>In response to the earlier post about smart cards, a friend writes:
You posted about metro/metra/train details today. How do you feel about toll-roads, i-pass/speed-pass/etc, and different rates for speed-pass vs. cash?
In general, I think toll roads and congestion charges are good where they can be done efficiently, but only if the toll rates are set by the demand for driving. There are a few places where this is true. Bridges and tunnels are ideal, also the new innovations in high occupancy toll lanes (you get to ride in the toll lane for free if you are carpooling, alternatively you get to pay to drive in the carpool lane).
Tolls should be set by the demand for driving as follows. For a limited access highway, the capacity increases as you add cars until you reach a critical level, then the capacity decreases rapidly. That level is at a roadway speed of approximately 40-45 miles per hour. The toll should start out at zero and ramp up at 10 or 20 cent intervals as traffic increases, maintaining the traffic at a free flow level of service “C” or better. See, for example of level of service, this link (pdf). This system maximizes utilization of a public resource while using revenue as a rationing scheme, rather than congestion or queuing. Other schemes either set the price too high, resulting in unused roadway capacity, or too low, resulting in crowding and congestion. Sometimes, an unvarying price (such as the Dulles Toll Road’s $1.25 per direction) can result in both conditions at once, like the rush direction congestion combined with the countercommute’s free flowing traffic.
As far as different rates for speed pass and cash, I would say that the speed pass should get a small discount. There are two reasons for this. One, there is a cost to the driver to obtain and maintain a speed pass. Two, there are positive externalities associated with speed passes. The transactions can be performed at or near highway speed, do not require handling cash or coins, and require no personnel. The transactions can be performed with a lot fewer toll lanes and reduce construction costs.
A good link summarizing price elasticity information for various forms of transportation, including gasoline price elasticity, parking price and congestion charging is here.