Results Not Guaranteed: A Tale of Road Pricing in New York and London

16 Pages Posted: 12 Dec 2009

See all articles by Jonathan Peters

Jonathan Peters

City University of New York/College of Staten Island

Cameron Gordon

University of Canberra

Date Written: December 11, 2008

Abstract

Pricing of roads has been a mantra in transportation economics for many decades now. The basic economic reasoning is sound: optimal consumption of a road is set where price=marginal cost (P=MC) and the lack of a price or the presence of underpricing will lead to economically inefficient levels of congestion. However, the authors here argue that to be effective in managing congestion, imposition of a road price is only a necessary, but not a sufficient condition for obtaining an optimal level of road usage.

Pricing regimes in London and New York are compared and contrasted to examine this argument. In London road pricing has been imposed as part of an overall urban congestion management scheme that takes preexisting traffic flows and alternative modes of transport into account. This effort has generally been deemed to be successfulin obtaining its objective of reduced automobile traffic on constrained urban roads. In New York pricing has been imposed on a piecemeal basis, without overall system performance goals in mind. The result there has been high tolls but growing congestion, and now a London-style cordon pricing scheme has been proposed. In general the authors conclude that road pricing is economically sensible in generic terms but that it may often be detrimental, or at least inefficient, in many of its particular manifestations. To reduce congestion, pricing must be specifically designed to do so taking into account local conditions and institutions.

Keywords: congestion pricing, road pricing, New York, London, transportation, transportation economics, tolling

JEL Classification: H41, H42, R41

Suggested Citation

Peters, Jonathan and Gordon, Cameron Elliott, Results Not Guaranteed: A Tale of Road Pricing in New York and London (December 11, 2008). Available at SSRN: https://ssrn.com/abstract=1522048 or http://dx.doi.org/10.2139/ssrn.1522048

Jonathan Peters

City University of New York/College of Staten Island ( email )

NY
United States

Cameron Elliott Gordon (Contact Author)

University of Canberra ( email )

Canberra, Australian Capital Territory 2601
Australia
6201 2685 (Phone)

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