Congestion Pricing: Still a Good Idea

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"Congestion Pricing: Still a Good Idea"

This Economist look at a new bus pricing scheme in Singapore is fascinating, but at the end it went in a direction I’m unhappy with:

Rewards-based schemes are more politically appealing than punitive charges. Several cities have tried to implement congestion charges (fixed fees to drive into crowded areas) but most have failed. Such charges are seen as little more than additional taxes, and if there is only one tariff, they hit the poor the hardest. Rather than fuel resentment, incentive schemes could encourage commuters to change behaviour voluntarily, and even gladly.

Conventional journalistic wisdom seems to me to have arbitrary biases around politically unpopular idea. Unrestricted unsubsidized free trade in agricultural commodities, for example, is not very popular and has failed politically in all major countries. But I don’t think you’d ever see an Economist article just dismissing the idea as unworkable. The idea is to keep working toward a better world!

On this particular idea of it being better to do subsidies than penalties, I think you run into the same problem as with the idea that it’s better to do clean energy subsidies than carbon taxes. The reason the alternatives to taxation are more popular is that people don’t like taxes. But if you’re going to spend money, you wind up needing to raise taxes to pay for it. The right issue to analyze is policy packages. Not “tax peak-time commuters” vs “subsidize off-peak commuters” but “tax peak-time commuters and cut sales taxes” vs “hike sales taxes and subsidize off-peak commuters.” And the same point recurs for the distributive issue. A congestion charge could be regressive in impact depending on what you did with the money. But since many poor people don’t own cars (cars are expensive) a congestion charge offset by lower sales taxes would be a very poor-friendly policy on net.

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