Michael Manville’s Medium piece on congestion pricing and retheorizing the present in planning

Sorry for typos. It’s not as well-proofed as it should be, but school started, I’m busy, yada yada yada excuses for “I’m actually a terrible blogger.”

ICYMI, UCLA Luskin prof and friend Michael Manville has a nice piece up at Medium titled: “Is Congestion Pricing Unfair to the Poor?” It’s a very nice discussion, and like all Mike’s writing, well-reasoned and beautifully written. I have written about the equity effects of congestion pricing and, in particular, high-occupancy toll lanes, and it’s a tough subject to write about simply because people come to the discussion with many different conceptions of equity, and congestion pricing can be difficult for people to understand. Probably the most common misperception that I find comes from people thinking that they will wind up paying to sit in traffic, since they do not think government is competent to manage anything, let alone congestion.

I have some quibbles with Mike’s overall arguments, even though I obviously think congestion pricing is the proper way to ration driving during peak hours. (To be specific, congestion tolls with revenues to transit alternatives). The first one is the notion that

Moreover, free roads get congested, and congestion exacerbates vehicular air pollution. Vehicular pollution has been linked to health problems ranging from cancer to asthma to preterm birth, and it most affects people living near congested roads — who are disproportionally likely to have lower incomes. So poorer people are not just less likely to benefit from free roads, but more likely to suffer from them.

This statement in and of itself correct, but it doesn’t do to forget that yes, low-income people can and do benefit from streets. Impoverished people are unlikely to benefit from cars. Streets, by contrast, are among the most-multimodal things we have; they benefit from transit, which is easily exempted from charges, and biking, and nondrivers do benefit from economic activity that streets can generate even from driving. Whether they do so in excess in what they contend with in terms of cross-subsidies and crash risks is certainly debatable.

Mike was talking about “free streets” specifically. Pricing everyday activities like driving is likely to cause myriad economic effects; to the degree that we increase costs of travel–and shipping–we are likely to see not just the first-order effects of who originally pays a toll or a per-kilometer fee for road use and who eventually pays the toll. High-income professionals can easily pass such commuting costs onto employers or their own employees; if they have to pay with time, they can hire services to make up the difference. Lower income individuals have less ability to do that, and they are more likely to be at wage levels where their commuting costs wind up being their problem alone–they can’t or don’t see wage increases to deal with them. Similar issues come up with shipping; some items and shippers can pass operating cost changes onto consumers, and others can’t, with varying effects on low-income people from potentially labor loss to higher consumer prices.

Again, this is not say congestion pricing shouldn’t be done. It is by way of saying we should probably think more about how such ideas are implemented. We could, for example, refund the effects of higher commuting costs with higher earned income tax credits. Just, boom, give people a commuting allowance (and phase out the favorable tax treatment of parking).

The reason I wrote this blog post, however, has more to do with what Medium editors decided to call out of the essay: a quote about the status quo:

Is congestion pricing fair to the poor 100 Hours Medium

This is some Brian Taylor/Marty Wachs influence right here, I swear, because I remember Marty and Brian saying similar things to me when I was a student of Brian’s. It’s absolutely true, of course, but it’s also got some real problems as an argument for change, if we think about it.

How one feels about the status quo is one of the deep, ontological differences between progressives and conservatives. Progressives, conservatives grump, are always all for upsetting the status quo for some imaginary progress towards an imaginary end-state, which could just as easily make us worse off instead of better off because what we have now is fragile and worth preserving. Conservatives, progressive grump, never want anything to change because they are the ones benefitting from the status quo, which is not just fine, thank you. A bit overstated, but you get the idea. Sometimes I have to go with extremes to avoid having to write a dissertation about these things while still noting their influence on attitudes.

Planning tends to be a bit too much on the “let’s move ideas into practice” for my taste, which is probably more conservative on some dimensions than many of my colleagues in the field. It is a perfectly reasonable research finding to say “let things alone” or “no, this actually is not a better idea” even though those are disappointing findings for a profession whose job it is to intervene and innovate.

With congestion pricing, challenging the status quo on equity terms takes us only so far. Perhaps one of the most important lessons from public finance concerns how policies become embedded into decisions and practices over time. Many public finance experts, even really progressive ones, get antsy when you talk about throwing out the entire tax code and starting afresh. Why? Because, as they will note, people at all income levels have likely adjusted their behavior already to account for the code as it is. Diddling with it, let alone throwing it out, will introduce similar windfalls and losses as the policy in the first place, as well as transactions costs of changes.

This isn’t to say that the tax experts I’m hanging with reject all reform; they don’t. Most feel strongly that there are some things that need to change, but those changes have to be done thoughtfully.

Changing the status quo around unpriced freeways strikes me as very similar. The problem with freeways is that they never should have been free in the first place. We now have a fruit-of-the-poisoned-vine problem with them, in that the status quo represents a policy that never should have happened, that was a bad idea from the outset. Did policymakers just not imagine a world where our cities were going to get as big as they have, with the attendant congestion that those numbers bring when they are auto-oriented? That’d be my guess. But even so, people at all income levels have been optimizing their personal choices around this bad policy for about 60 years now. It’s built into urban form, as regrettable as we may find that now. Deeply impoverished people and the working poor now live in suburbs and drive, just like wealthy people in exclusive gated suburbs do, because the powers that be set things up this way, and if the rules of the game change, they will get hurt the hardest, for all the good that congestion pricing can and would do us all. Yes, on average drivers are more affluent than nondrivers, but averages do not feel the pinch of changes. Individuals do.

That means, essentially, that movement towards new pricing policies should always have careful transition policies built in. For example, the home mortgage interest deduction (HMDI) is not good public policy, but it’s widely used and at least some of the people that use it are not dripping in wealth. Taking it away in one fell swoop would wipeout value for existing homeowners, to the benefit of those seeking to buy because they would face lower entry prices. (HMDI almost certainly gets capitalized into the value of the land, at least partially, so that your home price reflects a roughly amortized estimate of its tax shelter value; it also likely alters interest rates, so that the windfall to new buyers/borrowers is probably attenuated.) What to do? Lower the deduction by a small percentage (quarter percent) each year until it is eliminated entirely. Those capitalization effects will still occur, but they won’t happen all at once, and people will have time to adjust (including mortgage lenders, who would be likely to face much more rapid repayment and some income loss.)

With congestion pricing, I think boosting transit on the corridor, and advertising the hell out of its speed and success, prior to pricing changes is probably the best way to transition, along with the EITC strategy I suggested earlier.It burdens governments with costs ahead of revenues, but it is government’s role to do that sort of pro-social investing. You can’t really phase in pricing, unless you do it on some days and not others, because weak pricing simply annoys people with paying AND sitting in traffic–the cynics’ predicted outcome.

No, the status quo is not fair, but it is what we know, to the degree that we know anything, and we know how to behave in it in ways that we prefer, that we think is to our advantage. That has some value, just as change does, and it behooves planning to think more about transitions from the present than we often do. Beginning states and end states are only part of the vision.