K.O.R.E. Enterprises Workshop Urban Transportation Systems 10/15/08

Today’s Objectives u Urban transportation system –Automobile and highways (today’s focus) –Urban mass transit (next week’s focus) u Autos and highways –Congestion –Pollution –Highway accidents

O’Sullivan’s Summary u Most popular travel mode in cities is the automobile u The three most popular commuting trips are – between suburbs (40% of commuters) – within the central city (33%) – and from a suburb to the central city (20%) u About four of five workers (and 9 out of 10 suburbanites) commute –by auto, truck, or van u Automobile drivers base their travel decisions on – private –not social costs-- so the equilibrium volume exceeds the optimum volume

O’Sullivan’s Summary u Congestion during rush hours is inevitable –The issue is about whether the congestion is at the optimal level or not –There are many policies to decrease congestion, but the congestion tax is the most effective u Congestion tax internalizes the congestion externality u Congestion tax could be implemented with –a vehicle identification system under which every car is equipped with an electronic device that allows sensors along the road to identify the car as it passes. u In the long run, –the optimum road width and traffic volume are determined simultaneously –The congestion tax will pay the full cost of the optimal highway.

O’Sullivan’s Summary u The second problem with urban travel is air pollution –Federal government controls air pollution through auto emission policies –Economic approach to the auto pollution problem is to impose taxes on new cars or gas u The third transportation problem is auto safety –Traffic accidents injure and kill people and also disrupt traffic flow, contributing to the congestion problem –How do government policies affect highway death rates and accident rates

The Technology of Travel

Modal Choice of Commuters Central-city residents Suburban residents Walk Bus or rail Carpool Drive alone

Commuting by automobile u Auto commuting is predominant –77 % of CC residents commute by auto –80% of CC residents drive alone –93% of SU residents commute by auto –Over 97% of commuters use auto

Commuting, peak-hour travel, and overall urban travel u Much of O’Sullivan’s discussion focuses on peak-hour commuting behavior. u 37 percent of all person-trips are taken during peak-hours (6-9 a.m. and 4-7 p.m.) u But only 10 percent of all person-trips are peak-hour commutes. u The other 27 percent are peak-hour trips for shopping, school, recreational, etc.

Congestion Externalities and Congestion Taxes (fig 11.2) Trip Cost Vehicles per lane per hour Private trip cost Social trip cost Gain from tax Tax

Implementing Congestion Tax u Tax collection –Install toll booths and collect tax directly from drivers –Develop an electronic vehicle identification system (VIS) such as a transponder that can be used to bill the driver later –Use a smart card instead that is prepaid, etc

Peak-Period Road Pricing u Chicago-style tolls: cash cow, jobs for the boys, let’s make people spend 10 minutes in line to pay a $0.15 toll. (Getting a little better, lately) u Singapore-style tolls: peak period, pay $2 to enter the center of the city, display a license (going electronic soon).

Peak-Period Road Pricing u Keys to better road pricing: –Electronic, don’t create more congestion –Let the price vary by time of day »About 10% of trips are peak hour commutes, 27% of trips are peak hour non-commutes. Let’s move some to off-peak times.

Congestion and Land Use Patterns u Congestion tax –increases commuting costs –makes residential bid-rent functions steeper »Locations closer to the city center become relatively more attractive –makes cities more compact »(after the tax, a larger fraction of the city population live within a given distance of the city center, so it has shorter commuting distances and travel times) –increases total labor supply »because it increases the efficiency of the city’s transportation system and increases the welfare of city residents

Congestion Taxes u Congestion is an urban problem that can be solved with a system of congestion taxes u Congestion taxes enable cities to grow, not decline u Congestion taxes –internalize the congestion externality –improve the efficiency of the city’s transportation network –increase the relative attractiveness of cities

Highway Pricing (Fig. 11.6) u The other side of urban transportation congestion is adequate highway supply u Long-run highway pricing and investment has four steps –Derive the average total-cost curves for different width –Derive the long-run cost curves (average and marginal) –Pick the optimum traffic volume and road width –Pick the congestion tax that generates the optimum traffic volume on the optimum road.

Adequate finance for highways u Highways are financed through various user fees –Taxes on gas, oil and auto parts –User taxes by drivers such as truck drivers u These funds are not enough to build the optimum highway u A system of congestion taxes can more effectively support the supply of the optimal urban highway network

Tackling Congestion: Policy Alternatives to Congestion Tax u Encourage transit use (next week) u Gasoline tax u Parking tax u Capacity expansion and traffic design u Congestion zones and permits u Peak-period taxation using an electronic vehicle identification system (VIS)

Other Transportation Problems u Air pollution results from the emissions of motor vehicles. –This is an urban transportation problem u This problem is typically solved – through regulatory establishment of emission standards u Urban air pollution problem can be more efficiently solved – through pollution taxes and transit subsidies

Other Transportation Problems u Auto safety is also an urban transportation problem. –Traffic accidents generates two types of costs »People are either injured or killed »Traffic accidents disrupt rush hour traffic during rush hours and contribute to congestion u Auto safety problems are ameliorated through innovations and regulatory standards »Examples include head restraint, padded dashboards, seatbelts, shatterproof windshields, dual braking systems, collapsible steering columns, and airbags

Other Transportation Problems u Do improved auto safety regulations contribute to traffic congestion?