The 401 highway is a monster. A huge amount of Canada’s civilization is built around it. This makes the 401 the busiest highway in North America and one of the busiest in the world. As of 2008 the Toronto portion of the 401 gets most than 400,000 cars a day. The traffic on the 401 is horrendous at certain times of day, and the frequency of accidents on the 401 make it even worse. In fact, when someone dies in a traffic accident on the 401, its very possible that another lifetime is going to be lost in the traffic congestion that accident caused.
The first step to a solution is accurately identifying the problem. Why does traffic happen? Because people do not bare the costs of the congestion they cause others. Space on roads are in finite supply, and people will overuse it because they do not pay the costs of taking up space on a road. Every car takes up space on the road, and everyone else pays for that space through traffic. When everyone plays this game, the costs in traffic become very high for everyone. Roads get clogged up. This is a classic tragedy of the commons problem. Two obvious solutions: raise the price of driving in high traffic areas, or lower the price of alternatives.
The best way to tax traffic is whatever was is usually the most simple and has the least ripple effects. A tax on general driving, like a carbon tax, would help traffic. It is; however, very indirect and created distortions (ripples) in other areas. This might be an exception to the rule. These particular distortions are generally regarded by economists as efficient anyway. We want to tax driving anyway because it creates carbon emissions which create negative externalities. People aren’t paying the full price of carbon emissions or traffic congestion, so it makes sense to kill two birds with one stone through a carbon tax.
A more direct way is with a toll. If it isn’t discouraging traffic congestion then it is too low. If much of the roads become unused then the toll is too high. Again, we’re looking for the simplest way to charge drivers that has the least second-order costs. Stopping people at a toll booth before they get on to the 401 is obviously inefficient. The transaction costs would be too high. So charge them later by billing them through their license plate number. Even take it out of their tax return. Offer stickers that regular commuters can pay for ahead of time that gives them free access. I’m sure somewhere out there there’s an effective model of drivers being charged without being stopped.
Another way to fix this problem is to lower the price of alternatives. Me and my wife like to take the rail into Toronto. We usually sit in a near empty car full of seats. Why not charge less for a ticket and fill those seats up? There’s lots of room. Make it obvious that the rail is the way to go if you’re going to Toronto for a visit. The Via Rail is government owned, so its no wonder their pricing leaves cars filled with empty seats. This is extremely wasteful anyway. Relieve traffic on the 401 and reduce waste by by lowering the price of other modes of transportation.
There is another problem that creates traffic on the 401; accidents. Many of these accidents are caused by truck drivers. When they get in an accident, they create huge traffic jams. Make firms pay the full cost when one of their drivers get into the accident. Make them pay for all the time cost they put to everyone else when their accident held up traffic. Firms will have more incentive to train their drivers better, and make sure their sharp and aware when its time to drive. Of course they do this already, but not enough because they don’t bare the full costs that they’re imposing onto others.
Government “cracking down” on trucking standards is another way of doing this. Economists typically agree however that the better way to go is to adjust prices accordingly and let market mechanisms do the work. Government will not be able to do market jobs better than market participants trying to make money. The incentives and intimate knowledge of the industry aren’t there for governments.
Some applications might have problems or need to be adjusted, but there’s wide agreement from an economists viewpoint on what the basic problem is and what kinds of solutions to enact. The problem is negative externalities, and the solution is to raise the cost of driving in high traffic areas and lower the cost of close alternatives. I don’t expect us to ever get there. Why? Because voters want free solutions, or more accurately, solutions that look free. It’s not that the experts haven’t figured out and come to a consensus about the solution to the problem, it’s that there isn’t political incentive to do it.
A more technical explanation of the economics of traffic congestion
An economics tutoring session on traffic congestion
