Can Move NY Overcome Credible Commitment Problems?

Eric Jaffe writes about Move NY* at the Atlantic Cities. In the piece he highlights some work that Mike Manville and I did on credible commitment:

Some transportation experts worry that a pricing plan won't even advance to the point of debating the economic and equity questions. Over the years some notable pricing plans — Hong Kong in the 1980s, Edinburgh in 2005 — failed to get off the ground because residents lacked faith in the funding agency to manage the new revenue. Scholars Michael Manville of Cornell and David King of Columbia call this the "credible commitment" problem of congestion pricing. A few years back, Manville and King interviewed 50-some officials in Los Angeles about road pricing. About a third explicitly said they would not support a congestion plan because they didn't trust state officials to redistribute the toll revenue as promised, the same share who feared that pricing might be unfair to the poor.

"What happens is, absent that trust, that sort of revenue promise doesn't necessarily lead to the kind of political support you might think," says Manville. "In some ways, what people were saying is it would never get far enough for pricing's regressivity to be a problem, because we would just never see this money." 

Considering the emphasis Move NY's plan places on revenue redistribution, not to mention the MTA's own mixed record of public promises, those findings give reason for pause. The way around the commitment problem, says Manville, is to stress the traffic benefits that a strong pricing plan will bring, as opposed to the revenue gains. Some believe the best way forward is to run a pilot project first, as officials did in Stockholm.

The Atlantic Cities piece nicely describes many of the problems and opportunities for the Move NY plan. Revenue distribution sounds good for assembling coalitions, but these opportunities are constrained by trust. Hopefully such concerns can be overcome.

In earlier work Mike, Donald Shoup and I looked at the politics of congestion pricing, short and ungated version available here.




*Just as a point of disclosure I have informally and infrequently consulted with Move NY on their plans.

Now Published: Credible Commitment and Congestion Pricing

Mike Manville and I are pleased that our paper "Credible Commitment and Congestion Pricing" is now published in Transportation. Available online at this link (gated). Here is the abstract:

Abstract
Transportation analysts frequently assert that congestion pricing’s political obstacles can be overcome through astute use of the toll revenue pricing generates. Such “revenue recycling,” however, implies that the collectors of the toll revenue will not be its final recipients, meaning that any revenue recipient must believe that the revenue collector will honor promises to deliver the money. This raises the potential for credible commitment problems. Promises to spend revenue can solve one political problem, because revenue is an easy benefit to understand, but create another one, because revenue is easy to divert. Revenue recycling may therefore not be a promising way to build political support for congestion pricing. We highlight the role commitment problems have played efforts to implement congestion pricing, using examples from around the world and then focusing on California. Because congestion reduction is a more certain benefit than any particular use of the toll revenue, demonstration projects, rather than revenue promises, will be key to pricing’s political success.

 

Paying Access Fees on Congestable Networks

When road networks congest it's pretty obvious that the problem is too many vehicles are trying to use constrained capacity at the same time. One solution to this congestion is to charge the drivers a toll, thus nudging some drivers to switch the time or mode of their travel and limiting the demand for road space.

In the United States our internet access is through congestable networks, and we are now reaching the limits of free-flowing data in many areas, especially on mobile networks. (Other countries feature data plans where you pay more based on usage. Such plans are deeply unpopular in the US, just like congestion pricing!) AT&T has a novel solution to congestion on their mobile data networks, and that is to sell the data usage from apps and services to the companies who develop the apps and services. Here is a bit about how this works from Gizmodo:

Comparing it to the data equivalent of a toll-free 1-800 number, AT&T's network and technology head John Donovan, said that AT&T is working on creating a service that would let developers foot the bill for data usage in its apps. Like if all the data you used in an app would be free to the user and not count against data usage limits.

 Gizmodo is largely in favor of this arrangement as it will keep costs down for consumers. For a more nefarious take on this arrangement, here is conclusion from a piece from Digitopoly:

Add this up and it is worrisome for smaller developers. And it is precisely the sort of development that Net Neutrality advocates were worried about. To be sure, given sufficient competition between mobile carriers, this is all shifting around the deck chairs. But if competition isn’t strong enough, the money will stay with the power.

And if that doesn’t worry you, think about what this means for Netflix. On one level, it sounds like opportunity — they could pay for user’s data and open up the mobile viewing space. But on another level, so then can AT&T, Verizon and others who also have Cable TV operations and their own content. It costs them nothing to offer a data 1-800 service to themselves while at the same time being able to charge rivals for it. And then think about what happens if we don’t stop at mobile and move on to broadband.

There is a lot to unpack here, but Digitopoly's complaint raises lots of the concerns lobbed at congestion pricing, namely equity, fairness, competition, privatization and privacy. Overall, this seems like a second best solution. It would be better to keep the costs of production low and have consumers pay their full marginal costs of usage, whether road or data. And we should price mobile data and then move on to pricing broadbrand!

Fixing NYC traffic

Felix Salmon wrote about a new research project by Charles Komanoff about the costs of traffic in NYC. There is a really neat spreadsheet that Komanoff developed to estimate the various externalities and direct costs of various modes of travel and potential remedies such as congestion pricing. The two big recommendations are that buses should be free and taxis should be more expensive. This helps equalize travel costs across boroughs and opens the door for congestion pricing.

However, the spreadsheet and analysis makes an error that is all too common in transportation analysis and neglects parking altogether. Managing curb parking through performance priced meters is a very effective way to minimize congestion and travel. In parts of NYC (and elsewhere) the share of traffic simply cruising around for a curb space reaches 40 percent. By raising the price of parking the demand for auto travel will decline. The traffic reduction from eliminating cruising may be enough to reduce other direct costs such as tolls and taxi fees. This would make the overall management and use of the transportation systems fairer. The revenue generated from parking charges could be used to improve the pedestrian or bike facilities in the neighborhoods where the money is collected, or it could be used to improve transit. Any use would be better just watching it drive around the block as is the case now.