Monday, December 22, 2008

Gridlock and Gas

OTT once again proved to be fertile ground for discussion - this time, discussion touched on various energy and environmental issues - particularly those surrounding driving.

Since I live and work in semi-rural area of South Jersey and don't personally encounter much in the way of traffic in my daily commute, but our favorite anonymous poster made a valid point - drivers in many metro areas experience major traffic delays to and from their jobs on a daily basis.

While we both agreed that this was an issue, we had some differences on the best way to address the problem - although we both agreed that tolls would be an effective way to address high traffic areas.

Historically, gas taxes have been used for the purposes of road maintenance, traffic reduction and subsidization of alternative means of transportation. There are a few problems with this approach:

1) Gas taxes target the wrong resource - traffic jams are the result of excess demand (and shortage of supply) of road space - not gasoline.
2) Gas taxes treat all driving the same - sitting in a traffic jam and taking a scenic trip on skyline drive have vastly different effects on the traffic levels on the Capital Beltway from 6-9AM, but place the same costs on the driver
3) As vehicles become more efficient, gas taxes will have less impact on traffic snarls- Hybrid electrics already use very little (if any) gasoline when sitting in traffic. In fact, hybrids see their biggest gains in fuel economy over gas only cars in stop & go driving. If our theoretical drivers above had hybrids, the driver using the more available of the two routes (scenic driver) is paying a greater share then the driver using the heavily demanded road. If (or when) plugin vehicles begin to take any significant share of the car market, the effect of gas taxes on traffic will be even less.

As mentioned earlier, tolls would be the most effective way to address high volume traffic - especially if the prices varied based on time of day. Tolls have the benefit of placing a price on the resource being used - and with the increased popularity of EZ-Pass and other automated methods of payment, the bottleneck effect of tolls is lessened. The other advantage for tolls over gas taxes is that it places a price on a resource that the government owns rather than charging individuals for an otherwise private transaction.

If the prices were set correctly, many drivers would choose to travel at different times of day, some who would otherwise drive on their own would carpool, and many would choose public transportation (removing the need to subsidize fares to keep mass transit solvent).

Some of the proceeds from tolls would continue to be used for road maintenance and other transportation infrastructure, beyond that, I would propose using the rest to reduce gasoline taxes. While the total elimination of gas taxes is likely not feasible (after all, placing tolls on the vast majority of county & municipal roads is just not workable), if roads (and parking spaces) were priced with profit in mind, we would gain the dual benefit of efficient management of the resource that is the road, and a tax reduction to boot!!

14 comments:

  1. If we wanted to get really crazy, we could auction off toll rights to private companies...

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  2. No, no, no! None of the tolls should be used to pay tax payers back. The goal should be to provide alternatives to driving solo to work. Taking the alternative is how you reduce your "tax" by sharing the toll.

    The big opposition to tolls is that tax payers (aka voters) believe they have already paid to build the road and shouldn't have to pay to use it.

    I agree that gas tax isn't the BEST way of reducing traffic congestion, but it is a way to keep its consumption down which is a goal of mine as well as improving traffic congestion.

    Your #2 is not correct. It only treats burning of each gallon of gasoline the same. Each person has the option on how to use the gasoline. Here a few examples: you can use that gallon of fuel to cart 1 person 30 miles, idle in traffic for an hour, or transport 50 people 6 miles on a bus. Notice the major difference in each driving scenario.

    Here are some real-life estimates @ $1 per gallon tax:

    Bus -- $80 a year
    Carpool -- $240 a year
    Solo drive non-peak -- $480 a year
    Solo drive peak -- $720 a year

    Based on 60 miles a day for 240 days a year. Car gets 30 mph non-peak and 20 mph during congestion. Bus gets 6 mph and averages 30 people per bus trip.

    Also remember that my gas tax idea had tiers. No tax for "reasonable" consumption levels. If people are averaging 100 gallons a month in a certain locale & The Goal is to reduce by 10%, you get 90 gallons tax free, but will be taxed on anything above 90 gallons.

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  3. The big opposition to tolls is that tax payers (aka voters) believe they have already paid to build the road and shouldn't have to pay to use it

    And they are right to believe so. The gas taxes we pay now are for road maintenance. I wouldn't even support tolls if they were not coupled with reduction in gas tax.

    I agree that gas tax isn't the BEST way of reducing traffic congestion, but it is a way to keep its consumption down which is a goal of mine as well as improving traffic congestion.

    It is your goal. It is not my business, your business or anyone elses to determine appropriate levels of fuel consumption for other individuals.

    Your #2 is not correct. It only treats burning of each gallon of gasoline the same. Each person has the option on how to use the gasoline. Here a few examples: you can use that gallon of fuel to cart 1 person 30 miles, idle in traffic for an hour, or transport 50 people 6 miles on a bus. Notice the major difference in each driving scenario.

    You missed the point entirely. My driving down rural roads does in no way affect beltway congestion or contribute to smog levels in cities & yet gas taxes treat me the same as drivers clogging major arteries.

    Also remember that my gas tax idea had tiers. No tax for "reasonable" consumption levels. If people are averaging 100 gallons a month in a certain locale & The Goal is to reduce by 10%, you get 90 gallons tax free, but will be taxed on anything above 90 gallons.

    What business is it of yours, or anyone elses to determine what constitutes "reasonable" fuel consumption for other individuals? Oil, like any other commodity gets pricier when it is scarce relative to demand - and people adjust their consumption voluntarily. When it is more readily available (as it is now), the price goes down & people should be able to freely use their earnings to purchase what they wish. If we were actually coming close to the point of exhausting the earths fossil fuels, the price would reflect this the closer we get - without any intervention on the part of the government.

    I'm totally with you on the issue of traffic congestion - and to some extent on pollution (which is largely an issue local to cities - and again tolls would have the same affect).

    As odd as it may seem, forcing artificially high gas prices would have the effect of pushing consumers to smaller fuel efficient cars - with less seats. Thus making carpooling less likely.

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  4. I guess you think it is no one's business if you pollute your own land with chemicals; hog and waste food; use up the water upstream leaving none for the people downstream; etc.

    Some of these have more impact than others like hogging food and water, but they are all in a similar category -- limited natural resources.

    Why is it that you have no qualms about the "haves" doing whatever they want and can with the limited resources everyone (the haves and have-nots) needs?

    If the supply was endless and the impact to the economy and environment were negligible, I would probably agree with you, BUT since this is not the case, there is room to control the use of the resource.

    Regarding how to control the use, I'm not in love with a gas tax. I hate big government and am really skeptical of government being able to regulate the use of fuel honestly and fairly. You say never allow that type of regulation (as far as I know). I think it is foolish to continue on with our current consumption of fuel, which I see as presuming on the future.

    Is it better to be proactive now or allow the market to react to future problems that seem to be developing (not talking about environmental things, but economic and political)?

    Do you have any suggestions?

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  5. I guess you think it is no one's business if you pollute your own land with chemicals

    I said (nor implied) anything of the sort. We already have laws against pollution. Vehicular related smog is a localized phenomenon and is generated by many vehicles converging on a central area. I don't see how it is any way just to inflict the cost of smog reduction onto people who don't live or work anywhere near the problem. LA & NY metro areas need to deal with their own messes.

    hog and waste food; use up the water upstream leaving none for the people downstream

    Are you proposing extra taxes on food & water use? If food or water become scarce relative to demand, the price will reflect it and people will consume less. It's not an accident that the nation with the most economic freedom has the most abundant food supplies and the nations which have no property rights to speak of face starvation.

    I'm not sure how this relates to our discussion of fuel consumption either. It sounds as if you are concerned that those who waste will drive the price up and others won't be able to afford it, and that your solution is to artificially raise them now - the only way this makes sense is if you believe that the government should be making profit on oil rather than the companies that actually produce it.

    I think it is foolish to continue on with our current consumption of fuel, which I see as presuming on the future.

    Presuming on what? What economic problems do you foresee that the individuals actually recovering, refining & selling oil do not? Why would your or any government bureaucrat have better knowledge of the future availability fossil fuels than those who spend every day in the business?

    We are nowhere near the point of exhausting the earths supply of fossil fuels. If we were, the prices would begin to rise - and never again recede. What sort of business man is going to sell his product at ridiculously low prices until the barrel is dry?

    Is it better to be proactive now or allow the market to react to future problems that seem to be developing

    The market (which is actually made of individuals making daily decisions) does this all the time. That's why gas prices rise every summer when demand increases, or rise when world events threaten the supply chain. As with my above answer, I trust the people who's livelihood depends on making a profit in the oil industry to know more about it than I do our government.

    Free markets have a far better track record throughout history in terms of setting prices than governments do.

    Do you have any suggestions?

    My original post ;)

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  6. John, you questioned why anyone has the right to control the use of a natural resource. It seemed that you were implying that natural resources shouldn't be regulated whatsoever. I got that from your "what business is it of yours or anyone else's" comment.

    I'm not suggesting taxing gas to make it prohibitively expensive and thus curb its use, but to get money to fund alternatives to solo driving (carpool, lightrail, busses, etc.)

    The problems I see are:

    * Relying on foreign sources.
    * Competition with other countries for the same resource.
    * Resulting supply volatility.
    * Resulting wars.
    * Funding countries and people that don't like us.
    * Increased prices that result from the overuse -- the higher price is $ that people could spend on something else to fuel the economy as a whole rather than just the energy segment. Just think how much money went out the exhaust pipe when fuel was $5 a gallon. Is that money that people could use now?
    * Superfluous infrastructure requirements. (more waste)
    * Negative impact on environment.
    * And probably many more.

    Do we want our country to be in the position to have to fight for our energy needs? The market can't react to that kind of position -- especially if a major percentage of the economy is based on the fuel. The lower our fuel needs the lower our risk. That is one of the presumptions I was alluding to above.

    I agree that the market controls the price better than the government, but it doesn't control the waste. In the example above, a person choosing the driving solo option chooses to spend 9 times more on fuel than the person on the bus. That's a big difference.

    What's wrong with trying to find a way to reduce fuel consumption? Doing nothing NOW is a big mistake for those living in the future. I don't even have any progeny to protect, but I'm still concerned.

    I think your original post does not go far enough because it does not provide alternatives to driving solo which is a major part of the equation. I really like that it incentivizes shared rides through the economic incentive of sharing the tolls, though.

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  7. you questioned why anyone has the right to control the use of a natural resource. It seemed that you were implying that natural resources shouldn't be regulated whatsoever.

    This displays a common misunderstanding of economics. Resources (naturally occurring or otherwise) are OWNED by someone. The oil companies purchse the rights to recover them, stations purchase the refined product, individuals purchase it for whatever use they see fit. Protection of those property rights are crucial to economic freedom & prosperity.

    Copper is a critical natural resource for our energy distribution - and would still be even if it were possible to replace our entire energy production with renewables. The price of copper fluctuates greatly - much of our copper comes from foreign sources. Should the goverment regulate how people use copper?

    Price regulations boil down to government restrictions on the use of privately aquired property - whether artificially higher or lower) and have ALWAYS resulted in a less efficient economy.

    Regarding problems you foresee, for one, none of them escape the notice of the oil companies, for another, your concerns basically boil down to three points:

    1) Foreign dependency - first of all, a "foreign dependency" only exists because we refuse to tap the vast resources that we control here in the US. Second of all, we have "foreign dependencies" on all sorts of metals, foods, and many other things we need. If world events trigger shortages, the price changes and people adjust their behavior to conserve without anyone forcing them to. As far as competition goes - that's life. Everything is scarce - there will always be competition for resources. The best thing we can do is allow our economy to grow so that we will be in the best position to compete.

    2) Price increases - You are still arguing price increases (taxes) to prevent price increases which makes absolutely no sense.

    Price increases are not good or bad - they are a signal. High prices tell users to conserve & producers to provide more of it. Without those price signals, there would be no incentive for conservation or increased production. Lower prices indicate we have sufficient quantities to meet demand.

    3) Environment - discussed in my previous comment. Driving related environmental issues are mostly local to large metro areas. Again, I shouldn't be asked to clean up other peoples messes - which is what gas taxes do. Tolls cause drivers to spread out (over time & space) - thus diluting the particulate matter or choose alternatives (car pooling, public transit, etc)

    As far as "superflous infrastructure", I'm not sure how you are in a position to decide what is wasteful on behalf of others.

    What's wrong with trying to find a way to reduce fuel consumption?

    There is nothing wrong with you or anyone else trying to find ways to reduce your consumption. What IS wrong is trying to force your ideals on other people.

    I think your original post does not go far enough because it does not provide alternatives to driving solo which is a major part of the equation. I really like that it incentivizes shared rides through the economic incentive of sharing the tolls, though.

    For the record (from the original post):
    "Some of the proceeds from tolls would continue to be used for road maintenance and other transportation infrastructure" If cities wish to reduce road congestion, they are free to build alternative infrastructure - if not, the congestion is on them. Again - why should I pay because New York or Philadelphia doesn't deal with their traffic problems when I rarely go there?

    What I am against is subsidization of fares. If rails, subways, whatever can't sustain itself, then it is not a viable solution to the problem. Relying on gas taxes (or toll money) to continue to pay for subway riders will cause more individuals to switch, but in exchange, the government will be getting less revenue to pay for the subsidies - it's thinking like this that puts so many cities, states and our federal government in such big financial holes.

    The only way it can work is if both systems were run with the intent to make a profit. If a railway system can't sustain itself, then it needs to be replaced with something that will.

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  8. "What IS wrong is trying to force your ideals on other people."

    C'mon, John -- you can't tell me that you don't suggest forcing your ideals in other arenas. In fact, your very suggestion of not forcing my ideals regarding fuel consumption is forcing YOUR ideals on people (assuming that the two are opposites). Someone's ideals are going to win.

    I don't agree that OWNERSHIP gives anyone the right to have complete freedom to use anything from ammo (no I'm not in favor of more gun control) to zit cream.

    My suggestion of subsidizing fares is not much different than system-wide HOT lanes. People pay a toll to use the highway where all lanes are HOT. How are they HOT? Well, the tolls the people paid are used at some level (from 1% to 100%) to transport people thru systems that reduce congestion.

    Increase fuel price to decrease fuel price.
    There is the market price of fuel M and the non-zero tax T.
    M + T > M
    T is used to create systems that reduce the demand for fuel, thus reducing M by some positive factor F, less than one.
    There exists an F such that
    MF + T <= M
    I realize that we are not guaranteed that F will be sufficient to make this occur, but I do know that F will be less than one, which indicates that the overall demand from daily commutes will be reduced. I also know that the new transportation system as a whole will be more robust and EFFECIENT in TRANSPORTING people (there will necessarily be time and fuel savings). I even THINK it will even be more efficient economically (overall).

    Regarding one person subsidizing another.
    This happens all the time. I have no kids, yet I subsidize those that do. I do this thru taxes that are used only for education. I get something out of it, but not as much as families do, so my property taxes should be reduced. I subsidize families by paying a higher tax rate than families. There are plenty of programs that are tax subsidized that are exclusively for or practically for children only where I get no benefit, yet I have to help support them.

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  9. Don't have much time right now, so sorry for the quick reply:Regarding one person subsidizing another.

    This happens all the time. I have no kids, yet I subsidize those that do.

    Just because it happens all the time doesn't make it right - you shouldn't have to support other peoples kids.

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  10. Got a couple more minutes...

    In fact, your very suggestion of not forcing my ideals regarding fuel consumption is forcing YOUR ideals on people

    This is far more than just a stretch. Your ideas forcibly take money away from me. My ideas in no way prevent you from purchasing a tiny car, taking the train, carpooling, whatever. You are free to do what you wish.

    There is the market price of fuel M and the non-zero tax T.
    M + T > M
    T is used to create systems that reduce the demand for fuel, thus reducing M by some positive factor F, less than one.
    There exists an F such that
    MF + T <= M
    I realize that we are not guaranteed that F will be sufficient to make this occur, but I do know that F will be less than one


    Aside from the fact that the "F" resulting from taxes imposed would make the last equation true is far less than certain (actually, it is quite unlikely - if not impossible that F would satisfy MF+T <= M, since the lower price would again increase demand - the best you could hope for would be MF+T = M) , you also forget the incentives involved in prices.

    Lets say that we did find a level of taxation that produced such an F. The price point at which oil producers can maximize profit is "M". Now as a result of the federal governments added take, not only is the gross take below that level (due to the artificial demand reduction), but now the producers are taking home smaller percentage.

    You've in effect made oil production less profitable - providing less incentive to produce fuel, which leads to shortages.

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  11. Just for kicks and giggles I did some armchair math. To provide an estimated $17 billion a year to pay a full fare of $5 a day for 240 days a year for approx 14 million people, the price of gas would raise a whopping 13 cents a gallon. That's $20 a month for a family of 4. (The current average federal and state tax on gas is 40 cents a gallon.)

    That 14 million figure is a rough estimate of the number of people if 20% of the daily commutes are reduced for those that live in congested areas.

    One thing that I found out is that the average gasoline usage per person in the US is 460 gallons a year! Does the average family of 4 spend 153 gallons of gas a month? This number includes only motor gasoline, not jet fuel, distillate fuel oil (diesel), residual fuel oil, or other oils.

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  12. That's not the point. Even if it amounts to $0.50/person, any enterprise that relies on government funding for it's continued solvency is itself a waste.

    If a given method of transportation can't support itself, then it is throwing resources down a hole.

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  13. BTW - is the sort of policies we can expect if/when governments come to rely on gas taxes to function.

    Taxing any behavior naturally causes people to move away from that behavior. When people use less gas, then the sorts of things that rely on gas taxes to stay alive must seek their funding elsewhere.

    This is why gas taxes & toll money should not be used to fund other projects. A possible exception could be made for initial infrastructure investments, but governments have rarely been able to stay underbudget on anything.

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  14. any enterprise that relies on government funding for it's continued solvency is itself a waste.

    So, let's disband the military, fire & police services.

    If a given method of transportation can't support itself, then it is throwing resources down a hole.

    We are throwing resources down a hole when we don't transport people efficiently. Which is the greater waste, the lost time and fuel sitting in traffic or the waste that you speak of?

    I think we need to think of transportation as a whole system rather than just build a road and have individuals use it as they see fit. That may have worked a long time ago, but we are reaching some efficiency thresholds when we let everyone fend for themselves.

    The system I'm thinking about would include mass transit, individual transit and even transportation of goods. Everyone pays into the system at some level because everyone benefits from it. When the system is running more efficiently than now, groceries and other goods are cheaper; personal time spent traveling is reduced; pollution is reduced.

    I don't agree that the market is the best way to get this done -- it kind of works like survival of the fittest, which is really more like survival of the adequate. I'm more for intelligent design. . .

    May I say again that I'm not in love with a gas tax, but the main idea that I should be trying to convey is that we need to think more holistically and proactively. It would be nicer to flesh out viable ideas rather than bicker about funding them.

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