An ERP gantry in Singapore. source: Wikipedia

Note: I have recently published a more detailed, more updated scholarly version of this in Transportation Research Part C: Emerging Technologies. “Downtown congestion pricing in practice” https://www.sciencedirect.com/science/article/pii/S0968090X18306983 I am going to clean up a pre-print version soon that will be open access.

Recently New York Governor Andrew Cuomo announced, “Congestion pricing is an idea whose time has come.” He is talking about proposals to charge tolls on driving into parts of Manhattan, such as the Move NY plan. Mayor de Blasio, on the other hand, “does not believe” in congestion pricing — hopefully in the sense of not supporting it, not denying its existence.

I wrote my Ph.D. thesis at UC Berkeley about congestion pricing in downtown areas like Manhattan, and I read a lot of news articles about its prospects. I have become concerned that news coverage does not pay enough attention to other cities’ experiences with pricing. The article on Cuomo’s support, for instance, simply says: “Cities across the world, like London and Stockholm, have adopted systems that have succeeded in reducing traffic and improving public transit.” But the lack of context isn’t surprising: the thousands of pages academics have written on the topic are almost all behind paywalls.

Unfortunately, ignoring other cities’ experiences can hobble clear thinking. One gets the impression that there is a coherent, monolithic system called “congestion pricing,” which either works or fails. For example, Donald Blinken writes to the New York Times:

After congestion pricing was introduced there some years ago, there was a decline in central London traffic. But as anyone who has been to London lately can tell you, the traffic situation seems even worse than before. A city government website confirms the recent increase. In other words, congestion pricing has nothing meaningful to do with long-term traffic reduction but is simply an additional tax on motorists.

While London has become congested, the fact requires some context: First, London has undergone a sharp fall in road capacity. So, the London Congestion Charge has likely kept speeds from falling more than they have. Second, the London Congestion Charge has many exemptions which compromise its effectiveness but are not an essential part of pricing as an idea.

To clear things up, I’ve written the following history of downtown road pricing. In particular, I emphasize the stories of how the schemes came to be, politically and administratively, in keeping with the spirit of Bent Flyvberg’s theory of Phronetic Social Science: “It is a basic tenet of phronetic research that in so far as social and political situations become clear, they get clarified by detailed stories of who is doing what to whom.” I close with a list of open access references.

Housekeeping

Here are some things to keep in mind while reading.

This has not been peer reviewed. If you find a mistake, please comment.

The scope is limited. First, I am talking about the recent, rare practice of tolling streets of large downtowns — not the old, common practice of tolls on bridges and major roads, nor tiny systems like Durham’s or Valetta’s. Second, I ignore schemes that were only proposed, with the exception of Hong Kong’s.

I use “road pricing,” “congestion pricing,” “charging” and “tolling” interchangeably, but I prefer “downtown road pricing” to be very broad. And by “scheme” I mean the British sense of the term: a specific program design — not a con job.

I have tried to translate quoted costs and prices into 2016 US dollars, but doing so is tricky and the figures are only meant to be a sort of ballpark estimate. The conversions are in parentheses, like “It costs 10 kr ($1.2).”

Intellectual background

(See also Do Economists Reach A Conclusion on Road Pricing?)

Road tolls have interested economists and civil engineers for centuries. In The Wealth of Nations, Adam Smith writes:

When the carriages which pass over a highway or a bridge, and the lighters which sail upon a navigable canal, pay toll in proportion to their weight or their tonnage, they pay for the maintenance of those public works exactly in proportion to the wear and tear which they occasion of them. It seems scarce possible to invent a more equitable way of maintaining such works.

What concerns Smith in this passage are explicit costs — the “wear and tear” on the road — and the “equitable” way to assign them. To Smith it is fair to put the burden on users — not taxpayers.

A downtown bridge toll from the 1500's

In 1920, Arthur Pigou published The Economics of Welfare — one of the most famous and influential economic treatises of all time. In one passage, Pigou describes a situation in which road tolls can be used to redirect traffic so as to cut the aggregate time spent traveling. This is a sea change in thought: now tolls are not merely an equitable way to pay for roads, but a way to efficiently manage them. You could draw an analogy to traffic signals: signals do ensure that travelers in orthogonal directions both get a chance at crossing an intersection (fairness), but it is also possible to coordinate signals to improve traffic (efficiency).

Since Pigou, most research on pricing has been theoretical, answering questions like: “What should the toll be if the macroscopic fundamental diagram theory of traffic flow applies?” But transportation economists have also always been deeply enmeshed — institutionally and by enthusiasm — in civil engineering, and have thought deeply about applications. For road pricing in downtowns — where there are thousands of intersections, and where streets are small and crowded — the chief problems are these: (i) how to check when and where a car is, and (ii) how to charge the driver. You can’t have many tollbooths in Lower Manhattan.

In a 1959 testimony to the US Congress, William Vickrey (future Nobel Laureate for his work on auctions) spelled out a wireless, electronic road pricing system for cities that would make tollbooths unnecessary. Having studied electrical engineering in college, he even built a prototype in his driveway and would show skeptics a list of his own comings and goings.

Ignored by Congress, Vickrey found a readier audience in the UK, where there was an appetite for less driving. A 1963 report, Traffic in Towns, conveys the British zeitgeist in a very British style:

It is impossible to spend any time on the study of the future of traffic in towns without at once being appalled by the magnitude of the emergency that is coming upon us. We are nourishing at immense cost a monster of great potential destructiveness, and yet we love him dearly. To refuse to accept the challenge it presents would be an act of defeatism… The American policy of providing motorways for commuters can succeed, even in American conditions, only if there is a disregard for all considerations other than the free flow of traffic which seems sometimes to be almost ruthless. Our British cities are not only packed with buildings, they are also packed with history and to drive motorways through them on the American scale would inevitably destroy much that ought to be preserved.

Since Britain wasn’t about to nourish at immense cost a monster of great potential destructiveness, despite loving him dearly, the Ministry of Transport empaneled a team of engineers and economists — centered at Britain’s Road Research Laboratory — to study road pricing in cities. In 1964, the panel published “Road Pricing: The Economic and Technical Possibilities” (called the “Smeed Report” for the panel’s leader, Reuben Smeed).

None of the Smeed Report’s schemes were adopted in the 1960s, but the report advanced principles that would later blossom. Perhaps most importantly, it consistently embraces the notion of tolls for use of entire city zones, rather than trying to have, say, a different toll on Broadway than on 2nd Ave. The drawback, of course, is that zone-level pricing can only go part of the way toward “optimality”: there may be a nasty pocket of recurring congestion somewhere inside a zone.

1975: Singapore’s Area License System (ALS)

Introduction

Singapore is an island nation a little smaller in area than New York City and with 5.6 million people. When it gained independence from Britain in 1965, it had a GDP per capita equal to about 1/6 of the United States’. Today its GDP per capita is about equal to ours, and its median household has twice the wealth of the median US household. Remarkably, for such a dense and rich country, growth has come with little congestion, thanks to plans adopted in the 1970s — including the world’s first downtown pricing scheme.

How it happened

Between 1960 and 1970, the number of private autos in Singapore more than doubled. Ordinary people were making more money, and the state was energetically building “New Towns”: massive public housing projects away from the Central Business District (CBD). Meanwhile, the volume of public roads rose only 35%, and there was no rail system nor a coordinated bus system.

The prospect of a flood of cars worried Singapore’s leaders: they nurtured a vision of the CBD as a hub of international business and thought traffic would strangle it. In 1971, the Singapore Concept Plan, a modeling and planning study, came out forecasting rapid growth in traffic and calling for a huge infrastructure campaign. Road-building began right away — road spending rose 6x from 1975–1980 and road density doubled from 1975 to 1985. But disputes over cost-benefit analysis delayed work on the Mass Rapid Transit rail system until 1982.

While pro-construction, the government was sober about whether infrastructure alone could balance supply and demand for road space. So in January 1974 the government convened the Road Transportation Action Committee (RTAC), with members from across the bureaucracy, to tackle demand.

Regarding car ownership, the RTAC aimed for no more than one car per twelve persons. To achieve this goal, the government raised the Additional Registration Fee (a sales tax on new cars) to 25% in 1972, 100% in 1975, and 175% by 1983. Since 1990, the government has run a complex system of quotas, taxes and rebates to make cars costly and clean.

The RTAC also did three things to discourage cars from driving downtown: (i) double downtown parking prices; (ii) improve bus service via commuter shuttles and a park-and-ride system; (iii) the Area License Scheme — the world’s first downtown pricing system.

Details

The Area License Scheme (ALS) launched on June 2nd, 1975. At post offices, gas stations, convenience stores and roadside booths, a driver paid S$3 ($6.20) for a daily “license.” The license was a paper decal, to be placed in your windshield, that let you enter a 6.2 km² Restricted Zone (RZ), Monday through Saturday morning. For enforcement, wardens standing at 22 access points to the RZ inspected passing vehicles for licenses. The design loosely follows one proposed in the Smeed Report.