Say Anything Blog

Bart Hinkle has an interesting post today about an article in the USA Today concerning “congestion pricing” and what it has done to traffic jams on high-traffic roads.

The average driver in the Los Angeles area spends the equivalent of more than two workweeks each year stuck in traffic. But one place where cars and trucks hum along at full speed is in the left lanes of a 10-mile stretch of State Road 91, an east-west highway in Orange County.

That’s because those lanes use a toll system known as “congestion pricing.” Tolls on SR 91 vary depending on time of day, from $1.15 to $9.25, and are priced to keep traffic moving.

Congestion pricing is essentially a reflection of free-market pricing.  In the case of toll roads, traffic capacity is finite.  Only so many cars can be on a given road at one time, so when demand for road space increases so does the price.  This encourages people to conserve road space by traveling at different times, or finding alternate routes, ultimately leading to a quicker trip home for everyone.  When the toll price is controlled, however, and does not fluctuate with demand you get traffic jams.  Or, put another way, shortages in road space.

Now apply this thinking to, say, health care.  Currently health care costs more than anyone would like, but if we try to “solve” that problem by putting the government in charge of doling out our health care we’re going to run into shortages.  Why?  Because the government has only a finite budget for health care and they cannot provide to unlimited supply of health services to a public that isn’t paying for them directly.  In a government-backed health care system we would all pay into the system whether we like it or not and then could use the system whenever we needed it.  Because we will have already paid for the health services none of us will feel the need to shop around for cost-effective health care (or find another route home in the toll-roads example), nor will we be pressured by financial considerations to take care of ourselves so that we can avoid visits to the hospital (which is akin to traveling at a different time in the toll roads example).  Instead we’ll all try to cram into the government hospitals whenever we need care, and what we’ll ultimately be stuck with is Canadian and British-style operating waiting lists and health services shortages.

Sort of like the traffic jams that happen on toll roads where the toll doesn’t reflect demand.

You can apply this sort of thinking to other areas as well.  Like price controls on energy.  If Congress were to mandate that all gasoline must be sold for no more than $1.50 a gallon I think most of us would be appreciative...until there were gas shortages because the oil companies weren’t making enough money to produce enough gasoline to keep up with demand.  Look also at California’s power shortages from several years ago.  In that instance energy prices were capped, meaning that they couldn’t reflect real demand for energy.  So nobody in California felt financial pressure to, you know, shut off some lights or turn off the air conditioning.  At least, not until the shortages hit and those things were shut off for them.