Market Urbanism

Liberalizing cities | From the bottom up

“Market Urbanism” refers to the synthesis of classical liberal economics and ethics (market), with an appreciation of the urban way of life and its benefits to society (urbanism). We advocate for the emergence of bottom up solutions to urban issues, as opposed to ones imposed from the top down.

Bloomberg pokes (again) at hornet’s nest of entitled drivers

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The New York Daily News broke the story yesterday that New York lawmakers are once again trying to push congestion pricing through the state legislature, a task at which Mayor Michael Bloomberg failed in 2008 after meeting fierce resistance from outer borough and suburban drivers. Learning from his previous failed bid to charge drivers $8/day to enter Manhattan below 60th Street, the plan is being rebranded as “traffic pricing” and will be linked to payroll tax relief for those outside the five boroughs in an attempt to win the support of suburban legislators who torpedoed the 2008 proposal.

Despite being the most transit-saturated city in America, New York City drivers have had free reign of its surface streets since the days when they were maintained by private streetcar companies. Unlike highway users and transit riders, drivers have never been asked to pay a penny in direct fees for the local roads they use. This has created generations of Americans who feel entitled to freeride on the backs of their poorer, car-less fellow citizens, which has made congestion pricing one of Bloomberg’s rare failures during his decade-long tenure as mayor.

New York State Senate Majority Leader Dean Skelos (R-Nassau County) calls it “just another tax,” but it differs from a general tax in one critical way: It is levied solely on those who drive in Manhattan, meaning that it does not redistribute wealth from those who don’t use the roads to those who do. And while the accounting costs for modes of transportation are subsidized to some extent, roads have enormous opportunity costs—far higher than transit, which uses relatively marginal underground land and has a minuscule footprint relative to paved roads. Land is extremely expensive in New York City, so these opportunity costs are larger than they might be out in less dense areas—imagine how much the city could get from auctioning off the land beneath the West Side Highway, and you start to get an idea of the magnitude of these subsidies.

Congestion pricing has been in place for a few years now in London, Copenhagen, and Singapore (cities you may never have heard of, since they were vaporized the instant they started charging for the right to drive), but the motorist lobby in America has so far managed to stave off any attempts to make local road users pay their fair share. San Francisco is mulling over a congestion charge as well, so it’s a race between the nation’s two most notoriously leftist cities to see which one will de-socialize its local roads first.

Comments

  3. I support congestion fees, but NOT because “the state and city are starving for extra cash” – the last thing I want to see is congestion charges being dumped into the general treasury so it can disappear into the pockets of whichever lobbying groups are tops in Albany at the moment. I support congestion fees because I support “user fees” in general. Thus, I would rather not see congestion fees simply thrown at transit either – that just gives opponents ammunition to use when they trot out their usual (and usually successful) “populist” arguments against transit. Instead, the fees should be used to reduce the taxes we all pay to support roads, taxes we pay regardless of how much we use them. It is no more fair for drivers to pay for transit they never use, than it is for transit riders to pay for roads they never (directly) use.

  4. I’m definitely sympathetic to what you’re saying – I’d much rather transit be paid for out of general revenues (that is, if we’re going to subsidize it at all) and have the congestion charge go to pay for local roads. However, I think that especially in places like New York City where roads have high opportunity costs, eventually the amount collected is going to exceed the amount that needs to be spent on maintaining them. While I’m sure a lot of self-identified libertarians would say, “The congestion charge should not be raised above the costs of the roads,” in a capitalist system entrepreneurs don’t just raise prices till they recoup their costs – they raise them until their total profits start to decline. In other words, the state should be able to make a profit on the roads, since that’s exactly what a real entrepreneur would do.

    …of course, at this point my anarchist leanings would kick in and I’d prefer for the land under the roads to just be auctioned off with full development rights (i.e., let someone keep them as roads, convert them into transit, build buildings on top of them, or whatever the hell they want). But given how politically impossible that would be, the next best scenario would be for the state to just collect as much money as it can and keep the profits for general spending.

    But I absolutely agree with you that the money should not be earmarked for transit. While *I* understand that money is fungible and money “earmarked” for transit is no more real than the social security lockbox, there are plenty of people who don’t get that.

  5. “eventually the amount collected is going to exceed the amount that needs to be spent on maintaining them”

    That’s only true if the fee is intended as “behavior modification” like any other sin tax – which is very likely exactly what will happen. This baffles me. Is it so hard to communicate the idea that roads should be supported by user fees…? Perhaps so – it’s not like transit is held to any such standard either (despite the occasional grumblings from various Republican opponents of Amtrak). Transit will always be plagued with gaping budget holes as long as no one is expected to pay any more than a tiny fraction of its cost. The same is of course true of driving but while the cost of driving is arguably more in line with market principles than transit, it has an even longer history of being publicly financed – so long that the notion of “pay as you go” driving, especially on local streets – sounds like crazy talk to most people. In comparison, framing the argument for congestion pricing in terms that amount to little more than class warfare is somehow easier for politicians.

    Anyway… I do reluctantly agree that this “next best scenario”, while ugly and driven by politics over anything that could be considered market-oriented, is an improvement if only because I am just as susceptible to human nature as the next person – it might give me something for nothing 🙂

  6. Hm, I’m not sure I explained myself properly (though maybe this deserves its own post), so lemme try again…

    Let’s say that the roads cost $10 million per year to maintain. What I’m saying is that even if a congestion charge of $10/day/person (all numbers completely made up) earned the city $20 million a year, this still might be a market outcome, despite covering far more than the simple cost. Why? Because a profit-seeking entrepreneur doesn’t seek to just recoup costs – they try to get as much money as they can, period. So in fact if they could maximize profits by charging $20/day/person, even if the roads only cost $5/day/person to maintain, then charging $5 or $10 is a subsidy.

    Of course in a real free market the price of land would rise such that the road operator (the gov’t in this case) wouldn’t be making much profit at all, but given that that’s completely politically untenable, the next best market approximation would be for the gov’t to just milk the roads for all their worth.

    Did that make sense? Let me know, because I’m sort of trying this argument out on you before I dedicate a whole post to it (hopefully more eloquently written than this explanation…)

  7. It’s not always true that the free market approach is to milk things for all they’re worth. Sometimes, long-run considerations make it a good idea to run smaller profits than possible in the short run – for example, to prevent behavioral changes from destroying revenue. This is the logic Saudi Arabia uses to keep oil relatively cheap – if it lets oil go to $200/barrel, which it’s perfectly within OPEC’s capability, then the US will either invade or engage in mass conservation.

    In addition, in a competitive market, a company can’t make too big a profit, or else its prices will be uncompetitive; if Wal-Mart were given monopoly over retail, it would not be low-price anymore. But at the same time, urban/regional transit is a natural monopoly (and I know it’s not treated this way in Japan and wasn’t in prewar America), because integrated fares can boost ridership in an initially small and fragmented market. So if the goal is to simulate a free market, then the fare union that helps both operators and riders should be encouraged, while setting the fare at collusion levels should be prohibited.

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