THE ECONOMICS OF TRAFFIC CONGESTION

TLDR

Traffic congestion is a pervasive urban problem that wastes drivers’ time and has led researchers to identify paradoxes where expanding roads fails or worsens congestion. The authors resolve these paradoxes by applying the economic concept of externalities to distinguish personal from social costs of roadway use. This analysis clarifies congestion economics and demonstrates that standard pricing tools can effectively address the problem.

Abstract

Traffic congestion has become one of the plagues of modern life in a big city. Time spent ensnarled in traffic is not simply time wasted; for most drivers, it is time miserably wasted. Transportation researchers have identified three paradoxes in which the usual remedy for congestion--expanding the road system--is ineffective or even counter-productive. The resolution of these paradoxes employs the economic concept of externalities to identify and account for the difference between personal and social costs of using a particular roadway. This not only clarifies the economics of traffic congestion, but it also points to ways in which the congestion problem can be solved with clever applications of the standard pricing tools of economics.