AP Photo/Richard Drew

Congestion pricing may reduce traffic, but that benefit can be offset by a loss in productivity in a city’s central business district.

Traffic jams aren’t fun for anyone. Driver stuck in them lose time, money, and peace of mind. And for society as a whole, congestion translates to economic and health costs. One oft-hailed way to tackle this problem is congestion pricing, or “road fares” (as CityLab readers and transit wonks prefer to call it)—charges levied for using busy city throughways at certain times. This policy has seen success in cities around the world, and academics swear that it’s one of the most effective solutions out there. But congestion pricing has its limits, and as a new study published in the Journal of Urban Economics finds, some less-than-desirable effects.

The truth is, congestion just isn’t the boogeyman it’s often made out to be. Yes, it leads to some negative consequences (called “negative externalities” in economics jargon), but it’s also an indicator of dense, healthy economic activity (“agglomeration externalities”). To find out how these forces weigh against each other, Jeffrey Brinkman, senior economist at the Federal Reserve Bank of Philadelphia, developed a spatial model of a U.S. city that accounts for how residential and commercial density, land use, wages, and commute times change with distance from a central business district. Using this model, he simulated what would happen if a road-fare equivalent to the social cost of traffic jams was implemented. Here’s his main finding, via his paper:

The results show that congestion pricing has ambiguous effects on important economic measures—the insight being that congestion pricing leads to more dispersion of employment and, in turn, lost productivity, which completely offsets the positive effects from lower congestion costs.

So if driving is discouraged and there are no alternate modes of transport, Brinkman explains in the paper, “either workers will move closer to their jobs or jobs will move closer to workers.” Job sprawl would lead to a decrease in productivity equal to, and in some cases, greater than the economic gain that comes from clearing up the roads.

One important point to Brinkman emphasizes, however, is that his model assumes a car-centric city with a single central business district. With the presence of alternative modes of transport, in cities like New York, for example, congestion pricing won’t cause the came amount of loss in productivity. The same can be said for cases in which the revenue generated from road fares helps increase public transit connectivity.

"When you implement a congestion-pricing scheme, you are going to reduce traffic. You want to consider that, for people who are no longer traveling on that road, what are their alternatives? Is it traveling at a different time or traveling by a different mode? Or is it simply going to change where the employment is located?" Brinkman explains to CityLab. “This [paper] is not a, ‘Hey, you should not do congestion pricing’. It’s a, ‘Hey you need to consider these unintended consequences of congestion pricing.’”

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