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Out on a Limb
Pricing Futures
Kenneth Small, University of California, Irvine
T
he experience of the past 20 years has produced Second, additional pricing experiments can be expected
two major forms of congestion pricing: systems in cases where the level of congestion is widely considered
that focus on city centers and systems that target to be unacceptable. People are learning that there are no
express traffic. Both forms of pricing can be shown to other feasible options for solving congestion. Solving con-
solve an array of problems. Congestion itself is the most gestion is not strictly necessary because it tends to be self-
obvious problem that road pricing addresses, but pric- limiting; it is disliked and inefficient but not necessarily a
ing can also be beneficial to public transit and can com- problem of highest priority. In the United States, most
bat urban sprawl and related land use problems. experiments are likely to be incremental: changes in toll
Muddling through is, of course, an alternative to pric- policy on existing toll facilities or addition of high-
ing, since congestion is at some point and by definition occupancy toll lanes or FAST1 lanes. Elsewhere more
self-limiting. However, the costs exacted by a muddling- large-scale experiments appear to be politically feasible.
through strategy would be high indeed; as public offi- Third, as large-scale experiments unfold, as in Lon-
cials and the public generally begin to understand these don, analysts will turn to measuring and documenting
costs, road pricing can become more politically viable the effects on economic productivity. Some preliminary
just as it is becoming more technologically viable. studies have suggested that a priced area need not nec-
The expanded use of pricing in the past 10 years can essarily become less attractive to business; theory sug-
be attributed to several factors, including a growth in gests that how revenues are spent is important to this
technical expertise and a keener understanding of the question. The relationship between congestion pricing
merits of the program itself. Lessons learned from past and economic conditions is still poorly understood and
mistakes are also critical to making today's pricing pro- stands as a prime area for further research.
posals more viable than those of the past. As we exam- Finally, where pricing is anticipated or in place as new
ine the various applications of both forms of pricing, roads are developed, we should begin to see changes in
four major lessons emerge that can help inform the roadway design. Pricing shifts the trade-off away from
approach for the future. the need to provide capacity and toward the desire to
First, as we look ahead, congestion pricing proposals maintain aesthetic qualities and conserve scarce urban
are likely to develop as niche strategies. They will take land. A result might be more parkways or "superstreets"
advantage of differences among users in order to offer a designed for moderate free-flow speeds and moderate
type of service that appeals to particular segments of the capacity. A speculative suggestion is that pricing might
population. The importance of such strategies is sup- be used as a tool for limiting speed to make such road
ported by recent research showing that user heterogene- designs safer when traffic is flowing freely.
ity greatly affects the welfare evaluation and optimal 1 "Freeing Alternatives for Speedy Transportation," a term used in
design of value pricing schemes. legislation introduced in the House of Representatives in 2003.
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