Congestion pricing for the Twin Cities metropolitan area


Herbert Mohring, David Anderson

January 1994

Report no. 1994 Congestion

"Congestion pricing" is the "something" that many economists favor to solve the urban traffic problem. The conceptual underpinnings of this solution are straightforward: Automobile operators not only experience road congestion, they also contribute to it. The "marginal costs" of their trips - the value of the resources that would be saved if these trips were not made - include not just the time and vehicle-operating costs they experience directly but also the costs they cause by contributing to the congestion that slows each other down - a cost that few consider in deciding when, where, and by what mode to travel. Maximizing the value of what society's resources produce in a market economy requires commodity prices to equal their marginal costs. The portion of the marginal cost of a road trip reflecting the cost it imposes on other travelers can be very large.

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