Fewer drivers are using Manhattan’s bridges and tunnels, which should mean that there is less congestion in the city. One obvious explanation is the increase in fuel prices. Another is the increase in tolls that went into effect March 2008. Either way, economics seems to work – raise the cost of something and people do less of it. But this raises an interesting question – what is the best way to reduce congestion within the city?
Mayor Bloomberg had proposed a congestion tax of $8 for entering a certain portion of Manhattan during peak times. That is a fee targeted at usage when the system is most highly congested, which, according to queuing theory, should be a more efficient approach than raising the cost of fuel, which applies for travel at any time. However, the increase in fuel costs may be equally effective if consumers are only able to choose alternative means of transportation at peak times. For example, consider two trips – a visit to a friend’s house for a dinner party or a commute to the office. The train may bring the person to the office, but not to the friend’s house. Hence, as fuel prices increase, the first trip to be dropped is the car drive to the office. Hence, it is an open question as to how much more effective a targeted congestion tax would be. However, it is clear that an increase in the cost of fuel funds oil producers whereas a congestion tax funds the city’s efforts to improve transportation – they may have similar effects on congestion, but not on the allocation of resources.
Politics Failed, but Fuel Prices Reduce Congestion
NY Times July 3, 2008