funded by user fees, we are in the world of the second-best, and it would be unfair and inefficient for only bicycle facilities to be fully funded by user fees.]

So then the question is whether these indirect positive effects are worthy of subsidy.

Political Economy

One of the problems is when the private beneficiaries are clearly identified (and organized), but the public beneficiaries are diffuse. This is a classic political economy problem, and explains why many special interests get tax breaks or subsidies. So the beneficiaries have an incentive to overstate the social benefit, especially when there is not a clear neutral arbiter of facts.

The net result may be overinvestment in such facilities on the grounds of positive spillovers. This is obvious in the example of the Vikings stadium, which is far more than actually needed to keep the owners financially compensated for staying in Minnesota. While bicycle advocates will scoff at this premise in the present context, there are many examples of overbuilding in the history of transportation. Just look at paved roads for cars and trucks, which at one time were in the same position as bike-only facilities today, and were clearly under-supplied. Today I suspect most bicycle advocates would assert such roads are over-supplied.

A second issue is the deadweight loss (the social benefit that is missed because of under-consumption) might be very small compared to the private benefit. This depends on the shapes of the curves and the magnitudes of the private and public benefits, both of which are unknown in practice.

Alternatives to Public Subsidy 

Public subsidy is not the only means for groups to obtain what they want when it is infeasible to do so privately. The website produces many social benefits, but is paid for by a relatively few (compared to readers) members. The readers must benefit, as they read. They probably benefit more than the private time and effort involved in reading. Yet they mostly don’t pay, and instead free ride (free read) on the efforts of others, and is produced anyway. Life is a free-ride on the efforts of our ancestors, who brought us fire, steam power, electricity, and the internet, among millions of other innovations.

Many philanthropic activities so occur.

Why isn’t transportation itself philanthropically funded? While there have been discussions of philanthropically subsidized public transport, I am not aware of this actually being implemented at scale. One may argue the scale is too large. While that may be true for large public works, surely that is not true for bike lanes, which are relatively inexpensive to construct. (Bikeshare systems are often funded with a mix of  philanthropy and user fees).

More likely it is because government already owns the roads, and thus the space out of which most bike lanes would be carved. Government is currently charged with building and maintaining roads, so that is the status quo. And if you can convince someone else to pay, why do it yourself.




Transit shelters and other amenities affect perceived wait times

CTS Catalyst reports  Transit shelters and other amenities affect perceived wait times on our soon-to-be-published report.


The overall results: “Perceived and actual wait times are clearly related, but the relationship is variable,” Guthrie says. “The waiting environment can change perceptions.”

Nearly 85 percent of those surveyed waited 10 minutes or less. Even with waits under a minute, however, people tended to perceive at least a minute or two, and they tended to estimate in round numbers (5, 10, 15 minutes). “This creates an initial ‘penalty’ of overestimates,” he says.

Researchers also found several variables to have statistically significant impacts. The presence of a shelter—even a simple one—made waits seem shorter, especially for waits less than 10 minutes. “The biggest difference in perception was between any shelter and none at all,” he says. The presence of a NexTrip real-time information sign also shortened perceived waits.

Posted schedules produced a “really interesting pattern,” Guthrie says. For shorter waits, schedules caused people to overestimate wait time, but after about 10 minutes, people began to underestimate it. “It’s possible that for short waits, people compare the clock and the schedule and get impatient, but for longer waits, they are reassured to know the bus or train is coming,” Guthrie says. “This implies that posting schedules is more important for routes with less frequent service.”

Gender alone was not significant, but there was a stark difference for women in less safe environments. “Most sites in the study were rated as safe, but at those that were not, there’s potential to improve the experience for riders and potential riders,” he says.5 Minute Wait

“With several major initiatives currently under way to expand the number of shelters at bus stops and to improve the quality of transit schedule information across our entire network, the timing of this project could not be better,” says Marilyn Porter, director of engineering and facilities for Metro Transit. “This study provides important insight that is directly applicable to the work that we are doing to ensure that our customers have the best possible experience using transit service in the Twin Cities.”

The model developed in the project includes many other variables such as household income, trip purpose, and the presence of benches and route maps. “Users of the model will be able to choose criteria and predict the impacts of hypothetical feature mixes,” Guthrie says.

A final report is planned for publication in March. Humphrey School associate professor Yingling Fan was the study’s principal investigator; David Levinson, RP Braun/CTS Chair in the Department of Civil, Environmental, and Geo- Engineering, was co-investigator.

Autonomous vehicles: The legal and policy road ahead

CTS Catalyst summarizes some of the discussion from the recent Conference Autonomous vehicles: The legal and policy road ahead


… David Levinson hypothesized some possible directions:

  • Autonomous vehicles enable more car sharing. Instead of the sunk cost of car ownership, people pay the marginal cost per trip—and thus make fewer trips.

  • Shared cars can be right-sized for any given trip, so fewer large cars are needed. Increased safety reassures people about driving smaller cars.

  • Smaller cars travel closely together on narrower lanes, so capacity increases.

  • As networks get faster, people choose to travel farther. Cities decentralize and more megacities and “placeless places” develop.

  • At the same time, inner cities get denser, as less space is needed for parking and garages.

  • With lower labor costs, transit becomes more cost-effective.

  • Driverless trucks lower delivery costs. Combined with drones, robotics, and online shopping, retail shopping declines.

School Miles vs. School Choice

The urbanist community has a nit about neighborhood schools. At one level. If all schools were interchangeable (like we imagine fire stations to be), people should use the closest one (just as you want the nearest fire truck when there is a fire). This is a “simple” covering problem in operations research, where you try to locate a set  of facilities (say schools) to serve some number of people (say on average 500 students)  at the lowest possible transportation cost, perhaps subject to some maximum transportation cost (no school is more than 12 minutes away).

Once upon a time (about the same time as all the model railroads in the world are set, that is, c. 1950, at the cross-over between Steam and Diesel so you can use both trains on the same layout), schools may have been interchangeable, since people were obviously undifferentiated.

I went to elementary school in the planned community of Columbia, Maryland, [in a generally well-off, well-educated suburban county with far more racial and income diversity than suburban Minnesota] where the elementary school was designed as the centerpiece of the Neighborhood, and the middle and high school were the center of the Village. Since the land use was planned along with the schools, it was probably as close to optimal at the time as any place in America.

I am old, so this was before the era of magnet and charter schools.  Most of the time I could walk home from elementary school (for a few years I was basically across the street). If I remembered my childhood fondly as an elysiatic paradise, (sadly for a variety of reasons, I don’t), I might want to impose that on future generations. Even then, there was school choice. Students could attend any public school which was not over-crowded. I attended an out-of-Village Middle School (which was in fact closer to my house).

It turns out however, that demographics change. Neighborhoods with lots of 5 year olds in 1972 have many fewer today. The best location for a school in 1967 is not the best location in 2017.

It also turns out that economies of scale change. The ideal size of school in 1967 according to 1967 standards is not the same as today. Schools are typically larger to provide more services, more diversity, and so on. [This has probably reached the point of negative returns, and is to the detriment of educational quality. Minneapolis’s Hans Christian Anderson Open School has 1000 students.]

Further, it turns out that many urban parents are tired of the poor quality of urban schools, so many systems, including Minnesota have moved from a “single provider” model to a “single payer” model. This is the core of the Charter School movement, and is definitely popular among those who send their offspring to Charter Schools, if not every teacher’s union (for the record, my mom was an NEA member, now retired) or the establishment Department of Education, for the same reason entrenched interests always oppose change. Magnet schools are another response, within the existing public school system.

Both charters and magnets increase the transportation miles of children traveling to school. This is an expected outcome, and produces the usual side-effects.

Travel to these choice school may be undertaken with buses or parents driving (or biking for some older kids or nearby kids, or walking for really nearby kids, as there will always be some). But it will certainly be more motorized than students who are captive to neighborhood schools.

Charters and magnets also are designed to increase the quality of educational outcomes.  If that has on average occurred — I believe it has (See: The Unappreciated Success Of Charter Schools), as do other parents who send their children there (otherwise they wouldn’t) — then we are trading off quality of education for transportation costs.

We trade-off all the time.

  • We don’t require you take the job nearest your house, though that would reduce distance traveled.
  • We don’t insist you buy groceries from the nearest supermarket, though this would reduce distance traveled.
  • We don’t ask you to go the nearest college, and in fact encourage you to travel to see more of the world.


Why do we believe elementary school education (which by programming minds is far more important than grocery shopping location which is merely filling stomachs with different sources of calories) is somehow completely substitutable?

Why do we denigrate the professionals providing education by asserting they are interchangeable parts?

Why do we diminish children by asserting they are indistinguishable and whose needs can be best met only at the closest school?

The whole argument is basically dehumanizing those both learning and teaching for the sake of nostalgia, congestion (which “urbanists” like, right? Isn’t congestion a measure of vitality.), theories about public health (the evidence relating built environment and physical activity is weak at best), and pollution (will this argument actually change if we used electric vehicles powered by renewables?)


If local schools are best for your child, you should send her there. Maybe she can walk or ride a bike. Fantastic, we all win.

If another school is best, you should send your child to that school. Maybe she can take a bus. She we will get the best education possible, maybe go to an Environmental Magnet school, and hopefully learn other ways to reduce the negative effects of human life on earth.

Don’t assume what is best for your child is best for all children and their families, or what is best for the environment in the short run is best for the children, and don’t be sanctimonious.

Main Street – Le Sueur, Minnesota

Le Sueur, Minnesota is not a county seat. But it is town that looms large in my mind as the home of the Minnesota Valley Canning Company, originally based in  Le Sueur, which became Green Giant – now a subsidiary, like all Minnesota food innovators (PillsburyTotino’sJeno’s, etc. of General Mills). Unfortunately it appears the Green Giant has, like Elvis, left the building.

The town, home to some 4000 people,  is interesting in many ways. William Worrall Mayo began his practice here, before moving to Rochester. The town itself lays claim to being in both Le Sueur and Sibley counties. Not even Minneapolis is in more than one county. The town sits just off of Highway 169, which bypasses the city. Being too lazy to look it up, I will assert the road used to run down Main Street (now Highway 112, which is Main Street), until some time [1960] as a bypass was constructed to speed traffic [okay, I am not really that lazy, it is true]. [Map]. This starkly contrasts with St. Peter, in our next installment.

Main Street, Le Sueur Minnesota
Main Street, Le Sueur Minnesota, north of pedestrian mall.
Main Street in Le Sueur south of the pedestrian mall. With cinema and bar.
Main Street in Le Sueur south of the pedestrian mall. With cinema and bar.


It still has food production in its core, as The Friendly Confines Cheese Shoppe sells a large variety of dairy and non-dairy products.

More interestingly, a pedestrian mall (adjacent to the Valleygreen Square shopping center) was installed on Main Street just south of the intersection of Main and Bridge. (Bridge Street, as you might guess, has a bridge across the Minnesota River). This I suppose has the aim of diverting traffic back on Highway 169. There is a small outdoor seating area for one of the restaurants/taverns, but it didn’t seem to busy on a Fall Sunday afternoon. We ate at Home Plate, which was better then expected, with excellent prices.


More photos on Flickr.

Home Plate Restaurant at Valleygreen Square astride the Main Street Pedestrian Mall in Le Sueur, Minnesota
Home Plate Restaurant at Valleygreen Square astride the Main Street Pedestrian Mall in Le Sueur, Minnesota


Le Sueur Farmers Elevator
Le Sueur Farmers Elevator


"The Mothers" - sculpture adjacent to the Mayo Home. "The sculpture brings two historic residents of the Mayo Home, Louise Mayo (1858-1864) and Louise Cosgrove (1914-1920) together. The Mothers Louise form an arch through which William J. Mayo, his sister Gertrude, and Robert Cosgrove pass. Louise Mayo was the wife of WIlliam W. Mayo and the mother of William J. and Charles Mayo. These three men founded the Mayo Clinic in Rochester. Louise Cosgrove was the wife of Edward Cosgrove and mother of Robert Cosgrove. Both men were President and Chairman of the Board of the Green Giant Company of Le Sueur. Dr. Paul T. Granlund, St. Peter, Minnesota created and cast this sculpture in 1978. The sculpture was dedicated the Arthur and David Cosgrove Memorial Fund."
“The Mothers” – sculpture adjacent to the Mayo Home. “The sculpture brings two historic residents of the Mayo Home, Louise Mayo (1858-1864) and Louise Cosgrove (1914-1920) together. The Mothers Louise form an arch through which William J. Mayo, his sister Gertrude, and Robert Cosgrove pass. Louise Mayo was the wife of WIlliam W. Mayo and the mother of William J. and Charles Mayo. These three men founded the Mayo Clinic in Rochester. Louise Cosgrove was the wife of Edward Cosgrove and mother of Robert Cosgrove. Both men were President and Chairman of the Board of the Green Giant Company of Le Sueur. Dr. Paul T. Granlund, St. Peter, Minnesota created and cast this sculpture in 1978. The sculpture was dedicated the Arthur and David Cosgrove Memorial Fund.”
Le Sueur Tigers marker to commemorate white settlers who were killed in the war with the Dakota Indians. Installed 2012. [I could not find a similar marker to commemorate Dakota killed in the same battle]
Le Sueur Tigers marker to commemorate white settlers who were killed in the war with the Dakota Indians. Installed 2012. [I could not find a similar marker to commemorate Dakota killed in the same conflict. There is one in Mankato.]

Cross-posted on

Virtual Traffic Lights Could Revolutionize City Driving – [Or Not] |TechNewsWorld

I was briefly quoted in TechNewsWorld in an article about Virtual Traffic Lights, a long-discussed possibility with “Connected Vehicles”.

“Optimizing traffic lights is a great idea,” said David Levinson, a transportation analyst and professor at the University of Minnesota.

Getting them deployed any time soon, however, “is impossible, since it won’t be useful until all cars have such devices,” he told TechNewsWorld. “You can’t eliminate regular traffic lights until every car has VTL.”

Further, all the infrastructure — including hundreds of thousands of traffic lights managed by thousands of jurisdictions — would have to be upgraded, he pointed out.

“Even if all new cars have this, it will be decades before every car has this; old cars will need to be banned, retrofitted or somehow accommodated in a way that diminishes the utility of VTL,” he explained.

“Autonomous vehicles have a much more viable deployment path, and rely on the ability of the vehicle to sense conventional lights,” Levinson noted.

I really wish technology promoters would think about the deployment path instead of the end state. And discussing “carbon emissions” assumes this is deployed while gasoline is still used for powering cars, in other words, in 30 years when this may be feasible, we will still be burning fuel instead of using batteries or something else, which may be true, but would be sad.

Prices before Pavements

Alon Levy writes “The most important principle for infrastructure planning in developed countries is organization before electronics before concrete. ”

A shorter version of this is “prices before pavements”.

We cannot know how much pavement we need until we charge the appropriate price for the pavement we have. Since drivers don’t pay the full cost the externalities they generate, foremost congestion, they over-consume road transportation. Since we use unpriced usage of facilities as a guide about where to build new roads and widen existing ones, we probably generally over-build compared to the priced equilibrium (even if we still have congestion), though it is hard to say, since we don’t have a priced comparison point, and model forecasts are hard.

This phenomenon of over-construction is not surprising. It follows from micro-economic theory and we have evidence of over-consumption every day in every major American city. We have evidence of under-pricing. We have evidence that when prices rise, consumption falls (e.g. gas prices, London, Stockholm).

So where is the failure in this collective action problem?

Historically road pricing was expensive to implement, particularly compared to fuel taxes, and toll collection would create its own congestion. Today’s electronic toll collection obviates the congestion creating aspects of tollbooths. However collection costs are still higher (and in practice, nothing could be easier than a gas tax, where you collect funds at the refinery). But even with those additional collection costs, the benefits of congestion reduction in places that suffer congestion should be enough to justify a more serious effort at pricing, leave aside the general benefits from less pollution and so on.

Today, no one is incentivized to raise prices on existing facilities. Roads are governed by elected officials, who believe they are re-elected when they keep taxes down and are sometimes punished when they raise taxes. Voter/taxpayers do not trust that increased revenue will be wisely used (and they are not necessarily wrong), and believe that if government just redistributed the revenue, that still imposes a cost (which it does, but again, not so much as to negate the benefits). This is true with gas taxes (which finds that tax escalators get rolled back). It is certainly more true with a new tax that people have no experience with.

States have little incentive to internalize externalities that are imposed globally, or on residents of other states, and little incentive to raise prices much higher than the prices in surrounding states, which may be engaged in tax competition. (They do have an incentive to raise tolls on their border though – as they can engage in tax exporting.)

Moveover, there is prospect theory, which suggests people feel losses more deeply than gains. A tax or toll or user fee is a known loss of revenue for an uncertain gain in travel time savings (which we don’t really value well either). [See also this different take on the implications of prospect theory on road pricing in Singapore by Anthony Chin.]

This suggests there is a governance problem. Even if a state raises some gas taxes to pay for transportation maintenance and construction, that would not be sufficient to internalize the external costs of travel. That would be politically impossible in the current regime in the US.

Which leads to the thought, if a good idea like road pricing is politically impossible under the current road ownership regime, perhaps changing the regime changes the political calculus: I discussed this in Enterprising Roads. Roads should be more like other public utilities, which provide a service and levy a charge to pay for the costs of that service, are are regulated not directly by the legislature, but instead by a body like the public utility commission.

I don’t know which is less politically impossible.

I think evidence supports the notion that expecting widespread road pricing at anything near the full cost of travel under the current road ownership/governance regime in the US is practically impossible anytime soon.

We may get voluntary odometer charges of some kind instead of the gas tax (Oregon), particularly for electric vehicles. We may get a city like New York or San Francisco try an urban congestion charge. We will certainly get more HOT lanes and more tolling on new roads (e.g. Southern California). But these are all nibbling around the edges.

The great white whale is full cost pricing, where prices vary by time of day (very important) and location, as well as amount of emissions (very important) and crash probabilities.

Perfect pricing will never be achieved, how close to perfect can we actually achieve?

Or will some new technologies just make obsolete all our concerns about externalities, just as we never got around to full cost pricing on horses?


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