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Road Pricing in Context The Efficient Allocation of a Limited Resource Martin Wachs, Institute of Transportation Studies, University of California, Berkeley Anthony May, Institute for Transport Studies, University of Leeds T he symposium began with two stage-setting pre- and Knight's work and became an advocate of applied sentations on the past, present, and anticipated congestion pricing. However, the proposal could gather future of road pricing. no momentum because the need for a stable funding base was already answered by the existence of the fuel tax. This condition may be changing, however, as the fuel tax's THEN AND NOW: THE EVOLUTION OF capacity to generate revenues gradually erodes because of TRANSPORT PRICING AND WHERE climbing fuel efficiency and the reluctance of public offi- WE ARE TODAY cials at all levels of government to raise fuel or other taxes. Another key factor that may support greater use of Martin Wachs pricing as a tool for managing demand rather than expan- sion of road supply is the frequent and potent opposition Obviously road pricing is nothing new--it has been to plans for increasing road capacity through new con- around for at least 80 years. But has it yet entered the struction. Environmental concerns and sticker shock mainstream? Not quite, but pricing is at a critical junc- from the high cost of new construction are forcing a more ture in North America and the United States. serious look at strategies for wringing the most mobility In the United States, the first motor fuel tax was insti- from the road infrastructure already in place. tuted in 1918, in the state of Oregon. The legislature had In a way, the United States and Europe find them- preferred a toll-based system of finance, but at the time selves in a sort of "back to the future" situation, with it was rejected because of the cost of constructing booths revenue shortages and a view of user fees as a reason- and collecting the tolls. So a practical limitation, rather able and appropriate pricing system hearkening back to than a policy-based one, dictated the starting point for the 1920s. The salient difference is the availability of our system of paying for road infrastructure. This prac- technology today to make the pricing system almost tical limitation has now been largely obviated by the invisible to motorists. The ability to charge for road use advent of electronic tolling, which is one of several rea- without cumbersome toll plazas and attendant traffic sons for this being a watershed moment for congestion slowdowns and, more important, to vary charges on the pricing. basis of congestion levels has finally made true demand- Another factor contributing to the current state of responsive variable pricing a practical possibility. affairs concerns the long-term viability of the fuel tax as a Since the publication of Curbing Gridlock almost a means of financing transportation. Road pricing was first decade ago, the United States and Europe have both pur- suggested by the economist A. C. Pigou in 1920 and was sued greater use of road pricing, but in quite different expanded on by Frank Knight in 1924. In the 1960s and ways. In the United States facility pricing is most com- 1970s, the economist William Vickrey built on Pigou's mon, and we see it in the congestion pricing applications 11